Sunday, July 31, 2011

Debt Limit Update

We hear there is an agreement.

The country's future has been held hostage, and we paid a substantial ransom.

The price will be economic contraction. Jobs will be lost.

I suppose disaster is better than catastrophe.

New Poll Questions

At least, these are questions I wish pollsters would ask:

Q: Do you support reduced government expenditures even if it means you lose your job?

Q: Do you support reduced government expenditures even if it means reduced unemployment compensation when you lose your job?

Q: Do you support reduced government expenditures even if it means reduction in Medicaid when you lose your job?

Q: Do you support reduced government expenditures even if it means reduced Social Security benefits?

Q: Do you support reduced government expenditures even if it means reduced Medicare?

For business owners:

Q: Do you support reduced government expenditures even if it means fewer customers buy your products or services?

Saturday, July 30, 2011

Pudd'nhead Wilson, Chapter 1 by Mark Twain (Excerpt)

Mr. David Wilson, a young fellow of Scotch parentage had finished a post-college course in an Eastern law school a couple of years before. A homely, freckled, sandy-haired young fellow, with an intelligent blue eye that had frankness and comradeship in it and a covert twinkle of a pleasant sort, Wilson had just made the acquaintance of a group of citizens. An invisible dog began to yelp and snarl and howl and make himself very comprehensively disagreeable, whereupon young Wilson said, much as one who is thinking aloud:

"I wish I owned half of that dog."

"Why?" somebody asked.

"Because I would kill my half."

The group searched his face with curiosity, with anxiety even, but found no light there, no expression that they could read. They fell away from him as from something uncanny, and went into privacy to discuss him. One said:

"'Pears to be a fool."

"'Pears?" said another. "Is, I reckon you better say."

"Said he wished he owned half of the dog, the idiot," said a third. "What did he reckon would become of the other half if he killed his half? Do you reckon he thought it would live?"

"Why, he must have thought it, unless he IS the downrightest fool in the world; because if he hadn't thought it, he would have wanted to own the whole dog, knowing that if he killed his half and the other half died, he would be responsible for that half just the same as if he had killed that half instead of his own. Don't it look that way to you, gents?"

"Yes, it does. If he owned one half of the general dog, it would be so; if he owned one end of the dog and another person owned the other end, it would be so, just the same; particularly in the first case, because if you kill one half of a general dog, there ain't any man that can tell whose half it was; but if he owned one end of the dog, maybe he could kill his end of it and -- "

"No, he couldn't either; he couldn't and not be responsible if the other end died, which it would. In my opinion that man ain't in his right mind."

"In my opinion he hain't got any mind."

No. 3 said: "Well, he's a lummox, anyway."

That's what he is;" said No. 4. "He's a labrick -- just a Simon-pure labrick, if there was one."

"Yes, sir, he's a dam fool. That's the way I put him up," said No. 5. "Anybody can think different that wants to, but those are my sentiments."

"I'm with you, gentlemen," said No. 6. "Perfect jackass -- yes, and it ain't going too far to say he is a pudd'nhead. If he ain't a pudd'nhead, I ain't no judge, that's all."


Discussion Question - Was David "Pudd'nhead" Wilson an early member of the Tea Party?

Or was the dog?

Friday, July 29, 2011

Early Sunday Morning?

So, are we going to have a constitutional crisis?

No, Thomas Friedman, a third party won't help.

A modest proposal: can the debt limit. It serves no useful function.

Federal Spending 2007 to 2010

Here's a graphical picture of the increase in government expenditure as a percentage of GDP from 2007 to 2010.

The Truth About Federal Spending

New Data: There Has Been No Recovery

Turns out, according to latest data from the Bureau of Economic Analysis, we haven't had a weak recovery for the past three years - our GDP actually decreased from 2007 to 2010 by 0.3% per year. One of the main contributing factors has been decreased state and local government expenditures.

Here's what the Washington Post's Ezra Klein has to say in his article "The Recovery-Less Recovery."

Slow Growth: Chicken or Egg?

Today's Commerce Department report shows the economy is growing at an annual rate of 1.3%. That is not enough to keep up with population growth.

The New York Times explains: "The economy’s slow growth rate is partly responsible for stubbornly high joblessness across the country. As of June, 14 million Americans were actively looking for work, and the average duration of unemployment has been reaching record highs month after month. Businesses are sitting on a lot of cash, but are still reluctant to hire because there is so much uncertainty about the future of the economy."

The Times has it backwards. The stubbornly high joblessness is causing the economy's slow growth rate. But cheer up, things could be worse. And if deficit hawks in Congress get their way and reduce government spending in the midst of joblessness, they will be.

Ideas and Words

"Where an idea is wanting, a word can always be found to take its place."

- Goethe

Thursday, July 28, 2011

Into the Valley of Death

Into the Valley of Death Rode the Six Hundred. Theirs not to make reply, theirs not to reason why, theirs but to do and die.

What kind of romantic nonsense have the Tea Party types been reading? Are they like the colonels who ordered their troops into a suicide attack, because they had bought their commissions and were incompetent? Or are they like Sir Joseph. the "ruler of the Queen's Navy" in H.M.S. Pinafore, who never thought of thinking for himself at all.

