Economics

Shop local, City Hall!

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news@sfbg.com

On Dec. 3, 2008, just before noon, Mayor Gavin Newsom arrived at a press conference in Noe Valley to remind city residents why it’s important to shop locally. The mayor climbed out of his shiny new hybrid SUV, walked into the Ark Toy Company, showed charts and graphs, and talked about how money spent in town helps the local economy. Joined by Steve Falk, president of the San Francisco Chamber of Commerce, Newsom urged holiday shoppers to look first in San Francisco before buying something on the Internet or in some suburban mall.

The mayor’s shop-local press conference was a clear sign that the debate over the role of small business in the San Francisco economy is over. Everyone from the mayor’s business advisors to the Chamber of Commerce to small business advocates and progressive economists now agrees that small local businesses provide the vast majority of the jobs, keep their money in town, and generate more tax dollars, more wealth, and more prosperity for this city than the big out-of-town chains.

It was a picture-perfect scene, until KPIX-TV reporter Hank Plante asked the mayor an embarrassing question: Why, he wanted to know, did the Mayor’s Office buy Newsom’s new car in Colma?

Newsom said he didn’t have a clue.

Actually, the reason was pretty simple: the dealership in Colma submitted the lowest bid. But San Francisco lost out on the sales tax, a local Chevy dealer that was going out of business lost a local sale, San Francisco workers lost a commission — and in the end, the city almost certainly lost more on the deal than it saved with the Colma discount.

That’s the untold story behind the mayor’s promotion. San Francisco, as a buyer of goods and services worth hundreds of millions of dollars a year, does a terrible job at shopping local. Indeed, for years small business advocates have been trying to get city officials to make it easier for local merchants to get city contracts — and they’ve made very little progress.

"I’ve worked so hard on this, year after year, and nothing ever happens," Scott Hauge, a small business activist and organizer, told us. "After a while, I just threw in the towel."

Hauge is devoting his energy these days to statewide issues. But on the local level, there’s a growing sense that the city needs to do more to help small local businesses get their share of the massive public spending pie.

"The Small Business Commission has made it clear that this will be a priority over the next year," Regina Dick-Endrizzi, the commission’s acting director, told us.

Nobody knows exactly what percentage of city contracts for goods and services go to local businesses. Hauge said the Mayor’s Office did a limited survey about a year ago, but the data wasn’t very good. And while Newsom signed an executive order in 2005 directing departments to look for ways to patronize local businesses, there’s not much to show for it.

"I think probably less than 10 percent [of city spending] goes to local businesses," Hauge said.

Board of Supervisors President David Chiu, a former small business commissioner, agrees. "I think it’s accurate to say that at least 70 to 90 percent of all city contracts go to out-of-town businesses," he told us.

As Dick-Endrizzi pointed out, city purchasing has strict rules — and for good reason. "In most cases, you have to put out a request for proposals and take the lowest bid," she said. "If you didn’t have that, you’d have a big problem with favoritism."

But when the lowest bid is the only criterion, San Francisco businesses are at a distinct disadvantage.

"Say a city agency wants to buy five hammers," said Steven Cornell, owner of Brownie’s Hardware. "I have the hammers for $6, but somebody in Nowhere, Miss., can sell them for $5.99.

"Well, the shop in Mississippi doesn’t have to pay San Francisco’s minimum wage, doesn’t have to pay for sick days, doesn’t have to pay for health care … We’ve asked businesses to contribute to all these good social policies, then those businesses get penalized because someone else can sell something cheaper."

Cornell — who says he agrees that local businesses should pay well and give their workers benefits — is frustrated that when it comes to purchasing, the city doesn’t give anything back. "We lost S&C Ford, we lost Ellis Brooks Chevrolet," he said. "Those were all union jobs, with good benefits. And how many cars did the city buy from them?"

When Cornell was on the Small Business Commission, he remembered some small locally owned cabinet-making shops came to complain about a $4 million city contract for woodwork. "They told us that they lost the contract to a Canadian firm," he said. "The costs of operating in San Francisco were higher than in Canada, so they couldn’t compete."

"We do not as a city reflect the fact that we ask employers to do good things for their workers," Chiu added. "When we spend perhaps $1 billion a year in city contracts, those employers don’t have a level playing field."

Sure, on the surface and in the short term, the city gets a better deal when it awards contracts based entirely on price. But San Francisco has, as a matter of public policy, already decided there are good reasons to give minority-owned contractors some advantage in bidding, and that public contractors should pay prevailing union wages and offer benefits to domestic partners. Local enterprises get a modest advantage in some bids, but nowhere near enough to make up for the cost difference of operating in San Francisco.

And as Newsom himself has made clear, spending money locally has a long-term economic benefit that almost certainly outweighs the price differential in most bids. "When Newsom bought his car in Colma, the city lost the sales taxes, and lost the multiplier effect of the money being spent in town," Cornell noted.

In fact, a 2007 study by Civic Economics, sponsored by the San Francisco Locally Owned Merchants Alliance, showed that if city residents shifted just 10 percent of their purchasing from national chains to locally-owned businesses, the city would gain 1,300 new jobs and $200 million in economic activity every year.

Imagine the activity — the positive benefits to the local economy — that would come with the city shifting, say, 25 percent of its spending to local businesses.

Obviously the city can’t buy everything in town. "Nobody in San Francisco makes Muni trains," Cornell noted. But a lot of what city departments buy, from hammers and paper to cars and trucks, is available from local suppliers — or could be. "If the city made it known it was looking to buy something locally, some entrepreneur would come along and figure out a way to supply it," Cornell said.

So how could this work on a policy level? It’s not that complicated. The city controller, or the Human Rights Commission, which oversees contracting policy, could devise a formula showing how much the cost of complying with city laws like the minimum wage, health care, and sick days (laws that most of us, and many small businesses, fully support) drives up the cost of doing business in San Francisco. Then give local merchants an equivalent advantage in the bidding process.

In other words, if the hammers at Brownie’s Hardware cost 25 cents more than the hammers in Nowhere, Miss., because Cornell pays for his workers’ health insurance, he should only have to come within 25 cents of the cut-rate suppliers’ price to get the city’s business. And if the taxpayers have to fork over a few cents more to buy local hammers, the money will come back, and more, from the demonstrated benefits of shopping locally.

