How We Stopped Investing in the Future: A Florida Case Study

In June 2009, ten Florida Congressmen sent a letter to the Department of Transportation, requesting over $2 billion from the federal government. They wanted to build a high-speed rail line, shuttling passengers from Tampa to Orlando and eventually Miami in only two hours. The money was supposed to come from the American Recovery and Reinvestment Act, the $787 billion “stimulus” bill that newly-elected President Barack Obama signed in February of that year.

Of the ten Florida Congressmen, three were Republicans, and all three had voted against the stimulus: Lincoln Diaz-Balart, Mario Diaz-Balart, and Adam Putnam.

This kind of about-face wasn’t unusual. Many Republicans were begging for a piece of the stimulus after they had tried to kill it in Congress. Even party leaders like Paul Ryan and Eric Cantor got in on the action.

John Boehner defended this contradiction by saying that the stimulus would fund “shovel-ready projects that will create much-needed jobs.” Only a few months earlier, he had been saying the exact opposite — and relentlessly trashing anyone who dared to disagree with him.

The Tampa-Orlando rail line really did fit Boehner’s definition. It was shovel-ready because almost all the land and permits were already lined up, and according to the U.S. Conference of Mayors, it would create 27,000 jobs.

Moreover, it was good fiscal policy. According to two separate reports, the project would produce an annual surplus of $31 million to $45 million by 2026 — and that didn’t include the much more profitable connection to Miami that was likely to follow.

And it was good environmental policy. High-speed rail emits far less greenhouse gas than cars, especially in densely populated regions like central and southeastern Florida, which is why overflowing cities in China, Europe, and Japan have surged so far ahead of us in this vehicle of the future. It saves time, money, and pollution. Unsurprisingly, it’s very popular.

Fifty years ago, this would have been a no-brainer. In the 1950s and the 1960s, politicians were dedicated to investing in new technology and staying one step ahead of the Soviet Union. It’s no coincidence that economic growth was faster and more widespread in those days.

Back then, the federal government spent 2.6 percent of the nation’s income on nonmilitary investment. In the last twenty years, it has averaged 1.8 percent per year. That difference of 0.8 percent may not seem like a lot, but it adds up to trillions and trillions of dollars that could have gone into research and development, education, and new infrastructure — and, if previous investments are any indication, would have yielded benefits many times higher than the costs.

As economist Eugene Steuerle put it, “We have a budget for a declining nation.”

On January 28, 2010, the White House granted Florida’s request. By December, the Department of Transportation had allocated $2.4 billion against a cost of $2.65 billion, and they promised to cover any cost overruns. Had Florida accepted the money, its workers would be laying rail for the Sunshine State bullet train at this very moment.

Instead, Governor Rick Scott rejected the deal, citing cost concerns that didn’t make much sense since the feds were on the hook for any losses.

Thus did the dreams of high-speed rail die in Florida. Thus do many dreams of the future die in the modern political arena.

In Tampa, there’s a street called Bayshore Boulevard. It’s the longest continuous sidewalk in the world. It’s a beautiful walk, with a balustrade that overlooks the water below. It was built in the 1930s by the Public Works Administration, part of the federal government’s response to the Great Depression. It’s just one of many breathtaking feats of construction that dot this great land of ours, each a reminder that, as Transportation Secretary Ray LaHood said during the high-speed rail fiasco, “We still know how to do big things in this country.”

I’d like to think that’s true. I’d like to think we still care about the future. I’d like to think we can build a better tomorrow. I only wish Governor Scott and his fellow ideologues felt the same way.

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This op-ed was published in today’s South Florida Sun-Sentinel.

Three Dirty Little Words: Liberal Media Bias

“Are any of you voting for Mitt Romney?” host Jimmy Kimmel asked the audience at the Emmy’s last month. “Okay,” he said after listening to the smattering of applause, “there’s forty Republicans and the rest: godless, liberal homosexuals.”

“Being a Republican in Hollywood,” he joked, “is like being a Chick-fil-A sandwich on the snack table at Glee.”

I work in Hollywood. So I’ve seen my fair share of “liberal bias.” And I’m here to tell you that there is no liberal bias in the American media.

Oh sure, some news outlets are more liberal than others. Everyone knows that MSNBC is the channel for Democrats and Fox News is the channel for Republicans. And everyone knows that the editorial page of the Wall Street Journal is more conservative than that of the New York Times. But it is flat-out untrue that the media as a whole leans to the left.

I mention this because Paul Ryan, the Republican nominee for vice president, recently accused the media of trying to swing the election in his opponents’ favor.

All evidence to the contrary. This summer, the Pew Research Center examined the news reports of 50 major news outlets and found that 72 percent of the references to Barack Obama were negative, compared to 71 percent of the references to Mitt Romney. Similarly, statistical wunderkind Nate Silver examined the historical record and found that presidential election “polls have no…history of partisan bias.”

This won’t come as a surprise to anyone who’s spent any time studying the subject. Experts have combed through the archives looking for all sorts of bias. The Journal of Communication collected the results of 59 published research papers on media bias, and they came to three clear conclusions: In newspapers, there is no bias. In network television, there is a tiny — and I mean tiny — liberal bias. And in magazines, there is — wait for it — a conservative bias!

