Wednesday, September 26, 2007
Assemblywoman Vivian Cook, a committee member, worried that parts of her district in Queens could be heavily used for parking by those avoiding the congestion charges and taking subways into Manhattan. The director of NYC's Long-Term Planning and Sustainability Office, Rohit Aggarwala, responded that this problem could be remedied with a review of parking permits and meters in the area.
Her concern and the City's response show the far-sightedness of the late Columbia Professor William Vickrey, whose 1992 plan (http://preview.tinyurl.com/yv33ed) to address congestion in NYC linked congestion pricing to a review of parking permits and fees.
Tuesday, September 25, 2007
The problem with the discount is that it is being discussed in the context of higher subway and bus fares. The Straphangers Campaign would like to see less of the fare paid by riders and more by property-owners, and the late Professor Vickrey has argued that property-owners in NYC will benefit from cheaper public transit fares.
On the other hand, New Yorkers are paying one-fourth of the $8 fare on the London Tube for a single trip. The fare drops to $3 per trip in London if one buys an "Oyster" Card, which requires a one-time fee of $6. The structure of the fares appears to make tourists pay more.
Saturday, September 22, 2007
The Recording Industry Association of America has tried to fight back against people - especially younger people - using Napster-like peer-to-peer (P2P) file-sharing networks. Reportedly the RIAA has filed 30,000 lawsuits against downloaders. But the tape and record stores still languish. Should the government be intervening more strenuously on behalf of the intellectual property of music recordings? Or is this a victimless crime? Evidence of victims includes the shortage of opportunities for younger wannabe musicians with many fewer record-company agents ready to sign them up for big bucks.
The clothing industry has an analogous problem - knockoffs, i.e., items of clothing that are copied from well-advertised brand-name items. Some argue that knockoffs, like Napster devices, are harmless and have no victims. Possibly some knockoffs are "complements" to brand-name goods, i.e., they don't compete with them (Mom buys the real thing from Bergdorf's and as she emerges from the store she buys a copy for her teenage daughter on the street outside). But some knockoffs are substitutes, i.e., they interfere with sales. Also, the supply chain for knockoffs is unknown, raising safety and sweatshop questions, not to mention evasion of taxes for goods sold on the street or in stores that don't collect or pass on sales taxes. Any comments?
Thursday, September 20, 2007
On the side of inertia is the former Executive Director of the Port Authority of New York, George J. Marlin (no relation). In a July blog he says he was once approached by some good-government Manhattanites about introducing peak-pricing tolls on the Hudson River bridge and tunnel crossings. The idea is that tolls would rise at peak hours and fall during off-peak hours, just as they do for commuter train tickets. Marlin dismayed his visitors by advising them that peak-hour pricing is just another tax and he was against it. But if tolls are reduced in non-peak hours to offset the higher revenue from peak-hour tolls, the new pricing can be revenue-neutral. The two people who commented on Marlin's blog - Ed Unneland and Erik Engquist - both agreed with the goo-goos that peak-hour pricing might be better than the alternatives.
I spoke in favor of congestion pricing twice in July - once before a public hearing of Manhattan Community Boards 4, 5 and 6 and once before a hearing of the Borough President of Manhattan, Scott Stringer. I noted that congestion is a symptom of popularity and therefore a good thing up to a point. In the 19th century, smokestacks were proudly shown on British city postcards as evidence of their prosperity. Better to be congested than to have boarded-up and deserted buildings downtown, as do some upstate NY cities. Hostility to the City’s congestion pricing plan in Albany might stem from upstate congestion envy. Traffic congestion also keeps down the speed of cars to levels where fatalities are less likely in the event of an accident.
The problems with congestion become very serious when traffic slows to speeds of 20 mph or slower. This wastes gas, increases pollution and creates serious stress for people stuck in traffic. Worse, it is dangerous because ambulances, fire engines and police cars can't get through to where they are needed.