Chiu thinks that’s a good idea, and he’s already taken the first steps to forcing the city to shop local. Chiu introduced legislation in April requiring the city to set aside a portion of all contracts for locally-wned businesses and to increase the financial advantage local firms get in bidding.

And at Chiu’s request, the HRC will appear before the supervisors Land Use Committee May 11 to present the latest data on how much city spending goes to local businesses. "I’ve been asking for this for two years," Chiu said.

"It is unwise for our city not to take $1 of public money and give it to a local business that will pass that dollar onto its local employee, who will then spend it at another local business," he added. "The multiplier effect of this is that money spent locally is better for the economy, and for the taxpayers."

Editor’s Notes

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Tredmond@sfbg.com

The first time the Guardian made an issue of the role small businesses play in the local economy, official San Francisco freaked out.

It was 1985, and only a handful of people were talking about sustainable local economies, about the connection between environmentalism and community-based economics, about how malls and chains stores were ruining America, and how spending money locally would create more jobs, with less waste of energy, than shopping at Wal-Mart or Home Depot.

The Guardian hired MIT economist David Birch to produce a study on job generation in San Francisco. His conclusion: small, locally-owned, independent businesses generated the vast majority of jobs in San Francisco. That directly contradicted the fundamental thesis driving city planning at the time; the planners and the mayor (Dianne Feinstein) argued that high-rise office development was the city’s prime source of new jobs.

The day the study came out, the city planning director (Dean Macris) called in his senior staff and directed them to work all weekend poring over our study and trying to figure out how to discredit it. Feinstein ignored us. The supervisors continued to allow high-rises to sprout, damaging small business and the local economy. The Chamber of Commerce was so disdainful of small business that a group of Fisherman’s Wharf merchants quit in disgust.

Today that battle is over. Done. The argument isn’t even an argument anymore. Everyone, from Mayor Gavin Newsom and the Chamber on down, agrees that locally-owned businesses are the lifeblood of the San Francisco economy. The mayor goes around urging people to "shop local."

But as we suggest in this special issue on San Francisco small business, the city itself isn’t doing such a great job at that. In fact, the public sector in general has been trained for so long to do business with the lowest bidder that the role a major institution like the city and county of San Francisco can play in boosting the local economy has gotten lost.

A 2007 study sponsored by the San Francisco Locally Owned Merchants Alliance shows that if local residents shifted just 10 percent of their purchases from big chains to local businesses, the city’s economy would pick up $200 million and 1,300 new jobs a year. Imagine if City Hall, BART, state agencies, the school district — every public sector agency in this city — did the same. *

Muni flunks Econ 101

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By Tim Redmond

There are lots of problems with the Muni fare hikes, and Paul Hogarth points out some of them. But there’s a larger issue here: Is this really going to bring in more revenue?

Every time Muni raises fares, some people stop riding the bus. That’s basic economics — you hike the price of a product, and you sell less of it. And if your raise the price too high, and enough people stop buying your product, you actually lose money.

That’s called the price elasticity of demand, and it’s a central part of any economics course. It’s hard to run a business without some basic understanding of the concept.

If your product isn’t necessary for people’s lives (and there are available alternatives), the drop-off is faster and sharper — raise airline tickets high enough and people quickly drop discretionary travel and vacation closer to home. When the product is something everyone absolutely needs, like housing, and there’s no substitute, you can raise prices a lot more without losing customers (see: San Francisco rents).

Muni is somewhere in between. For some people, typically poor and working-class people, it’s essential — they don’t own cars and need the bus or train to get to work. For others — those of us who are physically able to ride bikes, or to walk to work or the store, or economically able to afford private cars — the price elasticity of Muni is much higher.

There are all sorts of studies on this (here, for example, but trust me, unless you’re really into economic theory and lots of strange numbers, don’t even think about it.)

Suffice to say that in San Francisco, a small city with typically good weather, a fairly wealthy population and a lot of people who enjoy walking and biking, the price elasticity of demand for Muni is relatively high — that is, when prices go up, people who can will seek other alternatives. Nobody knows exactlyat what the price point Muni starts to lose money — when fare hikes become counterproductive — but I suspect we’re approaching it. The largest rate hike in half a century is not only regressive, counter to the city’s transit-first policy and environmentally stupid — it may be a financial mistake.

Now contrast that with raising parking prices. For starters, most drivers who park downtown can well afford to pay a couple bucks more for parking. Second, check out the streets — parking is so hard to find that it seems very likely that demand exceeds supply by enough of a factor that raising prices won’t impact use and will bring in more revenue.

And what if some people decide that parking costs too much and stop driving? Isn’t that what the city wants to accomplish anyway?

This decision to raise fares more than parking is nuts, on every level.

Stiglitz: Developing Countries and the Global Crisis

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Here is our monthly installment of Joseph E. Stiglitz’s Unconventional Economic Wisdom column from the Project Syndicate news series. Stiglitz is a professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

Developing Countries and the Global Crisis

By Joseph E. Stiglitz

NEW YORK – This year is likely to be the worst for the global economy since World War II, with the World Bank estimating a decline of up to 2%. Even developing countries that did everything right – and had far better macroeconomic and regulatory policies than the United States did – are feeling the impact. Largely as a result of a precipitous fall in exports, China is likely to continue to grow, but at a much slower pace than the 11-12% annual growth of recent years. Unless something is done, the crisis will throw as many as 200 million additional people into poverty.

This global crisis requires a global response, but, unfortunately, responsibility for responding remains at the national level. Each country will try to design its stimulus package to maximize the impact on its own citizens – not the global impact. In assessing the size of the stimulus, countries will balance the cost to their own budgets with the benefits in terms of increased growth and employment for their own economies. Since some of the benefit (much of it in the case of small, open economies) will accrue to others, stimulus packages are likely to be smaller and more poorly designed than they otherwise would be, which is why a globally coordinated stimulus package is needed.

Big box is back for Bayshore

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By Tim Redmond

Mayor Gavin Newsom and Sup. Sophie Maxwell are pushing a massive 107,000-square-foot Lowe’s home improvement store for the old Goodman Lumber site on Bayshore Boulevard.

And it’s still a bad idea.

Big-box retail is the opposite of sustainable economics and progressive city planning. I know, we’re in a recession and we need any jobs we can get, but low-wage employment in a chain store that sucks all its revenue out of town every night isn’t going to help us get out of this hole.