But you don’t have to read the Journal of Communication to figure that out. Just look around you. As media reporter David Carr pointed out earlier this week, the bestselling newspaper in America is the famously conservative Wall Street Journal, the most popular cable news channel is Fox News, and three of the top five radio broadcasters are Rush Limbaugh, Sean Hannity, and Michael Savage — and those guys make Mitt Romney look like Lyndon Johnson.

Moreover, every major news outlet is owned by a massive multinational corporation. Gannett owns the USA Today. Time Warner owns CNN. Comcast and General Electric own NBC and MSNBC. Walt Disney owns ABC. The New York Times, the Washington Post, and CBS are all listed on the New York Stock Exchange — and the majority shareholder of CBS is the billionaire Sumner Redstone.

Where do you think the sympathies of these mega-rich capitalists lie? Do you really think they’d let their news outlets dismantle the free market system that’s made them so wealthy?

And so what if they did? Is a “liberal bias” inherently wrong? Instead of asking whether a news outlet is conservative or liberal, shouldn’t we be asking if they’re right? Shouldn’t we demand, above all else, that the media tell us the truth? And what law of nature says that the truth is always nonpartisan?

It’s a fact that tax cuts for the rich haven’t increased economic growth. It’s a fact that the Earth is warming because of carbon emissions from manmade objects. It’s a fact that Palestine is a humanitarian disaster because Israel is blockading critical exports and imports.

And we’re supposed to sugarcoat these facts because they don’t fit into some people’s agendas?

The economist Paul Krugman has a famous saying: “If a presidential candidate were to declare that the earth is flat, you would be sure to see a news analysis under the headline ‘Shape of the Planet: Both Sides Have a Point.'”

And who comes up with these “sides” anyway?

In Europe, “conservatives” recoil at the idea of a government failing to allocate affordable health insurance to all its citizens. In America, rightwinger Glenn Beck gets a primetime slot on television, but a real leftist like Noam Chomsky is taboo.

Who’s the liberal equivalent of Glenn Beck? Rachel Maddow? Come on. This is a woman who said she’s “in almost total agreement with the Eisenhower-era Republican party platform.”

When was the last time you heard an American politician say that the government should give a job to every unemployed person who is willing and able to work? How many media pundits endorse tax rates above 50 percent or the abolition of nuclear weapons? Forty years ago, some of our most famous leaders were advocating exactly these solutions. Now, they’re fringe ideas at best.

Every time someone says “conservative” or “liberal,” I’m reminded of a line from the movie Princess Bride: “You keep using that word. I do not think it means what you think it means.”

My point here isn’t that we should change the system or that we should embrace leftist ideology. All I’m saying is, this is a ridiculous debate, and we must stop having it because it’s distracting us from the real issues in a very important election.

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An abbreviated version of this op-ed was published in today’s South Florida Sun-Sentinel.

Wall Street’s Rap Sheet Tells a Harrowing Story

There’s a serial killer on the loose.

This heartless criminal is slaughtering nations left and right.

For two decades, it’s been feasting on unsuspecting governments.

With each victim, its power grows.

And now, it’s at our front door.

The first reported crime occurred in 1982. That was the year when Mexico defaulted on its debt. For over two decades, Mexico and its Latin American neighbors had been borrowing money from American banks to finance their growing economies. The 1960s was a good time to be a finance minister south of the Rio Grande. Governments were flush with cash from the economic boom, largely financed by loans. When inflation drove U.S. interest rates into the double digits, Latin American governments found themselves with whopping interest payments. By the 1980s, they simply stopped paying the bills. Lenders fled, and a massive financial crisis swept through the region.

But interest rates eventually came back down, and the lenders returned. Again banks like Goldman Sachs lent money to the Mexican government, and again investors panicked. In 1994, another financial crisis struck Mexico and — in a so-called “tequila effect” — spread to Brazil. This time, the American government stepped in. Treasury Secretary Robert Rubin, who used to be the Co-Chairman of Goldman Sachs, engineered a $20 billion bailout that saved his old firm’s ass.

Meanwhile, on the other side of the world, the “East Asian miracle” was lapping up the money that was spilling out of Latin America. Hong Kong, Singapore, South Korea, and Taiwan — the “Four Asian Tigers,” they were called — were industrializing faster than any country ever before, and Wall Street was more than happy to slake their thirst for investment funds with the cool liquid of debt. Until, of course, the bubble burst. In 1997, it became clear that investors had been too optimistic and asset prices had gone too high, especially in real estate. Lenders ran for the exits, and the local economies took a bloodbath.

When the “East Asian miracle” turned into the “East Asian crisis,” investors started to question all their foreign holdings, especially the loans they made to the Russian government. Just to be safe, they fled Russia too, leaving the Kremlin no choice but to default on much of its debt. The shockwave rippled all the way to Wall Street, where the mammoth hedge fund Long-Term Capital Management nearly crumbled from a bet gone bad. Their bankruptcy probably would have brought down the global economy, had the big American banks not stepped in and bailed them out.