Time is money, so we are already paying a tax for congestion - in unpredictable and inefficient ways. One person understood this many years ago, Bill Vickrey, a Columbia professor whom I got to know through the City Club of New York when we were both active members. Bill received the Nobel Prize in Economics in 1996 and looked forward to the increased influence the award would give to his policy prescriptions. Alas, he died within a few days after the announcement of his award, in a car on his way up to a conference of like-minded economists.
Bill was keenly interested in giving advice to policymakers in the City and testified at an economic hearing I organized in 1992 as Chief Economist to the City Comptroller, Liz Holtzman. A summary of his 12 principles of congestion pricing is posted at http://tinyurl.com/29vz7n. More of his principles are technologically manageable now than when they were first proposed, and all of them promote an efficient city. When people said that the MTA can't handle the additional burden on the subway system created by those who leave their cars at home or park outside the city, Bill Vickrey answered that the signal system could be upgraded to permit shorter headways between subways and that a skip-stop system for the local trains would shorten travel time without great inconvenience.
The City of New York has won a $354 million grant to implement some of the recommendations for congestion pricing. A State commission is also reviewing other proposals to reduce City congestion and pollution. Their work is important because the existing free-for-all cannot continue. I hope the City and State will take into account the ideas of Bill Vickrey early on in their thinking and implement what is administratively feasible.
Wednesday, September 19, 2007
It’s no surprise that Los Angeles is the most congested, with 72 hours per year in wasted time per traveler. On traffic-congestion delays, New York City ranks with Chicago and Boston among U.S. metro areas according to the just-released 2007 Annual Mobility Report by the Texas Transportation Institute (part of Texas A&M University). The rankings are overall but are grouped by size of each urban area.
The report provides complete information on the New York City region trend since 1982. The total delay has risen eight-fold from 68 million hours in 1982 to 384 million hours, reflective of the area’s size and growth. However, the growth in delay per peak traveler has grown more slowly than the average – reflective of the large number of people in the area who use public transit.
In the absence of a time machine, government officials at all levels need to consider the high cost of traffic congestion – a total of 4.2 billion lost American hours in 2005, the cost per city varying based on size, availability of public transit and local policies.
The report attributes two-thirds of the delays in the NYC area to incidents on the highways that delay traffic. It gives most credit in delay-reduction to “freeway incident management” – e.g., use of cameras and service patrols to incident prevention and response.
The other bright spot is NYC’s strong public transit network. If there were no public transit, the annual delay per peak traveler would jump in the NYC area by 26 hours, from 46 to 72 – ahead of Los Angeles.The total cost of congestion in the NYC area has grown, according to the report, from $649 million in 1982 to $7.4 billion in 2005. Although NYC is not nearly the most congested on an average traveler basis, its total cost remains in second place throughout the 1982-2005 period. Congestion pricing and other options deserve the attention they have been getting from Washington and New York City officials.
Tuesday, September 18, 2007
This approach makes a lot of sense to me. Those who counsel couples about marital problems often put money issues high among the causes of marital discord. It is the number-one issue in the way of intimacy and commitment, and the number-one issue leading to divorce. But, as a participant on a multicultural connections site observes: "Money is not just about money. It represents a lot of things. It represents power, self worth, territoriality..."
In other words, a good financial advisor doesn't just help people manage their money well to maximize their net worth. A good financial advisor can also help save marriages and other relationships.
Saturday, September 15, 2007
Turkey's program of straddling its Islamic past and its economic future is being pushed, watched and challenged. It is being pushed by the government and watched by the EU, which Turkey wishes to join, and by its own army. At the same time, Turkey's employers are being challenged by low-wage competition from the country's near neighbors and European buyers concerned about labor conditions.
Comment HuffIt -->
Americans concerned with keeping our friendship with this Islamic country need to understand Turkey's economic challenges. Although almost entirely Islamic, Turkey's citizens support Ataturk's secular state, in part because they have seen the economic benefits it has brought. Turkish Prime Minister Recep Tayyip Erdogan -- former Mayor of Greater Istanbul -- leads the Islamist Justice and Development (AKP) Party. His candidate for president, Foreign Minister Abdullah Gul, was recently elected despite the concerns of the army about an Islamic agenda.
