Monday, February 27, 2012

West Oahu Development: Meat and Potatoes or Gravy Train?

Use this link to load or print a PDF version of this announcement.

US Financial Crisis and Globalization

In the coming years US may suffer greatly by the very pattern that it advocated: Globalization. The US is substantially dependent on outside sources to supply industrial products, consumer products, food and energy. So far this has worked well, but the table is about to turn around.

First let's summarize the fiscal crisis in a few bullets:
  • This is the fourth straight year that the US borrowed more than $1 trillion to support its federal government. US budget deficit will top $1.3 trillion, 8.7% of GDP. Only two European countries, Greece and Ireland, have larger budget deficits as a percent of GDP.
  • US national debt now exceeds $15.3 trillion, or 102% of GDP. Only four European countries have larger national debts than US: Greece, Ireland, Portugal and Italy.
  • If one adds the unfunded liabilities of Social Security and Medicare to the US official national debt, the US debt is $72 trillion, by Obama administration projections. This is more than 480% of GDP. France, the second most insolvent nation in Europe, owes 549% of GDP.
  • Under more realistic projections, the US official national debt is $137 trillion or 911% of GDP. Counting both official debt and unfunded pension and health care liabilities, the most indebted nation in Europe is Greece, which owes 875% of GDP.
  • 48 of 50 states have annual deficits and large long term debt. Several states have insolvent employee pension and health care trusts. Of course Hawaii is one of them.
  • Many US cities are in deficit, some are at or near bankruptcy and all face major infrastructure backlogs as well as their own employee retirement shortfalls.
  • Unlike the huge debt of Japan or France that is owed mostly by their own citizens, US is more like Greece. Most of its debt owned by foreign countries and external lenders.

Why is the US not at the same position as Greece? The reasons are many and they include US' vastly larger economy, vast ability to innovate, vast natural resources compared to most EU countries, vast dependency of many countries on the US consumer to buy the things they make, vast military capability, and having the US dollar as the world's main reserve currency.

This reserve currency is also US' main tool for controlling a quick financial collapse. The devaluation of the dollar would slash the debt owned to foreign interests. At the same time globalization will come back and bite the US consumer since all imports will become 30% more expensive if the greenback is devalued by 30%, resulting in internal hyperinflation and market instability. Messy!

At the same time, this devaluation will cause substantial losses to US' global partners. For example, BMWs will be 30% more expensive in the US and Chryslers will be 30% less expensive in Italy, causing compounded losses in the demand of consumer products in the EU. Messy!

What caused all this mess? Policies and actions focused on the negative side of Capitalism and the negative side of Socialism. Capitalism focused on price and profit, not on sustainable production. Socialism focused on ever increasing and unsupportable entitlements instead of basic and sustainable security.

The path to the abyss is clear.

Greece is there but the US is near.

Do politicians hear?

Friday, February 24, 2012

Traffic Signal Optimization

4,114 Stoplights in Los Angeles and the Intricate Network that Keeps Traffic Moving is a simple and informative article of some of the advances in moving heavy traffic in congested cities.

I note that the City of Los Angeles has placed major priority on this city function not only by developing their sophisticated control system called ATSAC but also by staffing its operation ... "Yu and his team of 35 ­engineers and 20 operators."

HONOLULU needs about 1/4 of this level of staffing. It has 1/10.

In general, traffic signal optimization is among the "low hanging fruit" in mitigating some of the traffic congestion in urban areas. But it needs funding and staffing because this is a 24x7 operations with ever changing flows and congestion spots.

Wednesday, February 22, 2012

Honolulu Can Do Much Better!

On President’s Day Senator Daniel Inouye called a press conference at his local office and made three recommendations for Honolulu. Build the rail, elect Mazie Hirono for Senator and elect Kirk Caldwell for mayor. Rail, Hirono and Kirk is the best trio for Honolulu’s future? I have a graphic answer ;)

US Debt: Remove 8 Zeros. Get an Understanding.

I could not resist copying here this simple chain email message.
  • U.S. Tax revenue: $2,170,000,000,000
  • Fed budget: $3,820,000,000,000
  • New debt: $1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cuts: $38,500,000,000
Let's now remove 8 zeros and pretend it's a household budget:
  • Annual family income: $21,700
  • Money the family spent: $38,200
  • New debt on the credit card: $16,500
  • Outstanding balance on the credit card: $142,710
  • Total budget cuts: $385
And I add this...

Revised family plan: Raise the credit card limit to

Obviously the parents are nuts. Pity the children.