Fluffy bunners

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› superego@sfbg.com

Look about you, horny toad. There may not be wee lambykins gamboling on your microlawn or the scent of fresh asparagus pervading your water closet yet, but all the mad party signs of spring are sneaking up to floor you: secret sunset shindigs (www.pacificsound.net), hunky Jesus Easter bonnets (www.thesisters.org), blackout drag road trips to Reno (www.trannyshack.com), and, that ultimate in vernal equinoxious signals, a flood of out-of-state gay porn stars looking for extra cash on Rentboy.com and the back pages of the Bay Area Reporter. Spring has sprung! And will probably be passed out in its stiff leather chaps, turquoise Lycra dress shirt, knock off Gucci wraparounds, and George Michael stubble on the corner of 18th and Market soon.

That’s right, those "Oscars of gay porn," the annual GayVN Awards, are coming upon us yet again, as the Castro Theatre plays host to the biggest circle jerk in the butt biz for another year. Downsizing, of course, is out of the question, despite the rash of porno pink slips being fisted out across the industry, which has been hit hard by a combo of economic deflators, internal tussles, and continued grappling with amateur Web competition. (We’ll see if the upcoming onslaught of 3-D dick flicks provides the stimulus package our local studios — second only to backwoods Eastern Europe in terms of sticky-fingered output — so sorely need.)

No, GayVN organizers are gut-pumping all the lubricious glitz they can into a whole weekend of kiki hurrah, with pre-parties, post-parties, Tupperware parties, and brunches that no one will eat at galore. Inflatable personality Janice Dickinson hosts the awards ceremony itself, with backup from homegirl Margaret Cho and Alec Mapa from Ugly Betty (ha!). Online erotic video-on-demand powerhouse Naked Sword, a.k.a. the giant candy-colored Flash octopus that froze my dinky Windows and made me cry with my pants down, will host the official afterparty, Shameless — "the party you’ll never forget, or remember!" — with some big-name DJs and performers I already can’t! It’ll be a wondrous semi-tragedy unfolding in fast motion, worth it if only to ogle the prancing scene. Just please try not to look at the camera when it’s over.

GAYVN AWARDS CEREMONY Sat/28, 7 p.m., $95. Castro Theatre, 429 Castro, SF. gayvnawards.avn.com

SHAMELESS GAYVN AFTERPARTY Sat/28, 10 p.m., $25. Wunderland, 181 Eddy, SF. www.nakedsword.com

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TINGEL TANGEL CLUB


The louche cabaret monthly celebrates a year of mingling salacious New York City talent and West Coast underground hotness. Original Cockettes Rumi and Scrumbly, singer Novice Theory, "hypersexual" musicians SlowMo Erotic and more light up the stage, and ever-crushable JD Samson of Le Tigre will Sam Ronson the turntables afterward. Tingel Tangel Le Tigre — it’s an anagram.

Wed/25, 8 p.m., $16. Café du Nord, 2170 Market, SF.

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FUCK MIAMI


Oh dear, is it that time of year again? Half our stellar nightlife talents (and a lot of pre-tanned wannabes) will be sucked into the studiously Spandexed and belotioned black hole that is the Winter Music Conference in Miami. If you’re too broke — or too allergic to aggressive slickness and pushy V.I.P. chicks — to jet to the coca beach, share the moment with a slew of worthy left-behinds at this lengthy affair.

Fri/27, 4 p.m.- 2 a.m., free. Mars Bar, 798 Brannan, SF.

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"HOMELESS NIGHT"


This party promises to be wronger than shitting in a urinal: anarchic drag weekly Charlie Horse is hosting a homeless-themed night. Partially controversial gender clown Monistat joins perky Percocetted hostess Anna Conda to present shameful acts by talented messes to actually help benefit homeless services. La-da-dee, la-da-dah, don’t try to rip the wigs off these queens or they will cut you.

Fri/27, 10 p.m., free. The Cinch, 1723 Polk, SF.

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LOOK OUT WEEKEND


Happy hours are all the populist rage, especially in these queasy economics, no? One of the biggest and brightest, Look Out Weekend, is moving into new quarters at Vessel off Union Square. The delicious electronic stylings of Oh Land and DJing by the Magnificent Seven complement yummy eats and fashionable freaks at the relaunch. Will L.O.W. 2.0 be as raucous as the first version? Hey, it’s free, so go see for yourself.

Fridays, 4 p.m.-9 p.m., free. Vessel, 85 Campton Place, SF.

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ROYALTY


Well! It may be a bit bombastic, but the name just fits. SF soulful house music king DJ David Harness inaugurates a new monthly to rain some of that ol’ hands-in-the-air spirit down on the children-in-waiting at the lovely Triple Crown. The Crown’s sound system is winning extreme plaudits, so be prepared for a high-fidelity throwdown.

Fri/27, 10 p.m., $5. 1760 Market, SF.

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DEVOTION


A few years ago, DJ Ruben Mancias packed up his little glam-house weekly at the EndUp, Devotion, and skedaddled to NYC to find fame, fortune, and a lot of really neat T-shirts. He’s occasionally popped back into town to show off each, and remind Latin- and soul-tinged house fans of past EndUp glories. Devotion’s eight-year-anniversary will find him back at the space with Oakland house princes Cecil and Dedan warming up. Memories!

Sun/29, 8 p.m.-4 a.m. The EndUp, 401 Sixth St., SF.

Stiglitz: How to Fail to Recover

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Here is our monthly installment of Joseph E. Stiglitz’s Unconventional Economic Wisdom column from the Project Syndicate news series. Stiglitz is a professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

How to Fail to Recover

By Joseph E. Stiglitz

NEW YORK – Some people thought that Barack Obama’s election would turn everything around for America. Because it has not, even after the passage of a huge stimulus bill, the presentation of a new program to deal with the underlying housing problem, and several plans to stabilize the financial system, some are even beginning to blame Obama and his team.

Obama, however, inherited an economy in freefall, and could not possibly have turned things around in the short time since his inauguration. President Bush seemed like a deer caught in the headlights – paralyzed, unable to do almost anything – for months before he left office. It is a relief that the US finally has a president who can act, and what he has been doing will make a big difference.

DeLong: The Stimulus Ostriches

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J. Bradford DeLong is a contributing writer for the Project Syndicate news series. DeLong is Professor of Economics at the University of California at Berkeley and a former Assistant US Treasury Secretary.