Erdogan meanwhile continues his aggressive Thatcher-like program of privatization of public assets along with growing trade with the west. This has fueled five years of GDP growth averaging 7 percent a year. At the center of this growth is the crucial textiles and apparel industry, which accounts for nearly 40 percent of Turkey's exports. The industry is being squeezed by competition from the rest of Asia at the same time as western buyers are asking questions about labor conditions in Turkish factories.
Neighboring countries have labor costs that can be as little as one-fifth of Turkish wages. The Turkish government itself has contributed to employer costs by taxing employment heavily and land lightly. A joint initiative (called JO-IN) of international NGOs looking at worplace conditions in Turkey calculated in 2005 that apparel workers cost employers directly 594 YTL (New Turkish Lira) per month, but after payroll taxes the workers received just 350 YTL. Employers say they pay another $100 a month for lunch and travel allowances, and that costs are rising rapidly -- the Turkish minimum wage rose more than 50 percent from 2001 to 2005. Turkey's trade unions respond that the minimum wage is still far below what they believe to be an appropriate living wage. However, for most garment workers the taxes are not paid at all, because so many workers are unregistered participants in Turkey's large gray economy.
In the thick of these issues is Yesim (YEH-shim), Turkey's largest apparel employer. According to JO-IN members, Yesim is a model garment-sector employer, certified to the SA8000 labor standard. Certification has helped with western buyers, but Yesim feels cost pressures from nearby cheaper competitors.
One May morning in Istanbul's Richmond Hotel, I spoke with Yasemin Basar, Director of Social Compliance for Yesim. The company has been growing outside of Turkey, but its employment has shrunk one-third from a few years ago, to 4,000 employees. Yasemin is proud that Yesim's Turkish workplaces enjoy high standards of morale, quality, on-time delivery, retention and productivity. Still, she told me: "It has not been easy for us to bring up labor standards at our factory to satisfy western buyers and at the same time remain competitive."
Yesim and other large employers can move production to Egypt, Moldova, Pakistan, Romania and Bulgaria, where wages are 20 percent or less of Turkish base wages and where payroll taxes are much less or zero. Yesim seeks to implement the high standards of its human-resource management systems everywhere, but it is hard.
When apparel jobs leave Turkey, the displaced employees may not find new work, reducing an employment rate already low by world standards, especially for female workers. The government gives more priority to high-margin industrial sectors. But if apparel jobs leave, what are the options for the laid-off workers?
Manufacturers are responding by increasing their efficiency as well as fending off possible black-listing by socially conscious western buyers. I visited an impressive Topkapi factory, certified as meeting global norms, with thousands of looms being operated by a small number of skilled workers.
Erdogan's government meanwhile is encouraging job creation in poorer areas by waiving 80 percent of the employer's social security contribution in rural Anatolia. Hey Group, the second-largest textile employer in Turkey, has two factories in the region. Benan Vey, who works on compliance issues with Hey Group, told me that the government concessions are "very helpful."
How can Turkey reduce payroll taxes while continuing to build the country's infrastructure and still provide public services and a safety net? When the government started considering reducing the Value Added Tax on tourism and food, to 8 percent from 18 percent, the IMF expressed concern that these cuts imperiled the country loan commitments.
If more workers were registered, the rates might not have to be so high. But a more basic question is whether Turkey could better face its challenges with lower taxes on payrolls and higher taxes on land.
