Op-Ed Columnist

This Is Not a Recovery

By PAUL KRUGMAN

Published: August 26, 2010

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What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.

Fred R. Conrad/The New York Times

Paul Krugman

But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.
The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.
All of this is obvious. Yet policy makers are in denial.
After its last monetary policy meeting, the Fed released a statement declaring that it “anticipates a gradual return to higher levels of resource utilization” — Fedspeak for falling unemployment. Nothing in the data supports that kind of optimism. Meanwhile, Tim Geithner, the Treasury secretary, says that “we’re on the road to recovery.” No, we aren’t.
Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly.
Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.
So what should officials be doing, aside from telling the truth about the economy?
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.
The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?
Which of these options should policy makers pursue? If I had my way, all of them.
I know what some players both at the Fed and in the administration will say: they’ll warn about the risks of doing anything unconventional. But we’ve already seen the consequences of playing it safe, and waiting for recovery to happen all by itself: it’s landed us in what looks increasingly like a permanent state of stagnation and high unemployment. It’s time to admit that what we have now isn’t a recovery, and do whatever we can to change that situation.

A version of this op-ed appeared in print on August 27, 2010, on page A21 of the New York edition.

August 26, 2010

Struggling Cities Shut Firehouses in Budget Crisis

By MICHAEL COOPER

SAN DIEGO — Fire departments around the nation are cutting jobs, closing firehouses and increasingly resorting to “rolling brownouts” in which they shut different fire companies on different days as the economic downturn forces many cities and towns to make deep cuts that are slowing their responses to fires and other emergencies.
Philadelphia began rolling brownouts this month, joining cities from Baltimore to Sacramento that now shut some units every day. San Jose, Calif., laid off 49 firefighters last month. And Lawrence, Mass., north of Boston, has laid off firefighters and shut down half of its six firehouses, forcing the city to rely on help from neighboring departments each time a fire goes to a second alarm.
Fire chiefs and union officials say it is the first time they have seen such deep cuts in so many parts of the country. “I’ve never seen it so widespread,” said Harold A. Schaitberger, the general president of the International Association of Fire Fighters.
The risks of cutting fire service were driven home here in July when Bentley Do, a 2-year-old who was visiting relatives, somehow got his hands on a gum ball, put it in his mouth, started laughing and then began choking.
“It blocked the air hole,” said his uncle, Brian Do, who called 911 while other relatives frantically tried to dislodge the gum ball. “No air could flow in and out.”
It is only 600 steps from the front door of the neatly kept stucco home where the boy was staying to the nearest fire station, just down the block. But the station was empty that evening: its engine was in another part of town, on a call in an area usually covered by an engine that had been taken out of service as part of a brownout plan.
The police came to the home within five minutes and began performing cardiopulmonary resuscitation, officials said. But it took nine and a half minutes — almost twice the national goal of arriving within five minutes — for the fire engine, with a paramedic and more medical equipment, to get there. An ambulance came moments later and took Bentley to the hospital, where he was pronounced dead.
The San Diego Fire-Rescue chief, Javier Mainar, said it was impossible to say whether the delay contributed to Bentley’s death on July 20. But he said there was no doubt that the city’s brownouts, which take 13 percent of firefighters off the streets each day to save $11.5 million annually, led to the delay.
“You can just lock everything down and look at it sequentially, chronologically, as to what occurred,” Chief Mainar said in an interview. “There is no question that the brownout of Engine 44 resulted in Engine 38 having to take a response in that community, and because of that, Engine 38 was now out of position to respond to something that happened just down the street from their fire station.”
Fire service was once a sacred cow at budget time. But the downturn has lingered so long that many cities, which have already made deep cuts in other agencies, are now turning to their fire departments.
Some are trying to wrest concessions from unions, which over the years have won generous pension plans that allow many firefighters to retire in their 40s and 50s — plans that many cities say are unaffordable. Others want to reduce minimum-staffing requirements, which often force them to resort to costly overtime to fill shifts. Others are simply cutting service.
Analysts worry that some of the cuts could be putting people and property in danger. As the downturn has worn on, ISO, an organization that evaluates cities’ fire protection capabilities for the insurance industry, has downgraded more cities, said Michael R. Waters, ISO’s vice president of risk-detection services.
“This is generally due to a reduction in firefighting personnel available for responding to calls, a reduction in the number of responding fire apparatus, and gaps in the optimal deployment of apparatus or deficiencies in firefighter training programs,” Mr. Waters said in a statement.
Several fire chiefs said in interviews that the cuts were making them nervous.
“It’s roulette,” said Chief James S. Clack of the Baltimore City Fire Department, which recently reduced the number of fire units closed each day to three from six. Officials saw that the closings in the 55-unit department were in some cases leading to longer response times. “I’m always worried that something’s going to happen where one of these companies is closed.”
Early in his mayoralty, Michael R. Bloomberg of New York closed six fire companies to save money. This year, a threat to close 20 more — a 6 percent reduction in New York’s fire companies — was averted when the city found savings elsewhere.
Several cities — including Lawrence — have said that they were forced to cut service because the unions failed to make concessions. Mr. Schaitberger, the union president, who was here for a union convention, said that protecting the pensions his members have won over the years was a top priority this year.
The pension issue has an added resonance in San Diego. The city was forced to consider a bankruptcy filing even before the Great Recession, and was barred from raising money by selling bonds to the public after officials disclosed that they had shortchanged the pension fund for city workers for years, even as they improved pension benefits. San Diego’s pension fund has only two-thirds of the money it needs to pay the benefits promised to retirees, according to an updated calculation made by the city in the spring, and faces a shortfall of $2.1 billion.
So even before the recession and the brownouts, fire service in San Diego was stretched thin. A previous fire chief, Jeff Bowman, was hired in 2002 with a mandate to build up the department, but he resigned in 2006, after the pension-fueled fiscal crisis surfaced and it became clear that he would not get the money to build and staff the extra fire stations he believed were needed. “The question is whether fire protection is adequate, and in my opinion it’s not,” he said in an interview.
After Bentley Do died, the City Council agreed to put a question on the ballot in November asking voters to approve a sales tax increase, which could be put in place only if the city adopts certain budget and pension reforms. The money could restore the fire service and help close a deep budget gap projected for next year.
But it would come too late for the Do family. Bentley, whose father, Nam Do, an American, was working in Vietnam as an architect, was just visiting San Diego with his mother, Mien Nguyen. Ms. Nguyen, who was six months pregnant, was here to take the oath of United States citizenship. She was sworn in the day after Bentley died, Brian Do, the uncle, said, but she fainted when she got her certificate and was taken to the hospital. Nam Do left his job in Vietnam to come here to grieve for his son, and goes to a temple every day, Brian Do said.
He said that the family had no plans to sue the city. “We’re not blaming the city or blaming the Fire Department,” he said, “but the reason I speak out is because I want them to do a better job for other people.”