None of these characters, however, had the power to drag a whole nation into disaster with them.

It must be a heady brew for eighty or so ignorant young idealogues.

Certitude unsupported by facts.

Where Are The Milk Jugs?

Remember a couple of years ago when local organizers in Oriental mailed empty milk jugs to Washington in opposition to President Obama's health care reform? Many of them were afraid the health care reform would harm their medicare. They were apparently influenced by "mediscare" reports.

I'm waiting for them to start up their protest again, mailing the jugs to Republican members of Congress. Turns out Republicans really want to reduce or abolish medicare, and are using the national debt limit to extort agreement.

Wednesday, July 27, 2011

Vicious Cycle

Here's a recent post by Robert Reich. I think he's absolutely spot on.

Let's Cut Spending and Follow Britain

Pentagon Staff Officers used to turn to each other after receiving particularly muddleheaded direction from on high and say:"that's dumb - let's do it."

In case we need current evidence that government austerity when a country is in a liquidity trap contracts the economy, just look to Britain.

Since invoking austerity, British GDP has shown no growth for the past nine months. The Tories have a number of excuses: it was the royal wedding of Prince William and Kate Middleton; no - it was the Japanese earthquake and tsunami; no - it was record high temperatures in April; no - it was advance ticket sales for the 2012 Olympics in London.


Might it be the result of reducing government spending, thus reducing demand when the economy is already weak?

Goldman Sachs seems to think that will happen here, according to a report quoted by economist Jared Bernstein. Goldman Sachs analysis:

“A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment. In the first quarter, the Commerce Department estimates that spending cuts at the federal, state, and local level subtracted 1.2 percentage points from the annualized pace of real GDP growth; moreover, the expiration of the “Making Work Pay” federal tax cut and hikes in state taxes probably offset most, if not all, of the boost to disposable income from the temporary payroll tax cut.

In the second quarter, the fiscal policy impact was probably smaller, but still negative. Indeed, monthly data on defense spending, state and local employment, and state and local construction all show a clear downward trend for 2011 so far.”

So don't be surprised if our next employment report looks bad.

In the meantime, I like this photo:

Tuesday, July 26, 2011


The North Carolina legislature today attempted unsuccessfully to override Governor Perdue's veto of House Bill 351, the Voter ID bill. According to the News and Observer, there may be future attempts to override.

I have commented previously on this and similar bills here and here.

Monday, July 25, 2011

Meanwhile, Back at Town Hall

The Town of Oriental has now resolved the police hiring impasse by recognizing that town administration, including hiring and supervision of police officers, is the legal responsibility of the town manager, not the Board of Commissioners.

The morning this revelation was announced, one of the commissioners revealed that she (the commissioner) had tasked one of the town employees with uncovering all of the amendments to the town charter and putting them on the web site.

Not a bad idea, but a better approach would have been to suggest the course of action to the manager and let him decide how to go about it. He is the one who must assign tasks to the staff. This is neither the duty nor the responsibility of a commissioner.

Now that the principal of how responsibilities are divided by North Carolina law between the board of commissioners and the town manager has been accepted, I think commissioners will find their own job very much easier. And they will probably do it better.

Debt Ceiling Kabuki

Here's what Brad DeLong thinks we should do about the debt ceiling:

I like it. It's an example of the TACAMO principal (Take Charge and March Out).

There's another principal the Republican intransigents should consider if they get their way: you broke it, it's yours. In other words, if they succeed, everything that goes wrong with the economy in the next year and a half belongs to them! Be careful what you wish for, lest you get it (the Midas Principal).

Heads You Win, Tails I Lose

Here are some thoughts on the probable effects of the debt talks: Lose-Lose-Lose.

Not in a Depression - Yet

One of the reasons we are only in a recession and not in a depression is the existence of safety net programs put in place eighty years ago under FDR, supplemented by programs put in place nearly fifty years ago under LBJ. As a consequence, even though the percentage of the population with jobs is lower than at any time since the great depression, we don't have masses of people living in Hooverville's, rummaging through garbage dumps for sustenance.

Because of those programs, which Republicans opposed from the very beginning, not only have individuals and families been able to survive, businesses that would otherwise have had to close their doors have been able to stay open.

The scale of our programs is significant. Twenty percent of all personal income in 2010 came from government transfer programs. Just imagine the impact if those programs didn't exist.

Before the year is over, you may not have to imagine it. Some programs, such as extended unemployment insurance, are due to expire later this year. Some stimulus programs are also due to expire. Among measures proposed to reduce government spending are proposals to raise retirement age, raise the age of eligibility for Medicare and increase the costs paid by individuals.

As of now, it appears that neither party is pushing for measures to stimulate the economy, create jobs, thus increasing GDP and revenue, reducing the deficit by growing our way out of it.

So whatever results from the current budget negotiations, it looks like government spending will be reduced.

This will kill jobs.

In the long run, though, there are issues beyond aggregate demand that need attention. How do we address the jobs deficit in face of outsourcing offshore, computerization, or a combination of both. Where will our future jobs come from?

