Obama’s Budget

I am rather conflicted about the budget that Obama administration unveiled. On the one hand it has the right investment areas — Health Care reform, alternative energy (with revenue generated from carbon emission heavy industries), and education.

It  also focuses on some of the right areas for generation of revenues — like  roll-back of tax cuts for people earning greater than 250K, cut-back of subsidies to agribusinesses, pharmaceuticals and defense contractors.

However, where it fails, in my eyes, is the cut-back required on wasteful government spending — I don’t see much of that. Another troubling sign is that the deficit for the fiscal year 2009 (that ends in Sept) will be $1.75 trillion. That is staggering addition to the government deficit. He predicts that the deficit will fall to $533 billion in the last year of his term — 2013 — but that is far off in the future.

It is a bold new experiment in trying to level the playing field between the haves and the haves not. However, neither is it trim enough nor is it immediate in reducing deficit, and I fear that entropy will take over as time progresses with positive goals less pronounced and negative factors exaggerated when all of this becomes reality.

In a very perceptive article in Washington Post titled, “A Budget Process Hijacked By Selfish Interest,” Steven Pearlstein points out that it was the drive for self interest that resulted in a pluralist approach which forced competing self interests to be looked at collectively by decision makers and helped balance out the overall outcome. He writes, “It’s hard not to see the parallel between the magic of this political marketplace and the “invisible hand” of the economic marketplace as described centuries ago by Adam Smith. It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest,” he wrote famously in “An Inquiry Into the Nature and Causes of the Wealth of Nations.””

 However, it is clear that the system can be manipulated and short term narrow interests can take away the focus from the long term issues that are more potent and dangerous. Also, the politics of Washington ensures that such sweeping, radical bills have more angles to attack it from. And that, I am afraid, will be the undoing of the budget. For, immediate, short term gains are easy for the butcher, the brewer, or the baker and hence that is what they lobby for but long term abstract gains like a balanced federal budget, reformed health care and green energy are hard to visualize. Just like Wall Street, Congressmen will continue to focus on short term gains till uncontrolled upheaval makes long term short term and then, unfortunately, change will be impossible to implement.

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The audacity of hope, indeed!

President Obama’s audaciously hopeful plan outlined today in his Address to the Congress is breath taking in its ambition. He has laid out such a vast agenda that even if he accomplishes half of what he wants to, the nation will be better for it — at least all his goals are admirable and that is, already, more than what could have been said of the prior administration.

What do the people of the world think? – Part I

BBC World Service Poll in conjunction with Program on International Policy Attitudes (PIPA) at the University of Maryland conducted  13,575 in-home or telephone interviews across a total of 21 countries between 21 November 2008 and 1 February 2009.

The poll asked if the individual’s view of a countries’ influence was “mainly positive”, “mainly negative” or “neutral?” The question was asked about 16 countries. 9 out of 16 countries had a net positive influence and 7 had a net negative influence per the poll (see graph below).

world-poll-2009

 

Some highlights based on the article and the poll results:

Rank 1: Germany

 Germany leads the rankings with 46 points net positive (61 positive vs. 15 negative). I can’t help but be amazed by the change in Germany’s fortune — very few at the end of WWII in 1945 would have thought that approx. 60 years later, the world population will view Germany as the most positive influence in the world!

 Germany has achieved this stellar ranking through deep economic, social and political engagements with the rest of the world, especially within EU. Angela Merkel comes across as a conscientious leader of a hard working nation: Germany has the highest export earnings of all countries. Secondly, the defanging of Germany since World War II has surely helped Germany since there has been none of the military mis-adventures like those that affect USA and other powerful nations.

Rank 2: Canada

Canada, with a net positive of 43 (57 positive and 14 negative) at # 2 is not a surprise though Canada is surely a soft power and most people, I suspect, who voted positive for Canada do so for the position it takes on various issues rather than what Canada does since, in my opinion, it doesn’t do as much as it can.

Rank 3: United Kingdom

With a net positive of 39 points (58 positive vs. 19 negative) United Kingdom is surely a surprise for me.  May be with the departure of Tony Blair people are disassociating UK from the USA, however, I do not see material difference in UK’s global policies in the one year since his departure. Gordon Brown played a crucial role in stabilizing the EU economy, at least temporarily, but if that is helping UK’s score, that is too generous an assessment since it is the same man who was singing the virtues of unbridled free markets like a canary all the way up until the advent of this recession. It can very well be the fact that UK is the magnet for all workers from other EU countries that is helping its score but whatever the case may be, I surely believe that UK can do more and the 3rd ranking is too high.

Rank 7: India

India comes in at 7th rank and has 6 points net positive (38 positive vs. 32 negative). While India is still looked upon as projecting positive influence it is a decrease of 5 net positive points when compared to last year (41 positive vs. 30 negative). The biggest change, per the report, has been in European countries, to quote, ” This is largely driven by sharp increases in negative views in European countries – France (35% to 50%), Germany (34% to 54%), Italy (30% to 43%), and Spain (35% to 47%) – as well as China (30% to 44%).”