RVs Dumping Human Waste on Venice Streets

KTLA News

5:26 PM PDT, August 25, 2010

(Getty Images)

VENICE -- Authorities in Venice have removed about a dozen RVs from one neighborhood after complaints about human waste being dumped on the street.

City crews cleaned up the area around Rose and Third avenues Tuesday night after receiving complaints from Venice residents and activists.

The city then made the owners of about 12 RVs move them out out of the area.

A local activist said as "Boston Dawna" said no one was cited. She said the RVs were back in the same spots by Wednesday morning.

A woman who allegedly uncapped a sewage tank on an RV on Pacific Avenue near Fleet Street, letting waste spill out as her partner drove the vehicle, was arrested over the weekend.

Boston Dawna witnesses and reported the incident.

Venice residents have apparently complained about the RV dumping issue for years.

They're currently trying to circulate petitions to get "no oversized vehicle parking" signs put up. They're meeting with resistance from the city council, according to some activists.

The California Coastal Commission has declined to get involved in the matter.

Copyright © 2010, KTLA-TV, Los Angeles

Why ambulance rides are so expensive: The Real Deal

Last Update: 8/24 6:56 pm

The Real Deal: Ambulance Fees in CNY 8-24-10

Syracuse (WSYR-TV) - It's not pleasant to think about needing an ambulance but the fact is that if you need one the fee has skyrocketed during the last five years. And, depending on where you get sick in Central New York, the fees could be dramatically different.

John Monahan recently had a seizure. "[I] shut off the water, got ready to start drinking it and my legs gave way and I hit the floor and banged against the door bruising my back," he said.

Monahan's mother immediately called 911 and a WAVES Ambulance arrived within minutes. "At the time I didn't have insurance coverage, still unemployed, still looking for work," he said.

He didn't give it too much thought, until the bill arrived a few days later. "It was an emergency condition, it was not something that's normally done. I expected at least a few hundred dollars, similar to in the past, plus an increase for their costs," he said.

He was wrong. He owed a total of $898, including a flat fee of $800 just for the ambulance to show up, and then another $14 per mile.

The Director of WAVES Ambulance, Al Kalfass, admits the prices for a transport have gone up twenty-five percent in the last five years but says that is because the cost of doing business has risen too. "We aren't looking to make anyone poor or afraid of calling an ambulance," he said.