Sunday, February 19, 2012

Ban the Ban of Plastic Bags

Dear Council Members,

I conducted a poll on the proposal on banning plastic bags. My list of emails is large and diverse and I chose a random sample of 600 recipients to receive the survey link. Still, this is not a scientific survey. However, it is indicative that after 50 responses the results did not change by more than 2%. In other words, the public' sentiment is quite clear.

The poll results screen capture below reflects 112 responses.

Only 25% answered yes to the statement Plastic bags are a serious threat to our environment.

John Pritchett's cartoon at the very bottom concludes this presentation.

I'd say that you may safely proceed with bigger and better things.


Jobs: Fundamental Trends – 2000 to 2050. How Did We Get Here and What’s in Store?

There are three fundamental trends at play in this half century:
  • Aging of both population and infrastructure;
  • Advanced economies cannot absorb unskilled and low skilled laborers; and,
  • Too many crises in one decade took our eye off the ball.
The first trend affects the US more than other nations. Baby-boomers have started reaching the age of retirement and the age when health maintenance expenses increase. As a result many state pension and health funds are under substantial stress and their situation is likely to rapidly worsen as more workers age and fewer workers find high paying jobs that pay high enough taxes to sustain pension and health expenses. One of the proposals toward retirement fund solvency is to raise the age of retirement from the typical of 65 year of age to 70.

Along with the baby boom in the US also came the second infrastructure boom (the first one was during the Great Depression.) The second boom focused mostly on transportation and the road and air modes in particular, along with a misguided urban rail renaissance* of the late 1970s till the 1990s. For example, BART in San Francisco and Metro in Washington. DC are facing work backlogs in the order of tens of billions of dollars for required refurbishment and rehabilitation to bring those systems to a top operational condition. The bills are in the billions for bridges and elevated highway sections, and for the strengthening and restoration of millions of lane-miles of roadways.

While infrastructure presents a great opportunity for boosting the job count, a lot of the work is both highly technical and very expensive. The former implies that unskilled labor is unsuitable, and the latter implies that a lot of infrastructure projects may be unaffordable. The existing gasoline taxes which have been constant for almost 20 years at the federal level have lost value and are insufficient to cover highway maintenance. In addition about 20% of these funds is re-purposed to pay for loss-making transit systems.

Electric and other non-fossil fuel powered vehicles are not visiting the gas pump regularly (or ever), thus no tax for their road usage is collected. The highway tax system needs both a tax rate update and modernization. This will create new jobs, but again, the expertise will vary from technician to engineer; no need for unskilled labor.

This segways us to the second trend which is the progressive evolution of advanced technologies out of labor intensive jobs. Agriculture, construction and manufacturing are increasingly automated. They require fewer and more skilled staff. A good example is driverless trains in France. They replace approximately 100 motormen with two dozen rail engineers and train management technicians in a control room. This cuts the job count by 75% and costs by 50%. Fewer, more comfortable and better paid jobs is what advanced economies provide.

Retailing absorbs low skill labor. But there are many changes that reduce the unskilled job count in retailing such as Internet retailing, big box store retailing and upscale retailing, all of which require fewer and better skilled workers.

The transportation sector employees roughly 5% to 15% of a region’s workers (the count is higher in highly urbanized areas). This sector is dominated by federal and state regulations as well as unions. Both regulations and unions make the absorption of low skill labor more difficult.

The third trend is actually a series of calamities that caused stress to the economy and inattention to its drifting into deep losses. I list eight major ones:
  1. Global Warming related regulations leading to various stresses on energy production and pricing.
  2. The September 11, 2001 attacks in the US and the subsequent wars in Afghanistan and Iraq.
  3. Hurricane Katrina in New Orleans which, among other things, caused a fuel price escalation.
  4. Drought in Texas with major impacts on jobs and food prices.
  5. Huge losses in wind and solar projects, and erratic US energy policy.
  6. Rapid increase in commodity and energy prices due in part to rising demand in Asia.
  7. The sub-prime lending melt down.
  8. Euro crisis, weakening US dollar, and Chinese RMB strengthening are causing various currency instabilities.
How did we get here? The discussion above suggests that large losses in the count of jobs in 2009 and 2010 can be explained by natural trends (aging), structural trends (modernization) and calamities (man and nature-made losses).

What’s in store? Prognostication is both fun and faulty. One thing that is certain is that the BAU model, that is, Business As Usual will bring more of the same.