These titans of Wall Street were hardly daunted by this near-death experience. First, they plowed their money into the American stock market and then, when that tanked at the turn of the century, into the American housing market. This too fell, and with it, the global economy.

But that was not all they bet their chips on. Led by Goldman Sachs yet again, the American banks spread their money across Europe — trading with hedge funds in Iceland, buying up mortgages in Spain, and yes, funding a widening budget deficit in Greece. When the bubbles burst, tax revenues plummeted, and governments started running out of money. Without central banks to buy their bonds, several countries ran the risk of defaulting on their debt. But the powers-that-be didn’t want that. They wanted the big banks to be repaid. So they took it out on the workers, slashing government spending and making the recession worse.

Only one culprit has been present at all of these crime scenes. It doesn’t take a detective to see that Wall Street has been duping naïve borrowers into excess debt time and time again, only to get away with it and strike again in a new location. In fact, after each conquest, the American banks found themselves bigger and more powerful, systematically demolishing the regulations that had prevented them from such predatory behavior since the 1930s.

In recent years, we have developed an unhealthy habit of blaming the borrower, but there are two parties in every financial contract — and the lender is almost always the more experienced, more sophisticated, and more powerful of the two.

For far too many years, we have allowed our banks to run roughshod over the world. And now, while our nation grinds through high unemployment and Europe suffers through worse, the Republicans have the inexplicable gall to nominate a Wall Street tycoon as their presidential candidate. To these thugs, I say: Leave us alone. Haunt us no more. Haven’t you done enough?

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This op-ed was published in today’s South Florida Sun-Sentinel.

Government Isn’t the Problem…and Austerity Isn’t the Answer

I have a friend who witnessed about half of the Supreme Court arguments on the Affordable Care Act. When he walked out of the courtroom, he wasn’t surprised to find a sea of people protesting the law. What did surprise him was how many of the protest signs were anti-Europe. Apparently, the protestors were worried that universal health insurance was the path to “becoming European” and all the nefarious consequences that implies.

If asked for their opinion on government spending to stimulate the economy, I imagine they’d give roughly the same answer.

But the truth is that fiscal irresponsibility has little to do with Europe’s current crisis.

Just before the recession hit, the European governments with the highest public social spending (relative to the size of their economy) were France, Austria, Belgium, and Germany — none of the so-called “PIIGS” nations that are in trouble. In fact, many conservatives have anointed Germany as the role model that its neighbors should emulate.

Even if you measure all government spending in the middle of the crisis, there is no correlation between a country’s public spending and the interest rates on its sovereign debt (which is the key indicator of financial distress).

From 1999 to 2007, the European government with the highest budget deficit (again, relative to economic output) was Slovakia, hailed by conservatives for its flat tax. France’s budget deficit was about as big as Italy’s, and Germany’s was close behind. Spain and Ireland actually had budget surpluses.

Besides, if government spending were the problem, then the crisis should be over by now. The EU and the IMF have forced the PIIGS nations to slash public expenditures — and the recession has only gotten worse.

Compare that strategy with what happened in the United States, where we took the opposite approach and increased public expenditures.

In the fourth quarter of 2008, real GDP contracted at an annual rate of 8.9 percent in the U.S. In January 2009, nonfarm employment declined by over 800,000. That was the lowest point both statistics — growth in economic output and jobs — would reach.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA), better known as the “stimulus” package.

In the first quarter of 2009, real GDP contracted by 6.7 percent. In February 2009, nonfarm employment losses were closer to 700,000. The recession was clearly not over, but the bleeding had slowed.

On March 6, 2009, the Dow Jones reached its cyclical low of 6,626.94. The next day, it began a strong recovery.

By the third quarter of 2009, when the stimulus money was starting to be spent, the economy was growing again. By March 2010, job growth was positive again. (Job growth always lags behind economic output.) By February 2011, two years after Congress passed the ARRA, the Dow Jones cleared 12,000.

Clearly, the ARRA was the turning point. Its passage was the beginning of the end of the Great Recession.

Coincidence? Perhaps.

But isn’t it odd that none of the critics’ predictions came true? They warned that interest rates would skyrocket with the government borrowing so much money. Instead, interest rates plummeted. They warned that inflation would soar. Instead, it’s been low and stable.

And that’s not all. Several economists have measured the effect of the stimulus since it was spent. Two Dartmouth researchers, for example, compared jobs growth in each state and county to the amount of stimulus funds spent in that state or county. They found that every dollar spent on the poor yielded two dollars in increased economic output, and every dollar spent on infrastructure yielded $1.85 in output.

Another study compared jobs growth in each state to the amount of federal Medicaid matching funds spent in that state. They found that each dollar spent yielded two dollars in output. A similar study found that the ARRA “created or saved about 2 million jobs in its first year and over 3 million by March 2011.”

So it’s no surprise then that Europe continues to flounder while America continues to grow. You can’t beat a recession by cutting government spending. Even Mitt Romney said so.

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This op-ed was published in today’s South Florida Sun-Sentinel.