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.

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:

"BE IT ORDAINED BY THE BOARD OF COMMISSIONERS OF THE TOWN OF ORIENTAL:

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."

ADOPTED THIS 12th DAY OF NOVEMBER, 1997

/s/ Sherrill Styron
MAYOR

/s/ William M. Crowe
TOWN ADMINISTRATOR"

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.

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.

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.

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.

Really?

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).

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?

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.

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:

Preamble

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?

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:

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

From:	David Cox
To:	bob maxbauer ; billsage@townoforiental.com; Warren Johnson ; jenniferroe@townoforiental.com; 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
Oriental"


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."

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.

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.

Once Upon a Time in America

Economist Mark Thoma has put up a quote from Franklin Delano Roosevelt's political campaign for reelection:

July 08, 2011

"Instead of Twirling Our Thumbs We Have Rolled Up Our Sleeves"

Mark Thoma sends us to Ronald Dworkin quoting FDR:

How FDR Did It: For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up. We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

Posted on July 08, 2011 at 10:19 AM in Economics, Economics: Macro, History, Obama Administration

A personal note: one day just before my eighth birthday in April 1945, my mother showed me the headline of a newspaper. "I want you to remember," she said, "that a great man died today." That great man was FDR. We were living in Greenwood, Mississippi.

Never before or since did she speak to me about another political figure.

Financial Regulation: Who and How?

One of the biggest challenges in government at every level is how to regulate complex economic and industrial institutions without putting the fox in charge of the hen house.

The answer, as it has been since the time of the Greek philosophers, is to have people in charge who combine knowledge and ability with integrity. The ideal of the "philosopher king."

More easily said than done.

You may not think of the Federal Deposit Insurance Corporation (FDIC) as a likely place to find a philosopher-king. Think again.

Joe Nocera, a financial reporter and op-ed writer for the New York Times has just published an exit interview with Sheila Bair, who just completed her five-year term as head of FDIC. His article is well worth reading.

The comments by readers are also worth reading.

The article answers a lot of questions about how we got where we are with the economy and who might have been able to keep things from being as bad as they are.

Read My Lips: No New Jobs!

Today's employment report from the Bureau of Labor Statistics was dismal. Unemployment rate increased to 9.2%. Percentage of population employed is down. Wages are down.

The creditor class, especially the 1% at the top who own 50% of the nation's financial assets are delighted.

I wish I could say the news is surprising. It isn't. Nothing new here.

I have some more dismal predictions:
1. If the deficit hawks in Washington succeed in reducing government spending, the economy will contract further;
2. Wages will either remain stable or decline further;
3. Unemployment will increase and there will be a further decline in employed persons as a percentage of the population;
4. Our present position as 23rd in the world in terms of quality of infrastructure will decline.

There will be more bad news.

Because we will spend no more to stimulate the economy, our debt will actually increase.

No light at the end of the tunnel.

Oriental Town Charter 1899 - Road Work

At last Tuesday's meeting of Oriental's Town Board, at least two of the commissioners seemed to believe that the 1899 Charter governs, no matter what subsequent changes have been made to North Carolina laws.

Just to remind readers, the charter states that the town "shall be subject to all the provisions contained in chapter sixty-two of the Code of North Carolina...." So what does that mean?

The charter itself requires all of the town's officers to be qualified voters in the town. It requires that elections be held annually on the first Monday in May. It provides that commissioners have the right to collect taxes by levy and sale of property.

Under the charter, the mayor "shall have the power to cause all persons failing to pay fines, or who shall be imprisoned for violation of any town ordinances, to work it out on the streets...."

Under chapter sixty-two of The Code, the criminal jurisdiction of the mayor is the same as that of justices of the peace. Penalties for violating an ordinance were up to fifty dollars or up to thirty days in jail.

Anybody out there think the mayor still has that authority because of our 1899 charter?

Oriental Town Board Closed Sessions

Last night the Town of Oriental Board of Commissioners went into closed session "to discuss personnel matters" and someone mumbled the paragraph "143-318.11 (a)(6)" as the alleged authority.