Sunday, September 9, 2007
Silicon Valley Includes San Francisco. The NY Times today (p. 41) reports the study as saying that the NY Metropolitan Statistical Area has "nearly 620,000 technology workers, two and a half times as many as Silicon Valley and nearly twice as many as Boston." The numbers appear in Exhibit 10 on p. 11 of the ITAC report, showing all "employment in technology":
1. New York MSA 619,881
2. Los Angeles MSA 483,706
3. Washington, DC MSA 377,144
4. Chicago MSA 356,351
5. Boston MSA 317,684
6. San Jose MSA 251,050
7. Seattle MSA 208,565
8. Atlanta MSA 188,294
9. Minneapolis-St. Paul MSA 169,449
10. New York City 169,303
ITAC uses as its definition of Silicon Valley the San Jose MSA, which excludes San Francisco. NYC was compared with Silicon Valley in the 120-page April 1999 report by the New York City Comptroller's Office (when the City Comptroller was Alan Hevesi and I was the Chief Economist), The NYC Software/IT Industry. The Comptroller's study looked only at the computer-services jobs (software) in 1997 and ranked the NYC 10-county area third using SIC-code data (based on classification of the business of employers) and NYC alone as sixth:
1. Silicon Valley 86,129
2. Boston and Route 128 55,956
3. New York City and Five Suburban Counties within NY State 46,606
4. Los Angeles 32,294
5. Dallas 31,892
6. Seattle 28,955
7. New York City 25,716
Why include San Francisco in the definition of "Silicon Valley"?
- The Comptroller's study followed the work of AnnaLee Saxenian, who included Alameda, San Francisco, San Mateo, Santa Clara and Santa Cruz counties. (Boston was defined as Essex, Middlesex, Norfolk and Suffolk counties. Los Angeles was defined as LA County, Seattle as King County, New York City as the five boroughs, and the NYC suburbs were the five nearby New York State counties, Nassau, Suffolk, Westchester, Putnam and Rockland.)
- PC Magazine defines Silicon Valley as: "An area south of San Francisco, California that is noted for its huge number of computer companies. Initially, Silicon Valley was confined to the Santa Clara valley and started north of Palo Alto stretching 25 miles south to San Jose. With expansion into neighboring towns, the entire San Franciso Bay area can be considered Silicon Valley." That includes San Francisco county.
Density Matters. More fundamentally, it does make a difference how specialized an area is. The ratio of computer-services jobs to all private-sector jobs in 1997 in NYC was 9 per thousand, the fourth-lowest of 15 cities, way behind Silicon Valley (40 per thousand), Boston (34 per thousand), and Seattle (33 per thousand). The argument for paying the higher cost of a higher-density city is that the opportunities for networking, selling and innovating are higher where density is higher. Density contributes to destiny.
Within New York City, of course, there are focal points for tech innovation. But the degree of cooperation among Berkeley, Stanford, local community colleges and private entrepreneurs - and the equivalent cooperation between Harvard and MIT - is still not matched in NYC, although great progress has been made over the past decade.
The nine pages of conclusions and recommendations in the Comptroller's report includes a strong recommendation (pp. 83-84) that: "A small Citywide office should be created to work on building these relationships [between educational institutions and entrepreneurs that is true in the Boston and San Francisco areas], possibly with an initial sunset life of five years or so. ... It should work with the [New York] software industry [association] (NYSIA) or the federally supported Industrial Technology Assistance Corporation [ITAC], or both."
Nine months after the Comptroller's report, ITAC published a report with recommendations for the tech industry in New York City. Before the recommendations were able to get traction, the tech sector began a long slide in the stock market and then in jobs. This is a good opportunity for New York State and New York City to look at recommendations for strengthening the tech sector and the comments here are offered in the spirit of identifying NYC's weaknesses as well as its strengths.
Friday, September 7, 2007
The Business Council has done some great work, e.g., on workers' compensation. But this study - c'mon. Who are we do believe - the Council or our own lying eyes?
The study compares the 2005 economy with the 1995 economy... and says NYC rates a C? Do the authors remember that the City of New York was attacked by terrorists on September 11 and the business community was on the edge of a diaspora? The fact that NYC has bounced back since 9/11 is amazingly impressive.
Perhaps NYC should be grateful to get a C since the study gives a good portion of the class (i.e., the upstate counties) an F.
But there is a deep flaw embedded in the study. It uses five variables and compares each county with the nation. Three of the five variables - population, jobs and total personal incomes - are biased against dense counties like the five boroughs of NYC, which are harder to grow from a population or jobs standpoint. It's easier for populations to grow rapidly from tiny numbers in the deserts of Arizona and Nevada counties than it is in a settled city like New York. However, NYC has its own upstate reservoir while the desert communities depend for their water on snow falling in distant states.