University of Texas economist James K. Galbraith has some thoughts on the subject in a recent essay published here by the New America Foundation.

Sunday, July 24, 2011

Senator Tom Coburn (R) Oklahoma Is After TriCare

Senator Tom Coburn, physician, of Oklahoma, wants to drastically reduce the health care benefits of retired military personnel and their families.

Senator Coburn, who never himself served in the military, according to his bio, has decided to aim his budget cutting axe at military benefits for active duty and retired military personnel and retirees. Under his axe are Tricare Prime and Tricare for Life, the military's medical care system that covers some active duty personnel as well as retirees and their families. His proposals would increase enrollment costs by as much as eight times and add thousands of dollars to fees charged to Medicare-eligible retirees. "It's a matter of fairness," he says.

Coburn would also raise the cost of pharmaceuticals by three to five times, and he would target prices in commissaries as well.

Walter Pincus of the Washington Post describes Senator Coburn's plan here.

Saturday, July 23, 2011

Heresy and Heretics

I'm not sure these days exactly what or who is conservative.

There was a time when "conservative" referred to people who dressed conservatively (women wore white gloves and hats, men wore suits and ties with hats and perhaps a vest), spoke with attention to grammatical and factual correctness, and who were cautious about making changes to the existing order. Plainly that understanding no longer applies.

There always were, I knew, different kinds of people who called themselves conservative. A quarter of a century ago, I was puzzled by two of them in particular: James J. Kilpatrick and William F. Buckley, Jr.

What puzzled me was the fact that, though I seldom agreed with James J. Kilpatrick (except when his topic was the English language), I could understand what he was saying and follow the logic of his arguments. Buckley, on the other hand, made no sense to me at all. Because of this, I had no idea if I ever agreed with him.

I asked an Irish Catholic friend and co-worker, who explained: "Kilpatrick is a Protestant. He presents facts and uses logic to make his case. Buckley, on the other hand, is seeking to expose heresy." Then he added: "by the way, liberal Catholic columnists do the same."

It appears that we are being led toward economic catastrophe by a group of grand inquisitors bent on rooting out heresy against the revealed truth as proclaimed by sainted (though dead) economists. If the economic facts collected by statisticians don't fit the revealed theories, then the facts are wrong! If predictions based on those theories don't come to pass - well then, there must be some other explanation.

Friday, July 22, 2011

Debt and Remembrance

Here's a comment from Paul Krugman's blog today:

July 22, 2011, 9:59 am

Debt and Forgetfulness

I keep seeing comments along the lines of “Keynesianism doesn’t work, because liberals keep running deficits even when times are good, and never pay debt down.”

Guys, how about looking at recent history (pdf)?

Between 1993 and 2001, federal debt held by the public fell from 49.2 percent of GDP to 32.5 percent of GDP. What stopped the paydown of debt wasn’t liberal big spending; it was demands from conservatives that the surplus be used to cut taxes. George Bush said that a surplus means that the government is collecting too much money; Alan Greenspan warned that we were paying off our debt too fast.

Oh, and I was very much against those tax cuts, arguing that we should pay down the debt to prepare for future needs. As a reward, I now get accused of inconsistency, for saying that deficits were bad under Bush but good now.

Anyway, get your history straight before making claims about who’s fiscally responsible.

Wisdom and Politics

"Do you not know, my son, with how little wisdom the world is governed?"

Axel Oxenstierna, Chancellor of Sweden to his son (1648)

He would feel right at home today.

Thursday, July 21, 2011

Larry Summers Comments: Jobs Deficit

I have copied the following comments by Larry Summers from economist Brad DeLong's blog:

Felix Salmon sends us to the Walter Isaacson interview:

The smart and charming Larry Summers: "I think the biggest problem the country has right now is not the budget deficit. The biggest problem the country has right now is the jobs deficit. Yes, there’s a risk that we will misplay things and make the mistakes of the 1970′s, and have inflation and have excessive borrowing. But far and away the larger risk is that we will make the mistakes of 1937, and that we will not have a recovery that is sustained, that we will make the mistakes that Japan made, and that we will have a decade or two of stagnation. The right question to be focused on is how to stimulate demand.

"Look out there, guys. The Treasury bond rate, Treasury note rate for ten years is 2.85 percent. Nobody is failing to invest because 2.85 percent is too much. They are failing to invest because there are no customers in their store. They are failing to invest because their factories are sitting empty. They are failing to innovate because they’re not sure how large the market for the product will be. That is the problem that we need to address. By the way, an extra percent a year on the growth rate for the next five years will do more for the budget than any amount of the entitlement-cutting that’s under discussion.

"So I think the President has been right to be focused, and I think he could even focus more intensely on what is, I think, the central problem, which is how to get enough demand and enough confidence going, so that this economy achieves escape velocity from the recession. We’ve been flying out of the recession, but we’ve been flying out of it dangerously close to stall speed, and doing something about that should be our top priority. I mean it is crazy.

MR. ISAACSON: "Does that mean more stimulus?