Not good enough, on two counts:

(1): The open meetings act requires the public body to act only on a motion that explains the purpose of the closed session in plain English. Western Carolina University has helpfully provided a model motion for closed sessions under North Carolina Law here. Under section 143-318.11, there is NO general permitted purpose called "personnel." As you can see from the model, the public body must provide more information concerning the purpose under 143-318.11 (a)(6), selecting one of the following:

"+ consider the qualifications, competence, performance, condition of appointment of a public officer or employee or prospective public officer or employee.

+ hear or investigate a complaint, charge, or grievance by or against a public officer or employee.

+ plan, conduct, or hear reports concerning investigations or alleged criminal conduct."

So the motion to go into closed session was improper on its face;

(2) Assuming that the actual purpose was to "consider the qualifications, competence, performance, condition of appointment of a public officer or employee or prospective public officer or employee," and that it concerned the possible hiring by the Town of a police officer, the closed session was improper because it usurps the statutory powers and duties of the town manager under NCGS 160A-148. I have mentioned this before here and here.

I reminded the commissioners last night that they attended a special workshop August 17 2010 at 11:00 a,m. at Town Hall for the purpose "to learn the difference between Council/Manager and Council/Mayor forms of government...." The explanation was provided by Mr. Hartwell Wright, human resources consultant with the North Carolina League of Municipalities, accompanied by Ms. Lisa Kinsey, NCLM Member Services and Marketing Representative.

According to my notes from that session, Mr. Wright made it quite clear that in a council-manager government, the manager hires, fires and supervises all subordinate offices, including police, unless the town's charter is specifically amended. Otherwise, North Carolina General Statutes 160A-148 apply.

One of the commissioners said to me, "I'm looking at the Town Charter and it says we elect the constable." The same paragraph also stipulates that town officers (including the constable) must be a qualified voter in the town. The charter stipulates that municipal elections will be held every year on the first Monday in May, that commissioners have the power to collect taxes by levy and sale of property, and that the mayor has the power to cause all persons who fail to pay fines or imprisoned for violation of town ordinances to work it out on the streets. None of those provisions still apply.

The charter specifically cites chapter sixty-two (62) of the Code of North Carolina, vol. II as the source of the town's powers, rights, privileges and immunities, "as amended by subsequent acts of the general assembly."

That refers to The Code of North Carolina, Enacted March 2, 1883. I have a copy of chapter sixty-two of that Code, and provided a copy to the town manager some years ago to file with the charter. A reading of chapter sixty-two of the Code makes it apparent that very few of its provisions still apply to municipalities. The Code was long ago replaced by North Carolina General Statutes.

I'm reminded of a question raised forty-eight years ago by another old codger:

"Can't anybody here play this game?"
- Casey Stengel

Congressional Redistricting

Every ten years the United States goes through two related procedures following the federal census: (1) reapportionment, which is a process of reallocating seats in the House of Representatives to the states based on population and; (2) redistricting, which is the process whereby state governments redraw congressional district lines to create districts with more or less the same number of residents in each district.

The first of these processes is mathematical.

The second process is political. There is no mathematical approach that will reliably meet the criteria established by law and by federal courts.

What does the US Constitution say about congressional districts? Nada. Zilch. Representatives are allocated to states by state population and representatives must reside in the state they represent. No mention of districts. Then there is the requirement of the fourteenth amendment for equal protection of the laws. The Court has ruled this means "one person, one vote."

The constitution also provides there may not be more than one representative per thirty thousand population, but there must be at least one representative from each state.

The total number of representatives is set by law, not by the constitution. The last time the number was increased was in 1913, when each member represented about 200,000 voters. Following this year's reapportionment, each member will represent about 710,000 voters.

If you find it hard to get your representative's attention, this is certainly one reason.

When citizens of other western democracies learn about our redistricting system, they are puzzled. Most have some form of proportional representation, which requires no redistricting.

Should the Town of Oriental Disincorporate?

The recent retirement of Oriental's police chief, who was also the only paid member of the police department, has caused some to ask whether we need a police department. Can't we just let the county do it?

Good question.

If our taxpayers want to save money, there is an even more effective way to do it. Just cease to be an incorporated town.