I believe the nuclear deal with the US, the Mumbai bombing — perversely affecting the victim in a negative way, and a potential backlash against off-shoring — a business practice that affects jobs in richer countries more — at a time of economic uncertainty might be the factors driving the negative trend in Europe. The Indian leadership should be careful to not appear too undecisive in the name of non-alignment and pick up good and important causes at home and abroad to change this trend.

The City of Angels is rationing water

Yahoo! News reports in an article titled “Los Angeles nears water rationing”   that the city officials voted to impose rationing. To quote, “With a recent flurry of winter storms doing little to dampen California‘s latest drought, the nation’s biggest public utility voted on Tuesday to impose water rationing in Los Angeles for the first time in nearly two decades. Under the plan adopted in principle by the governing board of the L.A. Department of Water and Power, homes and businesses would pay a penalty rate — nearly double normal prices — for any water they use in excess of a reduced monthly allowance.”

I really am trying not to paint too depressing a picture here but Washington Post reported on Feb 15th in an article titled, “Scientists: Pace of Climate Change Exceeds Estimates” that the pace of global warming is likely to be much faster than any recent predictions because industrial greenhouse gas emissions have increased more quickly than expected and the resultant higher temperatures are triggering self-reinforcing feedback mechanisms in global ecosystems.

Well, may be the climate change is already here, at least for Los Angeles. However, I am sure East Coast, being so far away, is not going to be impacted for another century or so and by that time our kids will figure out what to do. (The last sentence is laced with irony and sarcasm just in case you didn’t figure it out)

“Every cloud has a silver lining” (sorry, no affront intended to sensitive Los Angeles readers given they haven’t seen a cloud in a while, leave alone silver lining)…….so may be the economic downturn has one major positive affect — reduction in greenhouse gas emissions!

How’s that to cheer you up after all the depressing news in this post?

Education and its importance

The fecklessness of some of the Republican representatives to the Congress and Republican Senators is hard to believe — they oppose the money allocated for education in the stimulus bill for the reason that money cannot buy good education.

Wrong!

According to the American Federation of Teacher’s website, the average salary of a public school teacher in 2006-2007 was $51,009 and it was the first time since 2003 that it surpassed the inflation rate. And  A University of Washington study had calculated that the recession would lead to cuts of 574,000 school jobs without a stimulus.

I am sorry, but with the finance industry “worker” wolfing in millions on the average as compensation — I bet you even the secretary at these institutions is paid more than $51,000 — and knowing what we all know about the $18.4B taxpayer paid bonuses in 2008, I cannot fathom what these so-called representatives of people are thinking? I rather that the teacher’s average salary rise up to $100,000 so the best and the brightest start becoming teachers than give these exorbitant Wall Street bonuses. Continue reading

How does one solve the apparently unsolvable ills of Capitalism?

Mr. Kristof, an Op-Ed Columnist at the New York Times, wrote an insightful article titled, “Mistresses of the Universe,” that cites good research which relates preponderance of males on Wall Street and the high-risk decisions taken in turn. The article argues for more diversity in all Financial Institutions, especially increasing Women population.  There is no argument against more diversity on Wall Street — Women, African American, Asians, Hispanics, et al. — it can only be positive, however, I do not believe that will solve Wall Street’s ills.

I have seen corporations with great diversity yet forcing a singular agenda and eerie silence at the top no matter what the mix —  don’t see evil, don’t hear evil and hence don’t talk evil being the very easy to adopt philosophy no matter White, Black, Asian, Hispanic, Man or Woman.

Wall Street is burdened by its very nature — it deals with money. Firstly, it will attract people who want to make money, loads of it, and at any cost (Go to, “Why not socialism for all in bad times?” to read mind-numbing utterances from Mr. Welch, exposing himself as yetanother “money at any cost” guy).  The ones that do join the Financial sector due to academic achievement or lack there of (it is the average mind on the average that makes it to Finance) or “my-parents-told-me-so” phenomenon will soon find the temptation too great.

Continue reading

Obama restricts Executive pay!

The news is just in and I cannot be happier:  New York Times is reporting that the Obama administration plans to impose a cap of $500,000 for executive pay for any firm that will benefit from the next round of bailout money. This restriction is obviously not retroactive but many of the big banks are expected to come to the well once again given the deepening recession.

Yahoo! News reports, “Administration officials have said that the new restrictions would apply only to those struggling large firms that receive “exceptional assistance,” such as the American International Group Inc., Citigroup Inc., and Detroit automakers. They would not apply to healthy banks that receive government infusions of capital.

And Obama’s chief economic adviser, Larry Summers, has proposed that firms that want to pay executives above a certain threshold would have to compensate them with stock that could not be sold or liquidated until they pay back the government funds.”

On the same day, Obama was brave enough to admit that he made a mistake in nominating Tom Daschle for the Cabinet position — I like the courage in contrition displayed by our Commander-In-Chief. 

Hail the new President!