DR. SUMMERS: "Well, you can call it that. That’s one part of it. It is crazy if you think about it, that we have schools across this country where we tell our kids that education is the most important thing in the world, but we ask them to study in classrooms where the paint is chipping off the walls. We can borrow money to invest in fixing that, at 2.8 percent. Twenty percent of the people in the country who are doing construction are unemployed, and we’re not trying to do something about that, when we have a major demand problem? It just doesn’t make any sense. We have infrastructure in this country — I mean you can argue whether we need a new high speed rail system or whether we don’t need a new high speed rail system. But I don’t know what the argument is for letting bridges collapse. I don’t know what the argument is.

"I mean every time, and unfortunately it’s fairly often, I fly in and out of Kennedy Airport to any other airport in the world that you might fly to from Kennedy — you can fly to Europe, you can fly to Asia, any of those places, and you compare Kennedy Airport with the airport where you land, and you ask yourself which is the airport of the greatest country, richest, most powerful country in the world? I mean, and you know, you can say airports aren’t that important or whatever. But it is symbolic of an approach to infrastructure that probably never made any sense, and certainly doesn’t make any sense when you can borrow money at 2.8 percent and you’ve got 20 percent of the construction workers unemployed. So I’d rather see us focus on the jobs deficit. I’d rather see us focus on the public investment deficit. I’d rather see us focus on the human capital deficit. Those are deficits that we need to focus on also.

"Yes, in the long run right now, thanks mostly to what happened during the Bush administration, the United States of America taxes 14 percent of GDP. Fourteen percent. That’s about four and a half percent below the average of what we’ve done over the post World War II period, and we now have the oldest population that we’re ever going to have, a larger debt than we had before. We have, apart from the aging of the population, a public sector that’s heavily involved in health care, and in every country in the world, health care has grown relative to GDP. The idea that somehow 14 percent is adequate, or that the priorities starting at 14 percent should be to cut taxes, is crazy...

Debt Ceiling Analysis

What will happen if Congress doesn't raise the debt ceiling?

One analysis was provided today in an e-mail from Congressman Walter Jones.

"The House Republican leadership recently invited Jerome Powell - former Undersecretary of Treasury in the George H.W. Bush Administration - to present members of Congress with a nonpartisan debt limit analysis, and to present a fact-based look at what consequences our country will be facing without a resolution to the current budget crisis."

Actually, I don't agree that we have a current budget crisis. What we have is an artificially-induced political crisis over a matter that should be treated as a routine housekeeping matter. This is what President George W. Bush's Director of the Office of Management and Budget, Mitch Daniels, called the debt limit. He was right.
Jerome Powell, George H. W. Bush's Undersecretary of the Treasury, provides a debt ceiling analysis here. Powell's analysis makes it clear that the consequences of a failure to increase the debt limit could be catastrophic. He describes the risks as serious. In my view, he understates the risk, because he doesn't address the cascading effects of resulting job losses, interest rate increases and contraction of the economy likely to result.

So read the analysis, but bear in mind the consequences of default could be very much worse.

Wednesday, July 20, 2011

Oriental Town Charter: More Info

For those following the saga of Oriental's 1899 charter and subsequent amendments, I now have a copy of the 1997 ordinance, entitled 'AN ORDINANCE TO AMEND CHAPTER 184, PRIVATE LAWS OF 1899 ("TOWN CHARTER OF THE TOWN OF ORIENTAL").

The operative portion of the document reads as follows:


That Chapter 184, Private Laws of 1899 ("Town Charter of the Town of Oriental") be and the same is hereby amended by adding Section 16 as follows:

"Section 16. That the Town of Oriental shall operate under the council-manager form of government in accordance with Part 2 of Article 7 of Chapter 160A of the General Statutes of North Carolina and any provision of this act [the 1899 charter] not in conflict therewith."


/s/ Sherrill Styron
/s/ William M. Crowe

The bottom line: Pretty much what I have been reporting for the last year, as summarized here. In other words, the board of commissioners makes policy and political judgements, and the town manager administers the town.

Annoying (and Erroneous) Bloviations - Summary

Relating to several of my recent posts, economist Jared Bernstein today brings clarity to many issues in his post, "Roundup of Deeply Annoying Stuff."

I particularly like his analogy of the sinking boat. I may try to rework that one for Pamlico Sound.

Tuesday, July 19, 2011

Deficit? How About Jobs

Yesterday I posted a link to a good article in the Washington Post about deficits and debt.

The Post article, however, left out the most important thing - why managing the federal budget isn't at all like managing a household budget. The reason is jobs and overall economic health of the nation.

The government manages our money. The public quite rightly holds the president and members of congress responsible for the economy.

Money is a creation of man. Whether gold, silver or paper, it is a social artifact that must be managed. Wisely.

Some fantasize that a return to the gold standard for our currency will bring financial stability, forgetting that we were on the gold standard in 1929 when the great depression began and for four years after that. It didn't help. Other proposed magical solutions for a financial utopia include a balanced budget amendment. After all, every state has to balance its budget.

But states don't have their own money.

The federal government does.