The Stimulus Ostriches

By J. Bradford DeLong

BERKELEY – Of all the strange things that have happened this winter, perhaps the strangest has been the emergence of large-scale Republican Party opposition to the Obama administration’s effort to keep American unemployment from jumping to 10% or higher. There is no doubt that had John McCain won the presidential election last November, a very similar deficit-spending stimulus package to the Obama plan – perhaps with more tax cuts and fewer spending increases – would have moved through Congress with unanimous Republican support.

As N. Gregory Mankiw said of a stimulus package back in 2003, when he was President George W. Bush’s chief economic advisor, this is not rocket science. Deficit spending in a recession, he said, “help[s] maintain the aggregate demand for goods and services. There is nothing novel about this. It is very conventional short-run stabilization policy: you can find it in all of the leading textbooks…”

Compostmodern

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› news@sfbg.com

GREEN CITY The easier a compost bucket is to use, the more people will use it. But Compostmodern ’09 isn’t about compost at all — it’s about design. This annual event is a collaboration between the American Institute for Graphic Artists (AIGA) and the Academy of Art University that examines the intersection of design and environmental sustainability.

This weekend’s conference, held at various locations around San Francisco, features talks and slide shows by local designers, art installations, workshops, and demonstration projects proving that brown is the new green.

"I’m interested in helping people get a good grounding in what designing for sustainability means. The reality is that this industry is still so new," Nathan Shedroff wrote on the Compostmodern blog (compostmodern.wordpress.com). Shedroff chairs the Design Strategy MBA program at California College of the Arts, and will discuss sustainability frameworks at the conference.

Local graphic designer Amy Franceschini (futurefarmers.com) presented some of her work at Compostmodern in 2006. Inspired by all things green, she posed a question that only a designer would ask: if earth-bound plants lean toward light naturally, might design liberate plants to move about freely? There were mixed results to her experiment, but the question alone gets at the spirit of the conference: bridging the gap between the possible and the possibly possible by challenging designers to be environmentalists.

Autodesk brings sustainable design into the world of software by incorporating powerful new analytical tools into 3-D modeling programs used in architectural and other design. "Full-on energy analysis used to be really challenging and expensive," said program manager Dawn Danby, a featured speaker at Compostmodern this year. "We’re making software that empowers designers to make a case for sustainability, to make better decisions, decisions that have huge impacts on things like water or energy use. We need to make design a solution, not just a bonus when times are good."

Michael Gelobter, another of this year’s Compostmodern presenters, told the Guardian that the Bay Area’s unique combination of companies, researchers, and activists all living together is what makes it the epicenter of the clean-tech revolution. Even though he’s a climate strategist, Gelobter is optimistic about the future: "We have to own this change, and in the process solve a lot of other problems like wars and financial waste.

"A lot of our relationship with climate change and fossil fuels has to do with the built environment, the designed environment — our cities, buildings, schools. and the way we design our day-to-day interactions with products," Gelobter continued. "All of those include assumptions about energy use, where we get the energy, and the form that energy comes in. And designers are really the front line in redrawing that. They’re the cutting edge of how we make the world different, so they have to be informed about policy and economics, but also [about] people’s day-to-day lives, their lived experience of how change might happen. They have to be able to design to those kind of criteria."

That’s why Gelobter founded Climate Cooler, shifting his work from policy to shopping and "changing the choices consumers have so that they can take action." He insists that cleaning up the economy is good business. "You stop smoking crack, and you suddenly have all this money to spend on things that are a whole lot healthier. That’s true with fossil fuel use and the other things that cause global warming as well."

Gelobter’s latest project will equip Intuit’s popular QuickBooks accounting software with a carbon-calculator. It’s a partial redesign to help small businesses know the impact of their purchasing patterns on global warming, and to "start using that information to make better choices, to save money, save energy, and reduce their [carbon] footprint."

Taking on Herculean problems is not for everyone. But Compostmodern seeks to engage top designers with the task of making the seemingly impossible a little more likely. It’s a goal that is essential to achieving sustainability on a grand scale and using this economic meltdown as an opportunity to redesign our world.

COMPOSTMODERN ’09

Herbst Theatre, SF

Feb. 21

8:30 a.m.–5:00 p.m.

www.compostmodern.org

SF’s economist agrees that Newsom is wrong

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By Steven T. Jones
When I criticized Mayor Gavin Newsom’s latest budget plan as bad economics that will do more harm than good to San Francisco, Newsom spokesperson Nate Ballard said I (and the sources I relied on, from Moody’s to congressional Democrats to President Obama) didn’t know what I was talking about.
“OK, so you think he’s wrong. The City’s chief economist Ted Egan thinks he’s right. So does the Mayor’s chief economic advisor, Michael Cohen. I think the Mayor is probably going to go with Ted and Mike!” Ballard wrote (later referring me to this article, as if it proved his point).
Maybe Ballard or Newsom should have actually talked to Egan, who didn’t review Newsom’s plan and doesn’t agree with its premise. Egan told me, “We were in no way saying you should cut taxes to stimulate the economy, particularly if it means reducing government spending.”

Mayor Newsom doesn’t understand economics

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By Steven T. Jones

It’s maddening to read Mayor Gavin Newsom’s latest prescription for local economic recovery, which parrots the position and talking points that we’ve been hearing for weeks from congressional Republicans. And that fiscally conservative position is just factually wrong.
That was made clear recently in a widely circulated report from Moody’s that shows a dollar of tax cuts provides just over a dollar in economic activity, while a dollar of government spending provides about $1.60 in economic activity. And the most economic activity, about $1.73 for each dollar spent, comes from food stamps (which are similar to welfare assistance to the poorest citizens, which Newsom slashed with his Care not Cash program).
Yet Newsom boldly and stupidly declares in today’s Chronicle op-ed about economic stimulus that, “We need less spending.” Guess what? Spending is stimulus. Newsom even cynically refers to President Barack Obama as if he agrees, even though Obama recently scoffed at the very argument Newsom is trying to make.
Mr. Mayor, all the city jobs that you want to cut are jobs, good paying jobs with good benefits that cause people to spend money in San Francisco. Cuts those jobs and you hurt the economy, and you hurt is far more than you will help it by cutting the taxes of local businesses. It’s just dumb. Or if it’s not dumb, it’s at least very ideologically conservative, this discredited, faith-based belief in trickle-down economics.