Kalfass says new technology and reimbursement rates also contribute to the increase. Most insurance companies pay about $550 for an advanced life support transport. Medicare pays $395 for that same ride, and Medicaid pays about $215.

Also, ambulance services aren't allowed to say no. They have to respond when someone calls 911 whether it is a true emergency or not. When people call 911 for assistance with minor medical situations, they drive up the price of ambulance rides for everyone.

Kalfass says that in some cases, WAVES isn't even covering its costs, let alone making a profit. It seems that those with high deductibles or no insurance at all have to balance that out.

WAVES is one of the most expensive ambulance services in the in Central New York. While the average price is around $675 for an advanced life support call, prices range from $300 per ride to more than $1,000 even though each offers very similar services.

What is the reason there is such a price difference depending on which ambulance company shows up at your door?

First and foremost, the size of the service is a big factor. The more paid paramedics they have on staff, the more they're going to have to charge patients. Even volunteer corps still have paid staff.

It also depends on how large their coverage area is and whether they have contracts with towns and villages that enable them to collect some money through a fee on resident's property tax bills. Those that have such a contract tend to be a little less expensive, though not dramatically so.

Lastly, the farther you live from a hospital, the more you're going to have to pay. In addition to paying for the extra mileage, the longer trips take ambulances out of service for a greater length of time and put more wear and tear on the vehicles. All those are factors that go into setting prices.

Local government bankruptcy bill comes back to Capitol

August 23, 2010 |  4:21 pm

A measure that would make it harder for local governments to declare bankruptcy is returning to the Capitol.
The bill, AB 155 by Assemblyman Tony Mendoza (D-Artesia) will be heard in the Senate Local Government Committee Wednesday.
The measure would require local governments to obtain approval from the California Debt and Investment Advisory Commission before they can file for bankruptcy.
The bill is supported by a host of labor groups, who say the bill is a needed protection against cities or counties who will opt to declare bankruptcy to get out of contract agreements with their employees.
The measure is opposed by the California League of Cities, the California State Assn. of Counties and the California Chamber of Commerce.

State misses $2.5-billion payment to schools because of budget delay

State misses $2.5-billion payment to schools because of budget delay

August 23, 2010 |  4:27 pm

California's top fiscal officials Monday ordered the deferral of $2.5 billion in payments to the state’s public schools next month to conserve cash and stave off the need to begin issuing IOUs.
The state’s budget is 54 days late, and that delay has stretched the state’s depleted treasury to the breaking point. Issuance of scrip could come within weeks.
The deferral announced Monday “was not taken lightly,” state Controller John Chiang, Treasurer Bill Lockyer and Department of Finance Director Ana Matosantos wrote in a joint letter to the Legislature.
The payment delay –- which comes atop another $2.5-billion deferral in July –- was not unexpected, said Kevin Gordon, an advisor to school districts on state financing. Lawmakers approved the deferrals back in February.
“There was early warning to school districts about what the state's intentions were … giving districts enough time to make other arrangements,” said Gordon, president of School Innovations and Advocacy, an education consulting firm.
But the deferral will force districts to borrow more funds to cover their bills until the state pays up, driving up costs and taking money from classrooms, said Rich Pratt, assistant executive director of the California School Boards Assn.
“The more you borrow, the more interest you have to pay,” Pratt said.
State officials acknowledged the added hardship. “The lack of a state budget is levying additional fiscal stress on schools … deferral of state payments will further exacerbate the situation,” Chiang, Lockyer and Matosantos wrote.
Fiscal officials also ordered that a $400-million payment to counties be delayed; $700 million in county funds were pushed off in July.
The latest skipped payments to counties and schools must be repaid within 90 days, said H.D. Palmer, a spokesman for the Department of Finance.
-- Shane Goldmacher in Sacramento

Holding budget ransom may be Schwarzenegger's last hope

Governor has been pushing fiscal changes since he took office — among them, pension cutbacks, spending constraints and a tax-system overhaul. He hasn't made much headway with the hostile Legislature.

Gov. Arnold Schwarzenegger speaks to a group of Bay Area business leaders. The state budget is already several weeks overdue, and Schwarzenegger says he'll leave it in his successor's lap if his demands for fiscal reform are not met. (Justin Sullivan, Getty Images / August 23, 2010)

• Spring enrollment's budget connection leaves California college students in limbo

By Shane Goldmacher, Los Angeles Times

August 22, 2010

Reporting from Sacramento —

With fewer than 140 days left in office, Gov. Arnold Schwarzenegger is making a final stand for goals that have eluded him for nearly seven years, clinging to an overdue state budget for a last bit of leverage before he fades from relevancy.