There are two ways the government uses money to maintain or restore the health of the economy:
(a) Monetary policy. The Board of Governors of the Federal Reserve System and the Federal Open Market Committee (FOMC) make key decisions affecting the cost and availability of money and credit in the economy. If the Fed determines that inflation looms, they increase the discount rate or reduce the money supply to cool down the economy. If economic activity falls below trend, it may reduce the discount rate or increase the money supply.

The statutory goals of the Fed's monetary policy are to maintain stable currency and full employment. That is already very different from managing a household budget.

(b) Fiscal Policy. On a day to day basis, the Department of the Treasury borrows and repays money as necessary to conduct government operations. Government receives its revenue sporadically, but has to pay its bills when they come due. It covers any shortfall by short term borrowing and repays the debt when revenue is received. This is very much the same way businesses operate. Payment to businesses for goods or services provided is typically received well after the goods or services are produced and delivered. The business in the meantime has to pay its employees, its suppliers and its contractors. To cover the delay in receiving payment, businesses establish lines of credit with a bank. The bigger the business, and the greater the resulting income, the larger the line of credit a bank is willing to extend. Nothing unusual here.

Bear in mind that every expenditure the Treasury covers has been authorized by the Congress and funds have been appropriated. Strict controls are in place.

That being said, it is possible that monetary policy, controlled by the Fed, may work against fiscal policy, controlled by the Congress and the president, since expenditures in excess of revenue can be expansionary, while revenue in excess of expenditures will be contractionary.

Right now, with the Fed’s interest rate set as low as it can go (the zero bound), there is nothing more the Fed can do to stimulate the economy. Businesses and banks are awash in cash, interest rates are as low as they can be, but businesses aren’t borrowing to expand capacity. They already have excess capacity as it is. What they need are customers.

For the foreseeable future, only the government can act as a purchaser at the scale needed to get the economy going again.

The last thing we need is reduced government spending.

Monday, July 18, 2011

What Is This Deficit and Debt Stuff?

There's a lot of nonsense, hype and hyperbole being bandied about concerning the annual federal deficit and the national debt.

One of the problems for members of the public trying to cut through the hype is, what do the words mean? The Washington Post has provided a public service by explaining in pretty clear terms what the basic concepts are describing. The article is worth reading.

The Post could have done a better job, though, of explaining why managing the federal budget isn't like managing a household budget. I'll give that a try tomorrow.

Town of Oriental Referendum 1993

The North Carolina Legislature in its 1991 session passed An Act to Set a Referendum on Possible Changes in the Electoral System for the Town of Oriental (Chapter 878, Senate Bill 968). That act is posted on the Town of Oriental's web site at pages four and five of "town charter and amendments" under General Ordinances and Town Charter. The 1991 act scheduled a referendum for a special election to be held November 3, 1992.

Anyone reviewing the 1991 Act can see immediately that each of the three choices to be presented to the voters begins: "(a) Sections 3 and 7 of Chapter 184, Private Laws of 1899 (the original 1899 charter) are repealed."

Section 3. of the 1899 charter stipulates: "That the officers of the town shall be a mayor, three commissioners, a constable, who shall be elected by the commissioners, and such other officers as the commissioners may deem necessary and proper, as provided by said chapter sixty-two of The Code [of 1883]; Provided that no person shall be a mayor, commissioner or other officer of said town unless he be a qualified voter therein."

Before the special election was held, the state legislature passed "An Act to Make Technical Corrections to a 1992 Charter Amendment to the Town of Oriental, and to Reschedule a Referendum. The act rescheduled the referendum for November 2, 1993, modified option B to provide for a five-member rather than a six-member board and stipulated that whichever choice received a plurality of votes would go into effect beginning with the 1995 regular municipal election. That act is not posted on the town's web site, but is posted on the web site of the North Carolina Secretary of State.

The Pamlico County Board of Elections conducted the referendum at the same time as the November 2, 1993 municipal election. Sherrill Styron was elected mayor with 265 votes. Commissioners were Radford Lewis (265 votes), Joe Harris (249 votes), and Dave Nelson (185 votes). A plurality of voters voted for question 'C', a mayor and five member board of commissioners with the mayor voting only in case of a tie (218 votes). Question 'A', keeping a three-member board received 73 votes and question 'B', a five member board with the leading vote getter serving as mayor, received 69 votes.

The Pamlico County Board of Elections retains a copy of the abstract of canvassing (the vote count) for that election, as well as a copy of the ballot used for the election.

The 1993 repeal of sections 3 and 7 of the 1899 charter had no immediate effect. The town continued to have a "mayor-council" form of government, which gave the board of commissioners as much operational control of day to day operations, including hiring, as the board wanted to exercise. But in 1997, the town amended the charter by ordinance, changing to a "council-manager" form of government. Under that form, the commissioners have no day to day administrative powers - only the right to establish general policies and exercise general oversight.

North Carolina General Statutes establish the duties and responsibilities of the manager by law.

Saturday, July 16, 2011

Paper Money: Let 10,000 Banknotes Bloom

If you are a businessman, how would you like to operate in a country with 10,000 different kinds of banknotes?

Sounds pretty chaotic, doesn't it? How would you know which banknotes were issued by sound banks and which were not?