If Congress remains dysfunctional, if state and federal administrations focus on government expansion and business regulation, if unions stress demands for perks instead of modernization and productivity improvements, if US energy policy continues to be an assortment of mostly special-interest ideas and incentives, then job count and quality of life will certainly deteriorate.

It does not have to be this way. Upcoming articles look into ways for more sustainable jobs.

(*) Rail Transit: Are we creating new life or resuscitating a dinosaur? This was the title of an 1980s article by Northwestern University’s Joseph Schofer, a distinguished professor of transportation at the McCormick School of Engineering and its Associate Dean.

Thursday, February 16, 2012

ECONOMY Survey -- The Economist and Hawaii Results

I like people, global and local issues, and numbers ... so I present a mini-series of surveys on major issues which have been debated at The Economist. Obviously the results only represent people with at least a basic level of computer and Internet savvy. However, the results may be sufficiently indicative because most questions along with the careful wording of questions lead to a straightforward answer: Agree, Disagree or Do Not Know. The Economist has received a few thousand responses to each of their questions. I post results only when Hawaii surveys exceed 100 responses.

ECONOMY Survey Results (click to take the survey, part 1, and economy survey part 2.)

The results are summarized in the Table and discussed below.

The first three issues shown in the table results in solid agreement for both Economist and Hawaii respondents.
  • Brand AMERICA will regain its shine, although some may question whether brand AMERICA has lost its shine in the first place.
  • People do not have much faith in corporations to take measures towards sustainability. Although one might argue that it is people who force corporations to make "cheap" choices since they demand inexpensive products. You can't run an operation on solar power at current costs and expect to have a cost similar to a competitor using coal or hydro-electric power.
  • 75% of both Economist and Hawaii respondents agree that workers do not get enough sleep. This has important implication on weight gain, diabetes, productivity at work, safety in traffic and personal relations. How much of this is due to electronic gaming and social media engagement is an open question.

The next four issues show a solid disagreement between Economist and Hawaii respondents.

  • Almost 75% believe that China's currency won't be a reserve currency any time soon. Currently the basket of reserve currencies include the US Dollar, the Euro and the British Pound but dollar super dominated the basket accounting for 890-100% of most reserve applications.
  • A woman's place is at work is a controversial statement; it is the only statement for which I received complaining emails. Recall that The Economist has developed all these statements. Economist respondents give a slim margin of disagreement to this, but two thirds of Hawaii respondents do not agree that a woman's place is at work.
  • Almost 75% believe that senior company executives are not worth what they are paid. No surprise here and both the perception of the respondents and the reality are so, in my opinion.
  • The clear majority of the respondents do not agree that sustainable development is unsustainable. In other words, they believe that we can continue to develop but in a sustainable, Earth-friendly manner. Sure, but only up to a point. There will likely be too many challenges to overcome one Earth's population approaches 10 billion people. This bring up the divisive issue of population. (See below.)
The remaining four issues reveal opposing views between Economist and Hawaii responses.
  • 80% of Economist responses believe that the world would be better off with fewer people, but only 42% of "spirit of aloha" Hawaii respondents think so. Are we seeing the result of Western selfish culture and Hawaii's more accepting multi-ethnic culture?
  • Who should pay for higher education? Almost 80% of socialist-minded European respondents of the Economist want the state to pay. Free market minded Hawaii respondents make this an individual pocket-book and career choice.
  • Economist respondents come from industrial nations so it's no surprise that 78% feel that an economy cannot succeed without a big manufacturing base. In Hawaii with its sparse and light industrial base the response is about 50-50.
  • Again socialist-minded European respondents are split about 50-50 on the effect of government regulation of business finance, but Hawaii respondents are resoundingly against multi-billion bailouts and the ropes (not strings) that come attached to them.

Tuesday, February 14, 2012

Chrysler's Super Bowl Ad with Clint Eastwood

Half Time in America: Chrysler's 2-minute long TV commercial with Clint Eastwood during the 46th Super Bowl was a strong political statement. It was likely washed down too quickly with beer, pizza and nachos, but it did generate a lot of media coverage.

What did Clint's message say to people in Hawaii? My small sample survey reveals the following:

78% of the respondents agree that Clint is talking about American patriotism, Detroit rebounding, union jobs or all of these.

The majority opinion is that this commercial has nothing to do with Chrysler cars or cars in general, but 43% think that Clint is also talking about the importance of the car industry for America. See details below.

75% of the respondents feel that Clint is raising an alarm about the condition of our country, the upcoming elections and the future of America or all of these.