Stiglitz: Davos Man’s Depression

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The spirit of Davos was that we had gone from “boom to bust” to “boom and Armageddon”

by Joseph E. Stiglitz

– Joseph E. Stiglitz, professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

NEW YORK – For 15 years, I have attended the World Economic Forum in Davos. Typically, the leaders gathered there share their optimism about how globalization, technology, and markets are transforming the world for the better. Even during the recession of 2001, those assembled in Davos believed that the downturn would be short-lived.

But this time, as business leaders shared their experiences, one could almost feel the clouds darkening. The spirit was captured by one speaker who suggested that we had gone from “boom and bust” to “boom and Armageddon.” The emerging consensus was that the IMF forecast for 2009, issued as the meeting convened, of global stagnation – the lowest growth in the post-war period – was optimistic. The only upbeat note was struck by someone who remarked that Davos consensus forecasts are almost always wrong, so perhaps this time it would prove excessively pessimistic.

All mod cons

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› johnny@sfbg.com

How can any of us forget 1835, and the heady discovery of spherical amphibians, blue goats, and petite three-foot zebras frolicking on the moon? In Fakers: Hoaxers, Con Artists, Counterfeiters, and Other Great Pretenders (New Press, 245 pages, $24.95), Paul Maliszewski relates that time, when the New York Sun brought news of lunar life to an increasingly large readership that craved delightful information during an economic drought. Maliszewski doesn’t have to work to make the story funny — he merely has to relate how the paper’s moon-discovery serial likened a typical blue goat to "a young lamb or kitten," and presented scientists pretending to tickle the creature’s beard as seen through a telescope, only to witness it "bound away into oblivion, as if conscious of earthly impertinence."

Within the context of Maliszewski’s sprawling look at fakery, the Sun saga is a light vacation, because of its relative datedness and good-natured imagination. Before and after, Fakers largely avoids such Orson Welles’ War of the Worlds–style nostalgia for more contemporary tales: the stories of Stephen Glass, James Frey, and JT Leroy, for example. It places Glass’s accounts under a microscope that highlights their pandering corniness. It relates the life and times of Leroy — and his feverish endorsement by the likes of Dave Eggers and Michael Chabon (more on him later), as well as his editorship of an installment in Da Capo’s Best Music Writing series — without losing sight of the fact that Leroy’s much-celebrated writing is mawkish.

Such targets and views might suggest that Maliszewski likes to wag his finger and tut-tut, but his viewpoint is much more variable — he isn’t out to condemn various literary liars, for example, so much as critique them. Early in the book, he relates one of his own adventures in the creation of phony identities, a Walter Mitty–scale satire somewhat akin to the letters that Joe Orton used to write to newspapers as "Edna Welthorpe," a make-believe housewife outraged by Orton’s plays. Here, and in other instances, such as a discussion of George W. Bush’s use of the word "confidence" when discussing economics, Fakers suggests that the Bush years have not just eroded but demolished the value of truth.

In a seeming act of first-person tit-for-tat, Maliszewski shares an example of an instance when he fell for a hoax, though the chosen subject — a tall tale that might qualify as an urban legend if it weren’t set in the wilderness — cops out in terms of allowing a truly personal and thus uncomfortable examination of the various aspects of being duped. The most curious of Maliszewski’s practices is the frequent weaving of e-mail interviews — a format that would seem to allow for flights of fancy — into his investigative text. A correspondence with former New York Times journalist Michael Finkel, for example, stays soft-focus when it could have questioned the presumptuous audacity of a middle-aged white man assuming the voice of a West African boy.

In a recent Bookforum review, Hua Hsu describes Fakers as vaguely paranoia-inducing, and indeed, at the very least, this reader — a journalist who has been duped — wonders if any of the facts or stories that the author relates might contain creative twists. In an extended conclusion about a fraudulent Michael Chabon essay, Maliszewski essentially asserts that to lie for the sake of lying is a cynical, selfish act. True. But Fakers is more interesting when it is ambivalent and discomfiting, or when Maliszewski’s examples and anecdotes prompt ideas about various permutations of truth and falsehood in the media landscape. (Take CNN’s Nancy Drew, I mean Nancy Grace, and the way she is currently using a compulsive liar — Caylee Anthony — to co-author cable news television’s version of a radio serial.) Blue goats are cute, but — as Fakers makes clear — white lies have many facets.

Robert Shiller: The value of recession insurance

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When the 1990’s Internet bubble pushed markets to dizzying heights, one man warned of the dangers of this irrational exuberance, Project Syndicate columnist Robert Shiller. Schiller, a Professor of Economics at Yale and chief economist at MacroMarkets LLC, is the author of The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It.

Recession Insurance

By Robert J. Shiller

NEW HAVEN – The Chief Economist of the International Monetary Fund, Olivier Blanchard, and several IMF economists have proposed in a recent paper that governments should offer what they call “recession insurance.” Companies and/or individuals would buy insurance policies, pay a regular premium for them, and receive a benefit if some measure of the economy, such as GDP growth, dropped below a specified level. Such insurance, they argue, would help firms and people deal with the “extreme uncertainty” of the current economic environment.

Losing the West

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› amanda@sfbg.com

GREEN CITY Our society can’t continue functioning the way it does. Exploiting the natural abundance of resources in the western United States, without balancing the needs of nature, has lead to the myriad environmental problems outlined in The American West at Risk, a book recently penned by Bay Area–based geologists Richard W. Hazlett, Jane E. Nielson, and Howard G. Wilshire.

A thorough survey of environmental issues related to forestry, water, agriculture, mining, road building, outdoor recreation, waste disposal, military testing, nuclear energy, and warfare, the book was written from the perspectives of scientists, but told in such a way that the science makes the case for preservation by driving home the point that everything the human race depends on comes from nature. Ultimately, the authors stress that the solution is homegrown. "Americans have to start caring about the survival of small communities, their local towns, and their local resources."

We caught up with Nielson and Wilshire by phone to discuss the book in anticipation of their visit to San Francisco this week.

SFBG It often seems like saving the world becomes an emotional or moral stance and less of a scientific one — or that’s how it frequently gets framed by opponents.

JANE E. NIELSON That’s right, and for no reason. Economics have become more important. One of the things we’re trying to say is the environment is the basis for our economic well-being.