The value of residential and commercial real estate is one test of the City's economic magnetism. The recovery and growth of values since 9/11 speaks for itself.
What may happen in the future to Wall Street jobs and incomes and the value of real estate given the collapse of the subprime lending industry is another matter. It is as true today as it was in the 1980s that the City's economy is highly dependent for its performance on Wall Street's brains and skills. But meanwhile don't slam the City with unfair comparisons. Give it an A for its recovery from the disheartening months after 9/11.
Tuesday, September 4, 2007
As campaigners against waste and fraud, John Moorlach and Chriss Street rode to fame as the fiscal Batman and Robin of Orange County, Calif.
The duo worried publicly that Orange County’s longtime Treasurer, the memorably named Bob Citron, had put County-managed funds (a total of about $20 billion, including funds from other jurisdictions in a pool) at great risk through investments in leveraged derivatives such as repos and floating rate notes. The County lost big time on Citron’s bets when the Fed’s open market committee raised the target fed funds rate from 3.25 percent in February 1994 to 5.5 percent in November 1994. As interest rates rose, the value of the securities fell and the County lost about $2 billion.
Moorlach ran against Citron for the Treasurer post in June 1994 and lost. In December, Credit Suisse First Boston required more collateral from the County, which filed for a Chapter 9 bankruptcy. Moorlach was appointed to succeed Citron as Treasurer, and was subsequently elected through 2006. In that year, Moorlach gave his friend Street a leg up to the Treasurer job by appointing him to the civil service post of Assistant Treasurer after posting the job for just one day.
Street was elected to the Treasurer post in June 2006, his ballot statement unabashedly tied to Moorlach’s coattails: “Orange County Treasurer John Moorlach trusts Chriss Street to replace him…” His bio reports that “Chriss Street has been among John [Moorlach]’s closest advisors.”
Moorlach was at the same time elected one of Orange County’s five supervisors. Upon taking office in December 2006, he called for more accountability for the deputy sheriffs’ funds. Orange County has an estimated unfunded pension liability of more than $2 billion, of which a big piece is for law-enforcement pension benefits. Union leaders responded that Moorlach’s interest stemmed improperly from their opposition to his campaign for supervisor.
What a difference a few months make! The Dynamic Duo has broken up. Moorlach has disowned his protégé Street in the wake of a growing series of investigations of Street’s actions before and since taking office. The Justice Department is investigating Street's previous work as a bankruptcy trustee for Fruehauf Trucking Corp. So is the Department of Labor and Pension Benefit Guaranty Corp. The Orange County District Attorney joined the investigating troops in August. Moorlach became aware of Street’s having falsified data and privately asked Street to resign. Moorlach was rebuffed and has publicly called for Street’s resignation. Street has defended himself in a videotaped press conference.
Apart from the specific charges of malfeasance, one worry is that Orange County’s $7 billion funds have again been mismanaged, for example by buying subprime paper. The troubled Countrywide Financial Corp. is the nation’s largest subprime mortgage lender and is based in Los Angeles. New Century Financial was until April the second-largest subprime lender, based in Irvine (Orange County), and has been in Chapter 11 proceedings since April. At the August meeting of the Orange County Republican Central Committee, Moorlach was asked if the County has investments in mortgage debt.
Orange County’s troubles will doubtless one way or another come to the attention of Governor Arnold Schwarzenegger, who played Mr. Freeze in the ill-fated 1997 movie version of the Batman and Robin story.