Clint himself stated that he is not in agreement with the president's policies but he did not think that this commercial was about Obama. 43% of Hawaii respondents agree, but 49% responded that the ad support Obama policies. Only 8% responded that the ad goes against Obama policies. See details below.

Kudos to Chrysler for developing a thought provoking ad which some have labelled as a payback to Obama administration for arranging the auto industry bailouts.

Thursday, February 9, 2012

The 60% Lie: Less than 6% of Oahu's people live within walking distance of the proposed rail!

Dennis Callan, planner and rail aficionado says this:

"The city claims that more than 60% of Oahu residents, some 600,000 people, live along the rail route, but in reality less than 6% of Oahu's population resides within walking distance of the proposed train stations.

"Such misleading inflated numbers from our city government are part of their ongoing propaganda campaign, which has distorted most aspects of the rail system in their attempt to sell it to the public with rosy projections. They would like you to think the rail is very accessible and useful, but it is not."

Callan's video Who Will Ride Honolulu's Train has the analysis and numbers that proves the city's exaggeration and illustrates the continuous dishonesty of HART members who support the wrong facts in the media.

Wednesday, February 8, 2012

Jobs. Jobs. Jobs.

Seth Godin, marketing guru, ex-VP at Yahoo! and author of 13 books, believes that “the current recession is a forever recession” because the industrial age has ended and this means that the days when people were able to get above average pay for average work are over. Self-improvement, continuous learning and investment on oneself are key to employment otherwise “never mind the race to the top, you'll be racing to the bottom.

While this is useful advice for those currently employed, the pressing problem is unemployment and under-employment. The Bureau of Labor Statistics (BLS) calculates the official unemployment rate by looking at those who are employed or who have actively looked for work within the last four weeks. As a result, the official rate excludes workers who have decided to drop out of the labor market altogether. The official rate also ignores those who settle for part-time work since they are unable to find a full-time job.

Recognizing this shortcoming, the BLS also reports the U-6 rate, which includes those who have sought a job sometime in the last 12 months and those who have accepted part-time jobs but would prefer full time. The U-6 rate is a better representation of the ability of the economy to provide jobs. Let's take a look at the numbers as summarized in NCPA's Tracking the Unreported Unemployed:

  • The 1948-2007 unemployment average is 5.6%.
  • The unemployment rate moved from 5% in January 2008 to a high of 10.1% in October 2009, and a current rate of 8.6%.
  • The U-6 rate moved from 8.8% in December 2007 to 17.4% in October 2009 and 15.6% in November 2011.
  • U-6 rate is almost twice as high as the official unemployment rate. It explains the increasing pressure for economic improvement and jobs.
  • By the end of 2011, 43% of all unemployed have been unemployed for more than 27 weeks. Besides being jobless, their skills deteriorate, which worsens their employment prospects.

Without doubt the unemployment challenge is serious. What causes a high unemployment rate? There are several causes. Here is a big one: The disconnect between supply and demand for jobs. There is a glut of low skill laborer supply. There is demand for high skill, specialized jobs. Unemployed carpenters. Engineers wanted.

The problem of turning 500 unemployed carpenters to 500 engineers is impossible to legislate. In general, turning thousands of low skilled workers to thousands of high skilled workers is very difficult to solve. We need to understand and address the root causes of the problem some of which have deep cultural roots such as over-emphasis in sports instead of scholarly achievement, under-performing public education systems, and stereotypes based on race and gender. Another part of the problem is government regulations and union rules. I’ll cover most of these in a series of articles.

Instead of addressing the root causes of unemployment, politicians in the recent past responded to the cries for “jobs, jobs, jobs!” in two wrong ways: (1) They approved “make work” projects for low skill and construction labor, and (2) they “incentivized” new high tech industries.

“Make work” projects is the use of taxpayer funds to develop unnecessary or low effectiveness infrastructure projects, typically show-off projects or transit projects. These provide some jobs for low skill labor but in reality the unemployment problem is postponed for a few years while the tax hole becomes bigger. “Make work” policies are unsustainable. They develop dangerous dependencies for thousands of low skill laborers instead of providing opportunities for advancement and job diversification.

The current genre of “high tech incentives” is the green industry. Incentives are typically taxpayer handouts to targeted groups, e.g., relating to solar panels and electric cars. People and industry respond to incentives. While accounting in Hawaii is poor, it is much better in the UK where the conclusion in Worth The Candle? The Economic Impact of Renewable Energy Policy the UK was that “for every job created in the UK in renewable energy, 3.7 jobs are lost.” In Hawaii, misguided policies will likely result in more solar guys than nurses per 1,000 people; and a deeper tax hole. Such outcomes are unsustainable and undesirable.