SFBG Do you think that if people more fully realize that resources aren’t infinite, thriftiness will become more of the American lifestyle?

JEN It would be very desirable for people to realize that more, to have it taught in schools. How much time we have left to do that, I don’t know. I feel that once people do get an appreciation for the fact that life is going to be leaner, that the soil is really important, things can change very rapidly.

HOWARD G. WILSHIRE My pessimism is borne of the fact that they will have to respond quickly because we are on the brink of serious problems. Climate change is a big one and coping with that — the plans that are being endorsed now and pushed now by politicians and businesspeople — are that we’re going to have to find alternatives to cheap oil to keep on doing what we’re doing.

SFBG In the book you reveal a pattern of public commons being used to benefit a minority, whether its subsidies for big growers, cheap grazing rights, water rights for a handful of a farmers …

HGW It’s across the board.

SFBG How do we break these patterns of privilege, because it’s so ingrained it seems like an institutional problem?

JEN I have to tell you this is something that just sort of grew on us as we wrote the book. We knew about various subsidies, but the immensity of it and the pervasive pattern really only became clear as we progressed through the book.

SFBG It’s interesting that not only is there a pattern of subsidies, but they’re for a very small percentage of people.

JEN The whole history of land ownership in this country was intended to support the small person. The Homestead Act was supposed to give land to individuals, but most people failed at homesteading and there was no provision built in to prevent land from being gobbled up by big landowners.

SFBG So how can we flip this? Some of it is local, but for a lot of it these laws are federal.

HGW We have to take money out of the election system so we can get people free of monetary interest promoting their offices to do something useful. There are people who have the insight and the knowledge to know that we have got to stop this bleeding of our resources through subsidies.

The three authors will be reading and discussing the book Thursday, Jan. 8 at Books Inc. Opera Plaza, 601 Van Ness Ave. The event begins at 7 p.m. More information can be found at losingthewest.com.

>>Read the full interview with the authors here

>>Read Amanda Witherell’s full review of the book here

Stiglitz: The rocky road to recovery

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Here is our monthly installment of Joseph E. Stiglitz’s Unconventional Economic Wisdom column from the Project Syndicate news series. Stiglitz is a professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

More progressive taxation will help stabilize the economy

by Joseph E. Stiglitz

– Joseph E. Stiglitz, professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

NEW YORK – A consensus now exists that America’s recession – already a year old – is likely to be long and deep, and that almost all countries will be affected. I always thought that the notion that what happened in America would be decoupled from the rest of the world was a myth. Events are showing that to be so.

Fortunately, America has, at last, a president with some understanding of the nature and severity of the problem, and who has committed himself to a strong stimulus program. This, together with concerted action by governments elsewhere, will mean that the downturn will be less severe than it otherwise would be.

Stiglitz: Davos Man’s Depression

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Here is our monthly installment of Joseph E. Stiglitz’s Unconventional Economic Wisdom column from the Project Syndicate news series. Stiglitz is a professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

Davos Man’s Depression

By Joseph E. Stiglitz

NEW YORK – For 15 years, I have attended the World Economic Forum in Davos. Typically, the leaders gathered there share their optimism about how globalization, technology, and markets are transforming the world for the better. Even during the recession of 2001, those assembled in Davos believed that the downturn would be short-lived.

But this time, as business leaders shared their experiences, one could almost feel the clouds darkening. The spirit was captured by one speaker who suggested that we had gone from “boom and bust” to “boom and Armageddon.” The emerging consensus was that the IMF forecast for 2009, issued as the meeting convened, of global stagnation – the lowest growth in the post-war period – was optimistic. The only upbeat note was struck by someone who remarked that Davos consensus forecasts are almost always wrong, so perhaps this time it would prove excessively pessimistic.

Stiglitz: Whither the Obama economy?

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Here is our monthly installment of Joseph E. Stiglitz’s Unconventional Economic Wisdom column from the Project Syndicate news series. Stiglitz is a professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

The Dismal Economist’s Joyless Triumph

by Joseph E. Stiglitz

– Joseph E. Stiglitz, professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

NEW YORK – I have long been forecasting that it was only a matter of time before America’s housing bubble – which began in the early days of this decade, supported by a flood of liquidity and lax regulation – would pop. The longer the bubble expanded, the larger the explosion and the greater (and more global) the resulting downturn would be.

Economists are good at identifying underlying forces, but they are not so good at timing. The dynamics are, however, much as anticipated. America is still on a downward trajectory for 2009 – with grave consequences for the world as a whole.

Cut half the general fund?

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by Tim Redmond

I’m not kidding. That’s what the numbers right now suggest. San Francisco over the next year could face a budget deficit of $576 million — almost half of the entire discretionary money that the city has to spend.

Mayor Gavin Newsom, frankly, is entirely missing in action on this one. He’s been hiding out, doing his budget discussions in secret, playing Where’s Waldo (even showing up that the board meeting without a budget plan) and leaving City Hall and thousands of city workers, nonprofits and activists wondering what the hell is going on. The lack of leadership is mind boggling.

In the vacuum, the Coalition to Save Public Health has proposed a series of alternative cuts, and Sup. Aaron Peskin, writing in tomorrow’s Bay Guardian, suggests that the board consider them. The proposals include eliminating unnecessary jobs that pay more than $100,000 a year, cutting back the mayor’s seven-person PR staff, cutting the money the city gives to the Opera and Symphony and re-opening the police and fire contracts. These are all good ideas — and they might, in the best of all circumstances, add up to ten or 20 percent of the deficit.

The reality is that the mayor is going to be making some brutal cuts now — and it will be much worse in a few months, when the supervisors have to deal with the next fiscal year’s budget. You can’t cut half a billion dollars out of San Francisco city government without eliminating a lot of essential programs. Public health? Decimated. Parks and Rec? A wreck. Muni? Service will get way worse, fares may go up, and the city’s commitment to public transit will be at risk. What’s the city do for you? Get ready to give it up.

And you think the job market is bad now and the recession starting to hit the city hard? Imagine when a few thousand city employees join the unemployment lines.

So what are we supposed to do? Let me make a suggestion.

The worst thing a government agency can do in a recession is cut spending. The feds can borrow money and keep spending, but the city can’t. So we simply need to face the fact that this is an emergency, a crisis, the worst situation since the 1930s – and we need to look for new revenue.