What distinguishes an incorporated town from any other part of the county is the services it provides. Here is the list of services, some or all of which NCGS 136-41.2 requires municipalities to provide, along with the status in Oriental. The state's criteria is whether the town's budget appropriates funds for the service:

(i) police protection - not currently provided - some have proposed we just let the county do it;
(ii) fire protection - not currently funded by town - provided by Southwest Pamlico Volunteer Fire Department (no town appropriation);
(iii) solid waste collection or disposal - provided - town pays contractor. Some advocate changing to contracts by individuals instead of the town;
(iv) water distribution - provided - some have proposed selling our water plant to the county and letting the county distribute the water;
(v) sewage collection or disposal - not provided by town - the town sold its sewage treatment plant to Bay River Metropolitan Sewer District many years ago and no longer offers that service to its citizens;
(vi) street maintenance - some by town some by DOT - NCDOT already maintains some of the streets (e.g. White Farm Road, North St. and Broad Street) that would otherwise be our responsibility. Why not just let them do it all;
(vii) street construction or right-of-way acquisition - not provided - I have found no record in town minutes that the town ever purchased a street right of way or constructed a street (developers do that);
(viii) street lighting - provided - (many of the lights don't work);
(ix) zoning - provided, but controversial - the town's GMO is the source of great controversy. If we unincorporated, we would come under the county's land use regulations.

So, as it turns out, we do not completely provide or have abandoned a number of services normally provided by municipalities (six out of the nine listed services).

State law requires that municipalities levy an ad valorum tax of at least 5% per $100 of valuation in order to receive certain funds.

We could just lower everyone's taxes by 5% by unincorporating.

Not that there wouldn't be grumbling. Some would say we need a quicker police response than the county would provide. Some developers would chafe at the county's rules for waterfront property. Roads might deteriorate. Local ordinances would no longer apply. The town would no longer exist, so there would be no authority to sell liquor by the drink.

Operators of lodging would no longer have to collect and remit the occupancy tax. But something would have to be done with accumulated funds.

There would be no need for town hall and its staff. No public works department to fund.

So there would be complications and grumbling.

But look at the money we'd save.

Independence Day

The Continental Congress voted for independence on July 2, 1776.

On July 3, 1776, the British army evacuated Boston, leaving no British troops anywhere in the thirteen colonies of the Continental Congress.

The Continental Congress officially adopted the Declaration of Independence on July 4, 1776.

The official signing ceremony was not held until August, 1776.

So when British troops returned to the thirteen colonies, they were arguably invading an independent, sovereign nation.

Voting: Privilege or Right?

Last week, one of our local papers in Pamlico County printed an article claiming that voting is a privilege.

Wrong. Under both state and federal law, it is a right held by all citizens. The right can only be taken away by a court of law.

Or it can be frittered away by not standing up for it.

One of my earlier posts addressed the issue here.

Remember: municipal elections come up this fall.

Exercise your right to vote.

There are no unimportant elections!

The Age of Grand Undertakings

In September, 1929, the U.S. Stock market crashed. By 1932, as the depression set in, US industrial production had fallen nearly fifty percent, wholesale prices had fallen by a third, foreign trade was down by seventy percent and unemployment was up more than 600 percent.

In New York City, the corporation planning to build the world's tallest building continued with their plans and completed the building in 1931, a year and a half after construction began. Construction began on the largest reclamation project in the west, the Boulder Dam (later renamed Hoover dam) in 1931, with completion in 1936.Further west, in San Francisco, the Golden Gate Bridge and Highway District, authorized by an act of the California legislature, was incorporated in 1928 to design, construct, and finance the Golden Gate Bridge. After the crash, unable to raise construction funds, the District lobbied for a $30 million bond issue. The bonds were approved in 1930. Bank of America bought the entire issue in order to help the local economy.

Construction began January 5, 1933. It was finished by April 1937, $1.3 million under budget.

Further north, work began on the Grand Coulee Dam on the Columbia river in 1931. Later expanded in design, the project was completed in 1942 and provided hydroelectric power for wartime industries in the Pacific Northwest.

In 1934, the US Army Air Corps put out a bid for long range bombers. Less than a year later the first prototype B-17, which became the backbone of strategic air operations in World War II made its first flight.

About the same time, Congress authorized a new battleship. The keel of USS North Carolina was laid October 27, 1937. The ship was launched June 13, 1940 and put in commission April 9, 1941. Nine more fast battleships came behind her and served in World War II.