Already, the state's budget is 54 days overdue. But Schwarzenegger has said he won't sign a spending plan until the Legislature retrofits the broken fiscal system that has bedeviled California — and him — for years.

He is demanding cutbacks in public pensions, a new constraint on spending and an overhaul of the way the state collects taxes. If those conditions go unmet, Schwarzenegger has said, he will leave the budget in his successor's lap.

Some have likened his wish list to a gubernatorial ransom note, being used to polish his tarnished fiscal legacy.

"This is a governor that holds the state hostage," said Assemblywoman Noreen Evans (D-Santa Rosa). "How irresponsible is that?"

The effects of the budget impasse are cascading across California.

State worker furloughs resumed Friday, forcing Department of Motor Vehicles branches to reschedule more than 15,600 appointments so they could close that day and again next Friday. An emergency fund to pay health clinics that serve the poor has run dry; the final payments go out Monday.

And state Controller John Chiang has warned that IOUs could be as little as two weeks away, repeating last year's "shameful chapter of California history."

Schwarzenegger says his final budget is a last chance to fix the state.

"I have two choices as governor, especially since this is my last year," Schwarzenegger told a group of Bay Area business leaders this month. "Do I want to go and just make everyone happy and … go along with them, or do I want to go and, you know, wage this battle?

"I promised the people in 2003 that I will go and bring some kind of order into our budget system, so this is why I'm fighting," he said.

But Schwarzenegger has failed to align spending and revenue, and this summer's budget, which will have to eliminate a deficit estimated at $19.1 billion, is unlikely to change that. He still faces a hostile Legislature.

Meanwhile, the fall elections — particularly the showdown between fellow Republican Meg Whitman and Democratic state Atty. Gen. Jerry Brown, who are vying to succeed him — are increasingly sucking up the political oxygen in Sacramento, much as Schwarzenegger's celebrity did in his first years in office.

"Once this budget is done, I think he's done," said Assemblyman Tony Mendoza (D-Artesia). "That's one of the reasons he is delaying.… He doesn't want to face that his end is coming and we're all waiting" for it.

Earlier this month, Schwarzenegger briefly referred to his governorship in the past tense. "Yes, it was difficult, the most difficult thing I've ever done, but it was rewarding," he told the Bay Area group.

Still, he remains empowered when it comes to the budget and he is using that influence to press for structural changes to "put our finances on solid ground for future generations to come," as he argued in an opinion piece in The Times recently.

The governor wants public pensions to be rolled back to 1999 levels and is negotiating givebacks with every state employee union except prison guards. He has already struck six contract agreements, representing about 37,000 workers, that include pension concessions long anathema to powerful labor unions.

He wants lawmakers to put money in a rainy-day fund and pair such a move with a spending cap to limit the growth of state government. Voters have rejected two recent attempts to enact similar limits.

Schwarzenegger also wants a tax system overhaul to rein in the wild revenue swings California has endured for the last decade, beginning with the dot-com bubble that grew and then burst. He backed a reform commission's 2009 plan to rewrite California's tax code, but that proposal succeeded only in uniting the Legislature against it.

Even Republicans acknowledge that these demands, which Schwarzenegger made clear when he unveiled his revised budget proposal in May, are a tall order for a lame-duck governor.

"They've been on the table now ever since he first got here," said state Sen. Bob Dutton (R- Rancho Cucamonga), who will soon become leader of the Senate's GOP caucus.

Democratic lawmakers have chafed at the governor's ultimatums, arguing that this year's fiscal imbalance needs to be tackled first. Democrats are pressing for more than $4 billion in tax hikes to balance the books. Schwarzenegger wants more cuts: elimination of California's welfare program and daycare for 142,000 children of low-income families, further paring of education funds and deep cuts in money for home health aides to help the elderly, blind and disabled.

"If he wants to achieve some of the legacy items that he consistently refers to, it's not going to be done — will not be done — with the kinds of cuts that he is calling for," Senate President Pro Tem Darrell Steinberg (D-Sacramento) told reporters recently. "Period."

The current budget impasse is the fifth longest in California history, with no breakthroughs on the horizon, although Schwarzenegger has said repeatedly that he wants to strike an accord.

"It's not just my way or the highway," he has said.

But some lawmakers see it exactly that way.

"I don't feel the negotiation part," said San Francisco Assemblyman Tom Ammiano, a Democrat, as he sat in his fourth-floor Capitol office.

Glancing down at the governor's famed smoking tent, where past budget deals have been struck and dignitaries feted, Ammiano added, "I guess that, too, will be gone."