We can’t mess around with half steps, either. We need big money, right now – and the best, most fair and progressive way to get that is with an income tax.

Now, the city can’t just impose an income tax on residents, the way New York City and Philadelphia do. The California Constitution pre-empts that. But the city CAN levy a tax on all income earned within the city. So the commuters pay, too (although residents who live here and work somewhere else don’t; it’s an imperfect world). Oakland passed a tax on income earned in the city in the 1970s, and the issue went all the way to the state Supreme Court, which ruled in Weekes v. City of Oakland that the tax was perfectly legal (the City Council dropped the tax anyway). Here’s an opinion on it.

The nice thing about income taxes is that they hit the rich harder than the poor. In fact, San Francisco could exempt, say, the first $100.000 of income, then use a progressive scale to make sure that only well-off people paid anything, and the richest paid the most. Even in a recession, there are rich people in this town, people who have done very well under the Bush tax cuts – and shifting money from the rich to the poor during a recession is excellent economics.

And an income tax could actually bring in enough cash to make a real difference.

Of course, the rich people who pay it can deduct the local tax from their state and federal returns – so a lot of the money actually comes to SF from Washington and Sacramento.

Passing something like this would be a huge political challenge – it would have to go on the ballot, and nobody wants new taxes, and the Chamber of Commerce types would howl and raise huge sums to defeat it. It could only work if the entire City Hall establishment, starting with the mayor, was willing to go out and campaign, hard, for the measure. Make it temporary – the tax would expire in two years. Make it progressive – nobody who is hurting financially would pay a heavy burden. And tell the voters: We tax the rich, or we close libraries, and eliminate Muni lines, and take cops off the streets, and close fire stations, and let sick people die because they can’t see doctors – and watch the local economy fall even deeper into recession as city spending plummets.

Because that’s what we’re talking about here. These are the choices.

There’s a good chance the state will have a special election in the spring – a tax measure could go on the ballot then. Or the city could hold its own special election. And if the city income tax doesn’t fly, I’m open to something – anything – else. But is has to be big, and we have to move on it now.

Any takers?

Stiglitz: The Return of John Maynard Keynes

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Here is our monthly installment of Joseph E. Stiglitz’s Unconventional Economic Wisdom column from the Project Syndicate news series. Stiglitz is a professor of economics at Columbia University, and recipient of the 2001 Nobel Prize in Economics, is co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

The Triumphant Return of John Maynard Keynes

By Joseph E. Stiglitz

NEW YORK – We are all Keynesians now. Even the right in the United States has joined the Keynesian camp with unbridled enthusiasm and on a scale that at one time would have been truly unimaginable.

For those of us who claimed some connection to the Keynesian tradition, this is a moment of triumph, after having been left in the wilderness, almost shunned, for more than three decades. At one level, what is happening now is a triumph of reason and evidence over ideology and interests.

Hank Plante busts the mayor!

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Why did Mayor Newsom buy a $51,000 Chevy car in Colma when the only Chevy dealership in San Francisco is going out of business? Scroll down for the KPIX video showing how Hank Plante busts the mayor.

By Bruce B. Brugmann

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Photo by Paula Connelly

Newsom’s driver and new Chevy Hybrid Tahoe SUV vehicle, parked in front of the Ark toy store on 24th Street, during a press conference launching the Shop Local–Get More campaign. The city bought the car from a dealership in Colma for $51,000.

It was marvelous. Simply marvelous. Hank Plante busts the mayor.

Let me set the scene: The reporters and small business leaders on Wednesday (Dec. 5) were packed in the Ark, a toyshop on 24th Street, for a press conference to launch formally the “Shop Local–Get More” campaign aimed at getting San Franciscans and everyone else to shop local in San Francisco this holiday season.

Steve Falk, president of the San Francisco Chamber of Commerce, laid out the chamber’s extensive program for its members to give substantial discounts to customers. Gerald Johnson, owner of the Ark, explained how his store would give 10 per cent off your next purchase with a purchase of more than $100. Mayor Newsom, who rolled in late in his city car, gave a zippy little talk about the values of shopping local and helping out the merchants and business community during tough times.

Newsom is at his best at these informal occasions, a little pep talk here, a genial smile and gesture there, lots of jutting jaw, no tough questions please. Then came time for questions and Newsom visibly relaxed for what he hoped would be some Noe Valley soft balls.

Hank Plante, the savvy political editor of KPIX Television (Channel 5), was positioned in the front of the crowd with his television cameraman and his camera was whirring away. He led off with a timely question.

“Mr. Mayor, you want people to shop in San Francisco. You know the car dealerships are in trouble. Can you tell us why you didn’t buy your new official city car here in the city?”

Newsom replied testily, “Uh, I have no idea. Thanks for the Gotcha question and I don’t have a clue. I didn’t have anything to do with the purchase of that car.” He said he would find out what happened and get back with the answer.

Plante reported the exchange in the KPIX newscast that night. He said, “We’re losing our last Chevy dealership” in San Francisco. He said that the new car was a Chevy Tahoe Hybrid SUV that cost $51,000 at a dealership in Colma. He pointed out that the Chevy was one of the “most visible purchases the mayor made this year.” Marie Brooks, from Ellis Brooks Chevy dealership on Van Ness Avenue, told Plante, “I think it’s wrong for one of our city officials to buy anything outside the city.” Ellis Brooks is a family-owned car dealership and one of the oldest and most famous local names in selling cars in Northern California.

Plante reported that Newsom kept ducking the question and later refused to allow the press corps to take a picture of him leaving the press conference in his gleaming black hybrid car parked in front of the toy store (see pic above.) KPIX showed video footage of Newsom not getting into the car and walking down 24th street.

Plante had nailed a point that has been agitating the small (and big) business community for years. Scott Hauge, a prominent small business leader and founder and president of Small Business California, was at the press conference and picked up on the point immediately. In his followup email to small business people in the city, Hauge noted he had attended the press conference “where the mayor was promoting a shop SF campaign.

“I applaud the mayor and others like the SF Chamber, Bay Guardian, Small Business Commission and Hotel Council for their efforts. What I didn’t hear was anything the city will do to require SF City agencies to buy from SF companies located in SF.”