Politically expedient solutions to unemployment are both costly and ineffective. We can’t talk about solutions until we are able to wrap our brain around the issue of “jobs.” What are some of the many facets of employment and unemployment?

Unemployment varies widely by level of education. The Chronicle of Higher Education reports this: The overall unemployment rate for recent Bachelors degree recipients is 8.9%, compared with 22.9% for recent high-school graduates and 31.5% for recent high-school dropouts. It also varies by fields: Unemployment is higher among recent graduates with nontechnical fields of study, such as the arts (11.1%) and humanities and liberal arts (9.4%), but it is only 5.4% for graduates who studied health or education.

College pays off: The Los Angeles Times reports that the average take-home pay of college graduates is $38,950, compared with $21,500 for high school graduates. A college graduate's earnings would exceed a high school graduate's by more than $1 million over 40 years.

Gender makes a difference. The Economist published detailed analysis which I’ll summarize elsewhere but the bottom line of "The Cashier and The Carpenter" is that men and women do different work for different pay. For example, by working shorter paid hours, women are managing to achieve a reasonable balance in their lives. The Economist cites results that show that work-life balance dissatisfaction is about 18% for women and 27% for men in Europe.

The New York Times reports that in the two and a half years since the recovery officially began, men age 16 to 24 have gained 178,000 jobs, and women have lost 255,000 positions. “Apparently discouraged by scant openings, 412,000 young women have dropped out of the labor force entirely in the last two and a half years, meaning they are not looking for work. Young women in their late teens and early 20’s view today’s economic lull as an opportunity to upgrade their skills, their male counterparts are more likely to take whatever job they can find.” As a result, the next generation of women may have a significant advantage over their male counterparts in the near future.

The NYT article continues to say that many of the occupations expected to have the most growth, like nurses, home health aides and dental hygienists, have traditionally been filled by women. Jobs in male-dominated industries such as manufacturing and construction have been in decline. Manual labor careers can also be hard to maintain indefinitely because youthful strength eventually fades. The pension coverage of construction and manufacturing workers is also lagging which presents a challenge for males as they age.

Knowledge and understanding of the true causes of a problem are the right foundation for crafting solutions. My series of summary articles on “jobs” throws light onto the employment and unemployment challenges. Stay tuned!

1. Jobs. Jobs. Jobs. This article.

2. Jobs: Fundamental Trends – 2000 to 2050. How Did We Get Here and What’s in Store?

3. Jobs Hawaii: Outlook for Jobs in Education, Government, Military and Tourism

4. Jobs: The Young and Unskilled

5. Jobs: What Women Want

6. Top Jobs: 10 Hot Careers for 2012

7. The Right Job: Sustainable, Desirable Employment

Monday, February 6, 2012

Rail and Weather Forecasters

Hawaii weather is meant to frustrate weather forecasters. They predicted buckets of rain for Sunday and we got next to nothing. Then they predicted next to nothing for Monday and we got buckets of rain! As in the picture below.

Speaking of weather forecasts, professor Bent Flybjerg of Oxford University places weather and rail forecasters at opposite ends of the spectrum of truth and honesty.

Weather forecasters are neither deluded nor deceptive; they use some of the most complex models and report their forecast for a few days in the future. They get it right most of the time.

Honolulu Rail forecasters have used primitive models (*) and gobbles of delusion and deception (Dr. Flybjerg's words; see graph below) to predict rail's efficacy 20 to 30 years in the future! And they never get it right.

(*) Oahu rail forecasts were based on a relatively ancient OMPO zonal model from a 1994 survey. Much to the discredit of our local government at all levels, we have not conducted a comprehensive origin-destination survey since 1994. So we have developed a five billion dollar transportation investment using old and primitive data. We all know "garbage in, garbage out" and that's exactly what we are dealing with here.

Do not get me started about the traffic tools they have used in the multimillion dollar analyses to predict future traffic conditions. These rock bottom tools are acceptable to Hawaii government, and FTA simply does not care about traffic conditions. However, the Federal Highway Administration has this opinion: "Equation tools are very appropriate for localized study areas like a single intersection or a highway section. Equation tools also are appropriate for a quick-and-dirty preliminary analysis that may lead to or warrant a future, more detailed analysis." Above those tools come four more classes of tools with increasingly advanced sophistication, but hardly any of them were used in the rail EIS.