Saturday, September 1, 2007
Starting in his first year as mayor, 2002, Mayor Michael Bloomberg has sought to discourage smoking by New Yorkers. His efforts were opposed by many smokers, bars and cigarette vendors, and the City was derided by Human Events as “Nanny NYC”. But the Mayor’s efforts have paid off well. One-fifth of NYC smokers have quit smoking since 2002, a higher quit rate than in the nation. The Mayor crowed about this in his third annual public health report, noting that NYC had already reached its 2008 targets for lowering smoking and increasing colonoscopy screening – two years ahead of schedule. Unlike his predecessor Rudy Giuliani, who avoided drawing attention to his failures, the Mayor also admitted that he had failed to lower drug deaths and raise the number of breast-cancer screenings. The Mayor’s appetite for health activism was exceeded by the City Council when it voted earlier this year to ban metal baseball bats from schools. The Mayor vetoed the bill and the City Council overrode the veto. However, he is pressing on to help the great majority of City smokers who have tried to quit but have failed. The facts are in a new report, Who’s Still Smoking, which is based on the Community Health Survey, an ongoing telephone poll of New Yorkers. NYC is campaigning for better health by learning more about who is trying to quit and who is succeeding. The new report identifies emotional distress and binge drinking as obstacles to quitting. More surprising, it finds that fewer than one-fifth of NYC smokers are using nicotine-replacement therapies (such as patches and gum) to help quit, despite evidence that these therapies double the probability that a smoker will quit successfully.
Many Americans are increasingly dissatisfied with the high cost of medical care – yet smokers put their health at risk while spending $2,500 a year on cigarettes if they smoke one pack per day. Studies show that the United States spends by far the highest proportion of its gross product on health care but its residents have a lower life expectancy than other large developed countries like the UK, Canada, France, Germany, Japan and Sweden. Within the United States, how much Americans spend on health care per capita seems to have little connection with their longevity. A study by Christopher Murray and others on mortality disparities among “Eight Americas” in Public Library of Science - Medicine (Sept. 12, 2006) concludes that life expectancy is explained primarily by chronic illnesses (for example, heart disease and cancer) and injuries from alcohol-related traffic accidents in the 15-59 age group – and not by the relative mortality of infants or elderly people, incomes, violence or lack of health insurance.
Despite its high spending on health care, New York State ranks a surprisingly poor 19th out of 51 with an average life expectancy of 77.7 years. Hawaii has the highest life expectancy at 80 years, whereas Washington, D.C. residents have a life expectancy of only 72 years, a gap of eight years.
The size of the gap is even larger at the county level. Asian-American women in Bergen County, N.J. live the longest with an average life expectancy of 91 years. Native Americans in several rural counties in South Dakota have a life expectancy of under 67 years, a difference of 36 years.
These and other statistics point to the cost-effectiveness of public-health spending, the Nanny NYC derision notwithstanding. To support preemptive public-health activism against chronic illnesses worsened by smoking and poor nutrition, and against traffic accidents, NYC’s Department of Health and Mental Hygiene, headed by Commissioner Thomas R. Frieden:- publishes comparative data on health status in NYC's community boards,- urges colonoscopy screenings,- has alerted residents to the 75 percent increase in diabetes since 1990, and how to prevent it, - has researched safety factors for bicyclists,- has prohibited smoking in restaurants, - in a battle for better nutrition, proposes that all restaurants cut down on use of trans fats,
- proposes that 2,000 (about 10 percent) of NYC’s restaurants with standardized menu items list nutritional information, and
- is drawing attention to the fact that one million adult NYC residents do not have health insurance, even though 700,000 of them have jobs.
NYC men smoke more than women (20 percent versus 15 percent), but men and women quit at similar rates. Black and Hispanic smokers are more likely than whites to try quitting, but are significantly less likely to succeed. More low-income smokers tried to quit in 2006 than high-income smokers (68 percent versus 60 percent), but fewer succeeded. New Yorkers without a high school education were more likely to try to quit than those who have a college degree (70 percent versus 62 percent), but fewer succeeded (14 percent versus 20 percent).
Quitting rates vary by borough. Staten Island’s smoking rate has been stuck since 2002, while the citywide rate dropped by 20 percent, whereas rates in the Bronx, Manhattan and Queens have all declined more than 20 percent. So NYC’s Health Department is declaring the public health equivalent of a war on smoking in Staten Island, giving away nicotine replacements at the Staten Island ferry's Whitehall terminal Tuesdays-Thursdays, 3-6 p.m. from August 21 through September 20.
Every New Yorker should look at NYC’s surveys and alerts and should sign up for email alerts regarding health issues and emergencies. Non-New Yorkers should look at this survey as a model for what their community might do.