Then Hauge zeroed in. “SF government does not have a very good track record in this area. In fact the mayor was asked why he did not purchase his hybrid vehicle in SF and he said he didn’t know why. Now is the time to push this issue. SF businesses have a higher cost of doing business because of mandates imposed on us. It seems to me that the least the city can do is buy from SF businesses.” I think he’s spot on.

And so Plante, Hauge, the Guardian, and small (and big) business in San Francisco are waiting anxiously for Newsom’s explanation why he bought a $51,000 city Chevy vehicle in Colma and not in San Francisco where our last Chevy dealership is on hard times and going out of business. And we are all waiting even more anxiously to hear what the mayor plans to do to correct this Shop- outside -San Francisco-syndrome and get the city working to spend its tens of millions of dollars of city tax dollars on businesses and services in San Francisco.

P.S. Full disclosure: the Guardian is a sponsor of the Shop Local campaign. And we sent a delegation to the press conference: Sales and Marketing Director Jennifer Lachman, Vice President of Operations Daniel B. Brugmann, Online and Print Advertising Coordinator Rebecca Frank, Assistant to the Publisher Paula Connelly who took the press conference photos, and myself. We are happy to pitch in on this critical and timely endeavor to put as much instant cash as possible into our local businesses and our community.

Our contribution, as a locally owned, independent newsweekly, is our own Shop Local campaign featuring a key marketing line derived from an analysis provided by the Business Alliance of Local Living Economies (BALLE), using a formula created by the consulting firm Civic Economics. This data is dramatic. It shows that if our 600,000 or so Guardian readers would spend $l00 with locally owned, independent businesses in San Francisco during the holiday season, that would inject $99 million into the San Francisco economy. Immediately.

That’s nearly $15 million more dollars than the city would see if that money were spent on chain stores that send their revenues back to headquarters. That’s because money spent at local businesses tends to stay and circulate in the community and create more local jobs and economic activity and of course more tax dollars for the city. The Guardian is also leading a national Shop Local campaign among alternative papers that would put several billion dollars in total into local economies all over the country. As Guardian Executive editor Tim Redmond puts it, “A sustainable community needs a sustainable economy, and that starts with locally owned, independent businesses.”

Unsolicited advice for the mayor and anybody else at City Hall who keeps sending our money outside of town: check the policy of the San Francisco International Airport that mandates locally owned small businesses get most of the juicy airport franchises. That policy works and works well. When I go through the airport, I always stop to get something to eat at Klein’s Deli. Klein’s was named after Deborah Klein, a Guardian circulation manager in the mid- 1970s who became a restaurant entrepreneur in San Francisco. For many years, she ran Klein’s Deli on 20th Street atop Potrero Hill. B3

Click here to watch yesterday’s KPIX newscast.

Click here to see Guardian photo coverage of the press conference.

Stiglitz: What went wrong

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This article by Joseph Stiglitz, a Nobel prizing winning economist and professor of economics at Columbia University in New York City, is one of the best I’ve seen on what went wrong with the economy and what can be done about it by the Obama team. It appeared in the November Vanity Fair magazine, shortly before the election.
His monthly column will appear in the Bruce blog. B3

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The past as prologue? Lining up for food and water, Louisville, Kentucky, 1937. By Margaret Bourke-White/Time & Life Pictures/Getty Images.

Reversal of Fortune

Describing how ideology, special-interest pressure, populist politics, and sheer incompetence have left the U.S. economy on life support, the author puts forth a clear, commonsense plan to reverse the Bush-era follies and regain America’s economic sanity.

by Joseph E. Stiglitz November 2008

When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.

Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory—in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion.

Click here to continue reading Joseph E. Stiglitz’s article published in the November 2008 issue of Vanity Fair.

Obama economics: change we can’t bank on

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By Bruce B. Brugmann

Columnist Robert Scheer, writing in a Nov. l9th Chronicle op ed, pointed out that former Clinton Treasury
Secretaries Robert Rubin and Lawrence Summers “deserve a great deal of the blame for the radical deregulation of the financial industry that has derailed the world economy.” He said that they should be kept at a safe distance from our nation’s leadership.

He also noted that Timothy Geithner, president of the Federal Reserve Bank of New York, had served under both Rubin and Summers and was a candidate for the Obama Treasury Secretary.

On Friday, Nov. 2l, the Obama camp leaked the word that Summers was expected to be director of the National Economic Council in the White House, the president’s principal economic adviser and policy coordinator, and that Geithner was the likely nomination for Treasury Secretary.
Meanwhile, Heard on the Street column in Saturday’s Wall Street Journal noted that Geithner “in the past espoused many of the views championed by former Federal Reserve Chairman Alan Greenspan in terms of a hands-off approach to market regulation.” Obama is expected to announce his economic team at a press conference on Monday.

In short, the deregulation virus, and the carriers of the deregulation virus in the Clinton administration, are alive and well and thriving in the emerging Obama presidency. Where are the progressive economists from the Joseph Stiglitz/James Gailbraith/Paul Krugman wing of the Democratic Party? After all, the deregulators have been proven to be disastrously wrong about the economic crisis. And the warnings of the progressive economists have been proven to be on target. And their New Deal-type prescriptions are what are needed. Again, this will require that the progressives put strong and unending pressure on the emerging Obama administration, who will be getting pressure from the financial lobbyists pressuring to keep the bailouts coming without proper regulation or requirements. B3


Click here to read Robert Scheer’s timely and prescient Chronicle column: .

Jeffrey Sachs: A Sustainable Recovery

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Here is an installment from Jeffrey D. Sachs’ monthly commentary: Economics and Justice available exclusively on the Project Syndicate news series. Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also a Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

A Sustainable Recovery

by Jeffrey D. Sachs

NEW YORK – The global recession now underway is the result not only of a financial panic, but also of more basic uncertainty about the future direction of the world economy. Consumers are pulling back from home and automobile purchases not only because they have suffered a blow to their wealth with declining stock prices and housing values, but also because they don’t know where to turn. Should they risk buying a new car when gasoline prices might soar again? Will they be able to put food on the table after this year’s terrifying rise in food prices?

Decisions about business investment are even starker. Businesses are reluctant to invest at a time when consumer demand is plummeting and they face unprecedented risk penalties on their borrowing costs. They are also facing huge uncertainties. What kinds of power plants will be acceptable in the future? Will they be allowed to emit carbon dioxide as in the past? Can the United States still afford a suburban lifestyle, with sprawling homes in far-flung communities that require long-distance automobile commutes?

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