These were all grand undertakings. They were by no means the only grand undertakings in these years. In my native state of Oklahoma, the longest multiple arch dam was built on the Grand River to provide flood control and hydroelectric power.

Every one of these designs was created on paper by design engineers who did calculations by hand and with slide rules, made copies of detailed drawings using the blueprint process. Not a single digital computer was used, because none existed.

Where are our visionaries of today? All we hear is, "oh, we can't afford anything like that!"

Are we led by a generation of fraidy cats and wimps?

Don't Fence Me In

Sometimes memory plays tricks.

In my memory, I never cared much for cowboy movie star Roy Rogers. He sang too much and paid entirely too much attention to Dale Evans. Even Gabby Hayes was more interesting.

Didn't care much for Gene Autry, either.

This evening on Turner Classic Movies I watched a 1945 Roy Rogers movie that I first watched 65 years ago at the Will Rogers Movie Theater in Tulsa Oklahoma. The movie didn't get any better in the intervening decades. Still, I found I could sing along with Roy Rogers and the Sons of the Pioneers when they sang "Don't Fence Me In" and "Tumbling Tumbleweed." I was surprised that I remembered the words after all these years.

I still preferred Hopalong Cassidy.

Pamlico County Municipal Elections Candidate Filing

The candidate filing period for Pamlico County municipal elections opened today at noon at the Board of Elections office at the county court house in Bayboro. The filing period ends at noon on July 15.

As of 3:00 this afternoon, July 1, 2011, no candidates have filed.

Oriental Town Commissioners and Management

Some Oriental Town Commissioners seem to have great difficulty grasping the proper role of the board of commissioners. Let's try again.

The Town of Oriental has a council-manager form of government. That means the board of commissioners exercises a legislative role by providing general direction and control over town government, adopting general personnel rules, regulations, policies or ordinances and providing oversight over the Town Manager's activities.

The Town Manager is the chief administrator of the town. He is responsible to the board of commissioners for all municipal affairs. His powers and duties are spelled out in North Carolina General Statutes.

The manager supervises and directs all departments of Town Government, including appointing, suspending or removing ALL city officers and employees not elected by the people (subject in some cases to other provisions of the law).

In brief, the town board gets to hire the town manager. The board has NO statutory authority to hire or fire any employee subordinate to the manager. To be sure, the board can establish general personnel rules, regulations and policies.

Commissioners have NO operational role in the town's administration. No supervisory role and no authority over employees. No individual commissioner has any administrative or disciplinary authority over the manager or any other employee. Neither does the mayor.

We saw at today's agenda meeting the sort of problem that can arise when an individual commissioner takes on the task of obtaining cost estimates, "bids," making design decisions, and attempting to move forward with a project instead of asking the entire board to task the manager with the project. In this case, the project that seems unnecessarily muddled is the pier at the end of South Avenue.

There have been other matters unnecessarily muddled by commissioner meddling in the past year and a half.

The board needs to address this. It is a procedural issue.

Town of Oriental Personnel Procedures: Due for Amendment?

This morning at their 11:15 special meeting, the town board of commissioners passed a motion to offer Dwaine Moore, who is a corrections officer at the prison in Pamlico County. Moore, a resident of Oriental, has been working for months as an unpaid auxiliary officer for the Town of Oriental. The board also offered an unpaid position as auxiliary police officer to Bob Lyons, a marine patrol officer for the state.

From the subsequent discussion, it was unclear to me whether the board would decide to conduct a formal search for a permanent Chief of Police to replace the retiring Chief Casasa.

After the meeting, I decided to reread what North Carolina General Statutes have to say about hiring personnel. Here is what I found:

"Section 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) etc."

Among the officers who may be appointed by a city, presumably in this case by the manager, is the chief of police and other police officers (NCGS 160A-281.)

Another interesting provision of NCGS is the following:

"Section 160A-165. Personnel board.
The council may establish a personnel board with authority to administer tests designed to determine the merit and fitness of candidates for appointment or promotion, to conduct hearings on the appeal of employees who have been suspended, demoted or discharged, and hear employee grievances."

In other words, it appears that under NCGS, the board appoints the manager and the manager makes all other personnel decisions, possibly as supported by a personnel board if one is established.

And by the way, town commissioners have no legal authority to provide any degree of supervision or direction over any town employees.

Maybe it's time to review how the town does business.