Cutting Spending Bad For Economic Growth?

I’ll leave the statistical anaylsis of this to those like my friend Cory but it appears that despite what the GOP would have us believe, cutting spending is actually bad for growth.

From the start of the Great Recession in December 2007 through the end of 2010, 24 states have cut government spending by an average of 7.5 percent after adjusting for inflation. Another 25 states have expanded government outlays by an average of 11 percent. (The analysis excludes Alabama due to data problems reported by the National Association of State Budget Offices). And the differences in these states’ economic performance could not be more self-evident. Relative to national economic trends, states that increased spending enjoyed on average:

  • 0.2 percentage point decrease in the unemployment rate
  • 1.4 percent increase in private employment
  • 0.5 percent real economic growth since the start of the recession

In contrast, states that cut spending saw on average

  • 1 percentage point increase in the unemployment rate
  • 2.1 percent loss of private employment
  • 2.9 percent real economic contraction relative to the national economic trend


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It's About Jobs Stupid – Obama Speechwriter Lack Of Research Edition


Less than a week after President Obama mentioned a Toledo restaurant as being a beneficiary of the local Chrysler plant’s resurgence because of the government bailout, it announced it will soon close it’s doors for the last time. But luckily it appears all is not lost for those soon to be unemployed restaurant workers, McDonald’s is hiring and business seems to be so good at the fast food giant that they were responsible for over half of the already ridiculously low number jobs added in the US last month.

So where exactly are all those jobs that were promised by both parties last election? Oh and jobs generated by inexpensive, unhealthy, but all we can afford because we’re all broke fast food joints don’t count…

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EAS Funding Side Effects

I know the cut, cut, cut, mentality is all the rage these days in Washington and one of the programs being looked at is the Essential Air Service funding that provides subsidies to allow commercial air service out of smaller cities across the country. The program provides approximately $200 million (or about $182 per passenger) at 140 airports including Watertown ($1.3 Million) and Huron ($1.7 Million) here in South Dakota. These subsidies are often the only thing allowing these smaller cities to provide commercial air service.

Looking at just the numbers there is some obvious problems with how the program is being run. When you see airports like Ely, Nevada getting $5,223 per passenger it is no wonder that the suddenly cost conscious are looking to trim the fat. What you aren’t hearing though is some of the possible side effects of completely gutting the program.

If we just look at South Dakota for example. Huron is served by Great Lakes Airlines, and Watertown by Mesaba Airlines, companies whose business model relies on providing small aircraft to service rural airports, most of which rely on EAS funding. Shuttering the EAS program would likely put Great Lakes out of business and possibly Mesaba as well. As our local tea partiers would say, no big deal, if they can’t make it without government help then they don’t deserve to be in business anyways right?

Of course there is one small problem with that logic. With no Mesaba or Great Lakes Airlines, Aberdeen and Pierre also lose as those carriers are the only ones serving those cities meaning that while EAS funding only directly subsidizes Huron and Watertown, South Dakota could lose so much more. How many state capitols do you know of that don’t have commercial air service and how hard will it be to sell our cheap slave labor to out of state businesses when they have to fly into Sioux Falls or Rapid City and then drive 200 miles to get to the top secret Governors hunt?

Our economy is in a world of hurt highlighted by loads of wasteful spending and the EAS program is no exception. Cutting it out completely and saving $200 million right off the bat might look good now, but remember every action usually comes with a reaction and in South Dakota it could be more than we bargained for.

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Oh Geez, Who Would Have Thought?

While Conservatives were busy throwing tea into tiny lakes and calling it a non-political/non-partisan event aimed at protesting taxes. Taxes that actually went down for 98% of them by the way. It was business as usual for those circumventing the 4th amendment.

The two New York Times journalists who broke the original Bush-era NSA wiretapping story in 2005 have published fresh revelations of new abuses of the program, which include alleged access to Americans’ domestic communications and an attempt to wiretap a member of Congress without a warrant. The article reports that “officials with both the House and Senate intelligence committees said they had concerns that the agency had ignored civil liberties safeguards built into last year’s wiretapping law.”

What a suprise. Who would have thought that the NSA would continue to do whatever they wanted and that the recently passed FISA update was a bad idea? Oh that’s right, I did.

And as before, will this get the same outrage as other circumventions of the Constitution? Probably not as no one is attempting to delay, even for a day or two, John Q Public’s right? to purchase an AK47 for “home protection”.

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Guess What?

For all of those folks bitchin’ about Stephanie Herseth Sandlin voting for the Democrat authored “put us into debt until our children’s children grow up” package. Guess what, “Blue Dog” or not she is a Democrat so why are you surprised? Oh and by the way so is Tim Johnson so please don’t be suprised after the Senate vote either.

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Times Are Tough Even For The ACLU

I know my Republican brethren won’t be shedding many tears because they have the NRA to fight for the only Constitutional issue that really matters to them but it looks like the ACLU is having money problems which will likely affect their fight for all our other civil liberties. And apparently the just announced layoff of 10% of their workforce can be traced at least partially to Bernard Madoff’s ponzie scheme.