That's what we had in the United States in 1860. Samuel P. Chase, Secretary of the Treasury during the Civil War, brought some order to that system.

Oriental Town Charter Loose Ends

At the end of the Oriental Town Board meeting/press conference last Friday, Commissioner Venturi announced that she had asked town employee Lori Wagoner to compile the 1899 town charter and all amendments.

It's a really good idea to have and to publish on the town web site an annotated charter. The annotations should include not only the two amendments (November 4, 1993 by referendum and 1997 by ordinance), but also all changes dictated by changes to state law and annexations not listed in Section 2 of the 1899 charter.

This won't be a simple task. A cursory perusal suggests that, in addition to the repeal of sections 3 and 7 by referendum, Sections 5, 6, 8, 9, 10, 12, and 14 have been amended or replaced in whole or in part by subsequent changes to North Carolina law. It would be helpful to the public for these changes to be annotated on a public copy of the charter.

I propose the board of commissioners appoint a citizens committee empowered to contact the state legislative library, the Secretary of State's office and the School of Government to develop an accurate annotation.

Job Squeeze

I keep hearing it said that "government jobs aren't real jobs," that in fact, some assert, government jobs squeeze out private sector employment and actually hurt the economy.


If people who live in Eastern North Carolina really believe that, they should petition their representatives and senators to close down the Marine Bases at Cherry Point and Camp Lejeune, the Seymour Johnson Air Force Base at Goldsboro, the Army Base at Fort Bragg, state funded institutions such as ECU, and on and on. In Raleigh, the legislature's new budget has cut the funding for the capitol police in half. Can't we do more?

One of the mysteries of political discourse is the ability of participants to hold conflicting views at the same time and actually act on them. This requires a skill at intellectual compartmentalization that I never acquired.

By the way, those who serve in our military actually hold government jobs. When they walk into Wal-Mart or Target, their money looks like anyone else's. Their checking and savings deposits have the same economic effect on their community as anyone else's. And if they lose their jobs through a reduction in force, it contracts the economy just as much as if they had been working for General Motors or Google.

We hear a lot about the GDP. What actually goes into the GDP? GDP equals private consumption and investment, plus net exports, plus gov’t spending. It's as simple as that. Reduce government spending without increasing private consumption and investment, and the economy will contract.

The reason private consumption isn't increasing is that people have no money. The reason companies aren't investing in increased production capacity is that they have ample excess capacity already and can't see a near term increase in customers.

This is elementary business plan stuff. Businessmen (unless they have grown soft in the head) make business decisions based on reality, not on whether the president or members of Congress have hurt their feelings.

Economist Jared Bernstein has a good question and answer posting on his blog today.

In today's circumstances, any reduction in federal spending can only contract the economy. To be sure, some reductions would be worse than others, but right now any reduction will be bad.

As we await news from Washington on increasing the debt limit, I have my fingers crossed that the outcome will be merely very bad (reducing spending when we really need a stimulus) rather than disastrous (going into default).

Friday, July 15, 2011

Excitement in The Town of Oriental

The day began with an 8:30 public meeting of the Board of Commissioners at Town Hall. The meeting was originally called to discuss the board's hiring of a police officer.

There was no quorum, and it turned out there was no need for one. Mayor Sage explained that, after discussing the town's charter and subsequent amendments with the town attorney and with the North Carolina School of Government, it turns out that, under North Carolina law, hiring the police officer(s) is the job of the town manager rather than the board of commissioners.

Then the Pamlico County Board of Elections met at 10:00 to review candidate filings for November's municipal elections. Three municipalities - Arapahoe, Grantsboro and Vandemere did not have as many candidates file as there are openings for elected office. The board of elections decided to exercise the option to extend the filing period by five days for those three towns.

Just before the filing period closed, Ms. Jennifer Roe of Oriental filed to run for mayor of Oriental. There are now three mayoral candidates in Oriental: incumbent mayor Bill Sage, candidate Katy Pugh and incumbent commissioner Jennifer Roe.

Debt Ceiling

We wouldn't be talking about the debt ceiling if President Clinton's budgeting policies had continued. There would be no debt.

Publicly held debt of the United States right now is about 63% of GDP. Most US households would be happy if their debt, including mortgage, car loan, etc. were no more than 63% of annual income.

If the US defaults on its obligations, and you owe any money to anyone, you can expect your payments to increase, because one or more of your payments is likely pegged to US T-bills. This will drag our economy down even more.

Last week a columnist for the News and Observer wrote in glowing terms about the US economy of 1834. If that's where we are going, believe me - you won't like it. Where are you going to stable your horses?

Thursday, July 14, 2011

Bastille Day

Happy Bastille Day!

Historian David McCullough puts our ties with France in perspective in today's New York Times.

He gets one thing wrong, though. What we call "French fries," (originally "frenched fries" for the way they were sliced or "frenched") are actually Belgian. Belgians become very agitated when pommes de terre frites are ascribed to France. You can read all about it in Asterix and Obelisk cartoons.Link

Remember The Preamble?

When I was in high school, one of the things students were expected to do was to remember and recite the preamble to the Constitution of the United States.

Remember it? It goes like this:


We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

So how come so many conservative commentators rail against the "welfare state?" Our aspiration that the federal government promote the general welfare is embedded in our most fundamental document.

We can certainly debate how best to accomplish all the actions listed in the preamble, but so long as our Constitution defines who we are, we cannot deny the legitimacy of any of them.

Do students memorize such things any more? Or take them seriously?

Wednesday, July 13, 2011

Economic Recovery Manque [Translation: Missing]

In both economics and politics, the key questions are: "who benefits?" and "who pays?"

For two years now, statistics show the nations' Gross Domestic Product is growing, but people who work for a living don't see the benefit. So what's happening - is the GDP disappearing into a black hole?

Economist Jared Bernstein has tracked it down. Here is where it went.

Very interesting graphic:

Tuesday, July 12, 2011

Town Of Oriental Charter, 1899

This morning at the Bean before I arrived, an incumbent commissioner loudly disputed with another patron my contention that hiring policemen is the manager's job. The commissioner insists that the 1899 charter provision in Section 3 that the town's officers include a constable, "who shall be elected by the commissioners" authorizes the board of commissioners rather than the town manager to hire the town's police force.

It does not.

Am I certain? Yes, I am. The record is clear, and I can cite chapter and verse.

Earlier today I shared the information with Town Hall:

Special Meeting on Police
David Cox
To:bob maxbauer ;; Warren Johnson ;; barbara venturi ; Candy Bohmert

"To Town Officials:
I was pleased to learn that the board will meet Friday to address the question of a suitable police force for Oriental. I may not be able to attend much of the meeting that day, because of a prior commitment in Bayboro. Therefore, I want to provide the board of commissioners and the manager with some information I believe pertinent to the hiring procedure.

"As I have pointed out previously, we have a council-manager form of government, established by ordinance amending the charter of 1899, which ordinance was adopted in 1997. North Carolina General Statutes spell out the duties of a town manager in section 160A-148 as follows:
"§ 160A‑148. Powers and duties of manager.

"The manager shall be the chief administrator of the city. He shall be responsible to the council for administering all municipal affairs placed in his charge by them, and shall have the following powers and duties:

"(1) He shall appoint and suspend or remove all city officers and employees not elected by the people, and whose appointment or removal is not otherwise provided for by law, except the city attorney, in accordance with such general personnel rules, regulations, policies, or ordinances as the council may adopt.

"(2) He shall direct and supervise the administration of all departments, offices, and agencies of the city, subject to the general direction and control of the council, except as otherwise provided by law.

"(3) He shall attend all meetings of the council and recommend any measures that he deems expedient.

"(4) He shall see that all laws of the State, the city charter, and the ordinances, resolutions, and regulations of the council are faithfully executed within the city.

"(5) He shall prepare and submit the annual budget and capital program to the council.

"(6) He shall annually submit to the council and make available to the public a complete report on the finances and administrative activities of the city as of the end of the fiscal year.

"(7) He shall make any other reports that the council may require concerning the operations of city departments, offices, and agencies subject to his direction and control.

"(8) He shall perform any other duties that may be required or authorized by the council. (1969, c. 629, s. 2; 1971, c. 698, s. 1; 1973, c. 426, s. 22.)"

"I am told that certain commissioners believe 160A-148(1) does not apply to the hiring of a policeman because Section 3 of the town's charter of 1899 reads as follows:
"Section 3. That the officers of the town shall be a mayor, three commissioners, a constable, who shall be elected by the commissioners, and such other officers as the commissioners may deem necessary and proper, as provided by said chapter sixty-two of The Code [The Code of North Carolina, Enacted March 2, 1883]; Provided that no person shall be a mayor, commissioner or other officer of said town unless he be a qualified voter therein." This, some argue, meets the "whose appointment or removal is not otherwise provided for by law," provision of 160A-148(1). Not exactly.

"There is a problem with citing Section 3 of the charter as authority of any kind: a referendum held November 4, 1993 - the same referendum that changed the membership of the board to five commissioners - repealed both Section 3 and Section 7 of the Charter. The relevant wording of the Act to set a referendum (Chapter 878, Senate Bill 968, Session 1991) reads as follows:

"Sec 3. (a) Sections 3 and 7 of Chapter 184, Private Laws of 1899 are repealed.
(b) The Town of Oriental is governed by a mayor and a board of commissioners of five members. The mayor shall preside at all board of commissioners meetings, but shall have the right to vote only when there are equal numbers of votes in the affirmative and in the negative."

"I bring this to your attention, because I think it is important to comply with the law. In this case, I also believe the Charter as amended provides a sound basis for good management of the town. It allows the board to focus on policy and general oversight and the manager to focus on administering the town. A further benefit is that it provides clear lines of responsibility. No town employee reports to or is supervised in any way by any commissioner or by the mayor.

"I have intentionally not taken a position on particular candidates for the police position(s) because I don't know what the board's policy will be (e.g. how many police, whether they must live in town or nearby, etc.), and I haven't read the resumes of any candidates, don't know the status of any background investigations, their health status or other issues that a hiring authority needs to take into account. It's the manager's job to conduct proper hiring procedures as spelled out in the town's personnel manual.