“Like many organizations today, the ACLU is feeling the impact of the tough economic climate which has resulted in a decline of our assets and reduced the donations and grants that we rely upon to fund our activities, including those from two foundations that were wiped out by the Bernard Madoff scandal. We take very seriously our commitment to our donors and members who count on us to defend the constitutional rights of all Americans, even in difficult financial times. To safeguard the fiscal health of the ACLU and ensure that the vital work of defending civil liberties continues, we have taken a number of steps to cut expenses and streamline our organization, including instituting a hiring freeze, limiting travel, cancelling  conferences, and reducing non-personnel costs, resulting in savings of more than $9 million. Unfortunately, additional measures were needed and as a result, the ACLU National Office has been forced to eliminate 36 staff positions, which represents 10% of the current staff. Although we did everything in our power to avoid taking this painful step, it was necessary in order to protect our long term viability and ensure that the ACLU has the flexibility and strength to meet the challenges ahead. In addition, we are freezing salaries for the next fiscal year, which will save an additional 11 positions, and our executive director has voluntarily reduced his pay by 15%. We are confident that making tough financial decisions in the short term will serve to strengthen the organization for generations to come,” said Romero.

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What Happened To Customer Service?

In a bad economy, I think we can safely say that we are in the midst of one, wouldn’t you think the best way to set your business apart would be to provide excellent customer service? I was thinking just that the other day while waiting over 20 minutes for my order at a fast food place in Aberdeen. Eating fast food is bad enough, but considering I was one of only 2 customers in the place at 7 in the evening, should I have to wait 20 minutes to harden my arteries further?

Why is this a big deal? Afterall every business has a bad day. Well the next day at a half full restaurant in Watertown, I waited 15 minutes for a server to make her initial visit to my table, and I am still waiting, months and numerous phone calls later, for the carpenter I hired to install a couple of doors to come back and trim them out. Noticing a trend?

Maybe the one silver lining of this downturn will be weeding out companies that fail to realize that without the customer they would not exist. Based on my experience, it is past time that something like that happens.

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Put Your Music In The Clouds

Cloud computing is the new buzz so I guess the next logical transition in cloud computing would be to put your music library online and Lala seeks to help you do just that.

On the surface Lala appears to be just another Amazon or iTunes by offering DRM free music (okay not exactly like iTunes on the DRM front) but that is where the similarities end. First off searching their 6 million song and growing catalog gives you several options, you can listen for free once, purchase the song for 89 cents, or pay 10 cents to add it to your online library for unlimited streams of the song. If you later decide to buy the song, your 10 cents is put towards purchasing it and it will automatically be added to iTunes folder for later syncing to your iPod.

Also available is the ability to upload your own music to Lala so that you can stream it anywhere you have access to a computer. A simple program download allows you to upload your playlists which unlocks online versions of your songs from the Lala library and any songs not available are uploaded and stored so that you can access and stream them any time you want.

Is it legal? Apparently so as TechCrunch mentions in their post on Lala.

Lala has also done some serious legal wrangling to help you populate your online library. Using the site’s helper application (available on Windows and Mac), Lala can scan your iTunes music library and add every song you already own to your Lala web library, essentially giving you online streaming access to any song you already have on your computer. And best of all: Lala will give you free, unlimited streaming access to every song in your library, even the ones you’ve acquired in ways that weren’t quite legal. Ralston says that the record labels resisted this at first (”why should we give them access to something they stole”), but eventually came to the conclusion that users weren’t going to buy something they’d already downloaded.

Getting past paying 10 cents just for the ability to stream a song might be hard for some (just buy it if you can’t), but will 89 cents a song plus access to your current library of tunes be the next big thing or it will it be the next big bust? Would you use it?

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A Model Employer?

Tesla RoadsterTesla motors has earned the reputation as a leader in electric car technology. In fact their roadster has gained quite of bit of press including a spot on a recent 60 minutes. Unfortunately they haven’t figured out yet how to make any money and along those lines, it also appears they haven’t quite mastered that whole employee relations thing yet either.

Laying off employees is just part of running a business so when Tesla announced they were laying off a majority of their Detroit staff, you might not think too much of it. That is except that they did it by blog post!

In a sign of what this new Financiapocalypse might bring, employees in the Metro Detroit branch of electric car maker Tesla Motors were laid off via a blog post. Yesterday, we reported that Tesla would be cutting back and reorganizing, which included shutting down the office in Rochester Hills, near Detroit. Unfortunately, no one told the employees in Rochester Hills. Some of them logged on to find that they were now, according to their own website, obsolete.

And if you think the 10% of the Detroit workforce that remain are happy they still have a job, to keep that job they will have to relocate from Detroit to San Jose on their own dime…Pretty classy of them wasn’t it?

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