"I have, however, long supported the concept of at least one full time and one part time policeman.

"I urge you to direct the town manager to begin the search.

"David Cox

This dispute has gone on too long.

Let Us Now Praise Local Pols

I sometimes sit in the peanut gallery and aim (figurative) slings and arrows at local officials.

I have no personal interest in any controversies - I just want things done right. Yes, I have opinions about WHAT should be done to improve our town. My main focus, however, is HOW things are done. I try not to be influenced by personal feelings for or against individuals involved in the process.

This isn't personal - it's business. Public business.

There's another side to the story, though. We should admire all of our fellow citizens willing to step up to the plate and compete for approval of voters for the right to perform long hours of public service, steeped in controversy, often in the face of hostility, for no pay. Of all elected public officials in this land of ours, these are the ones we should most admire.

Let all incumbents know that we appreciate what they do.

For those who have already filed as candidates in November's election, I say thank you. For those still weighing whether to run for public office, I say "do it."

Monday, July 11, 2011

Oriental Police Issue

Prior to May 21, 2009, Oriental had a two-person police force. On that day, officer Careway resigned "for personal reasons," leaving the town with a one-man force.

The board of commissioners decided, largely for financial reasons, to "try out" a one-man force for awhile. After about six months, I argued that the trial had failed, leaving us with the worst of all possible outcomes. On October 13, 2009, following a series of break-ins and other crimes, I asked for a special meeting to discuss the police situation. The minutes of that session are here. (For those who are paying attention - yes, I did second an improperly worded motion to go into closed session. I hadn't figured out the rule then.)

More than two years have passed since officer Careway resigned. Now our sole remaining police officer has retired, and no effective effort has been undertaken to replace him, much less carry out the hiring effort we voted on in October, 2009.

The Board of Commissioners owes the town a decision. We need a policy - publicly discussed in open session. What kind of police force do we want? How many officers? Do we want our policemen to live in town? Do we want them to live within X miles or Y minutes of the town? What qualifications do we seek - what certifications, what level of physical condition ? Do we simply close our police department and rely on the Sheriff? If so, do we negotiate an interlocal agreement so the Sheriff and his deputies are empowered to enforce Oriental Town Ordinances? These are policy matters for the board to decide.

To be sure, the board can go into closed session under NCGS 143-318.11(5) to establish or instruct the town manager concerning the amount of compensation and other material terms of an employment contract or proposed employment contract.

The actual search, once the board instructs the town manager as to policy, is the manager's job. Once hired, under NCGS, the senior police officer (whatever we call him) reports to the town manager, who is the responsible official.

Morality and Morality Plays

My favorite Nobel Laureate in economics, Paul Krugman, is fond of saying, "economics is not a morality play."

Late last year, he explained exactly what he means: "economics is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished. The market economy is a system for organizing activity — a pretty good system most of the time, though not always — with no special moral significance. The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty; nonetheless, we accept a system with considerable inequality because systems without any inequality don’t work."

Republicans who claim to be good Christians will certainly recognize the principle as stated in Matthew 5:45: "That ye may be the children of your Father which is in heaven: for he maketh his sun to rise on the evil and on the good, and sendeth rain on the just and on the unjust." In fact, the Book of Job in the Hebrew Bible (Old Testament) is devoted entirely to this theological problem.

This is not the same as saying that there are no moral issues involved with economics. Reinhold Niebuhr, the great 20th century American theologian, in his 1932 book Moral Man and Immoral Society explained: "human society will never escape the problem of the equitable distribution of the physical and cultural goods which provide for the preservation and fulfillment of human life." A few pages later, he explains the particular aspects of our own history and that of democracy in general that generate moral complexity: "...the creeds and institutions of democracy have never become fully divorced from the special interests of the commercial classes who conceived and developed them. It was their interest to destroy political restraint upon economic activity, and they therefore weakened the authority of the state and made it more pliant to their needs....[therefore] the economic, rather than the political and military, power has become the significant coercive force of modern society."

Franklin Delano Roosevelt was making much the same point in 1936 when he said: "We know now that Government by organized money is just as dangerous as Government by organized mob." And he did not yet have to deal with the power of today's multinational corporations who seem answerable to no national power.

But when Krugman says that an economic system must have a certain amount of inequality in order to work, we are still left to wonder what is meant by an economic system that works. Works for whom? Works to what end?

These are fundamentally moral, not technical, questions.

Sunday, July 10, 2011

I Didn't Know The Gun Was Loaded

Listening to congressional Republicans downplay the danger to the nation of failing to increase the debt limit reminded me of a popular tune from the 1940's. If things go bad, they can always sing it:

What's Wrong With The Economy Today?

Economist Jared Bernstein has posted an analysis of the economy entitled "So Really, What's Wrong With This Economy?"

I promise - Professor Bernstein hasn't been reading my blog. But regular readers will recognize most of the themes. That's because "saltwater economists" are in agreement on what's wrong and what needs to be done about it.

We are also pessimistic that our government will do the right thing.