Archive for the ‘ Economics ’ Category

Dear New York Times

Spend any time (and I really don’t recommend this) watching Fox News or wading through the cesspool that is the conservative blogosphere, and you’ll detect a palpable Schadenfreude when it comes to the financial struggles of old-world media. And chief among the targets of that right-wing glee has to be the New York Times.

The Grey Lady of American journalism, our national newspaper of record, with at this point, precisely zero credible competitors, finds itself ten years into the third millenium in a strange position. It has, by dint of its undoubtedly superior writers, research, and journalistic standards carved out a place on the web as the most visited newspaper site in the world. A site that has, for at least the last two or three years, been totally free of any sort of paywall. And yet in the last quarter, the Times managed to lose $25 million in the third quarter of 2009.

Now, losting $25 million in a quarter doesn’t mean the company is going to fold up and disappear anytime soon. (A closer look at the Times financials reveals they actually threw off almost  $90 million in cash in that quarter. Much of the loss is attributable to depreciation in the value of some of their non-core assets.) But obviously the company cannot continue indefinitely losing money. How then is the Times going to remedy the situation?

I can’t answer that question. If I had the gold-plated answer to newspaper’s financial problems, I wrap it up in a shiny business plan and sell it to a bunch of investment bankers.

But I will say this: The NY Times is the most prestigous newspaper in the world. I pay 75 cents a day for my local newspaper – buying it from a box near my favorite coffee shop. That paper probably provides me about 10 minutes of actual news reading. Roughly five minutes on local stories – and the rest on national and international. But those “non-local” stories – almost all of them I’ve already seen on the Times website. Columns by Tom Friedman or Maureen Dowd show up a day or two after they’ve been published in the Times. Most of the “value” I get out of my local paper is the (laughably easy) crossword, a couple of other puzzles, and reading the comics. The “news value” I get from the local paper is close to zero. But I willingly pay almost a buck a day for the convenience of a paper to hold n my hand as I sip my coffee and fill out the crossword.

Dear NY Times: We love you, we need you. Figure out a way to get that 75 cents a day from me, and the millions like me.

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Gloomy Economics – Pt II

For the purposes of this discussion, lets us (somewhat arbitrarily) date the beginning of the US modern economic history to the inaugruation of Franklin Roosevelt as President in 1933. Not that the nineteenth century battles over the Free Coinage of Silver or the First and Second Bank of the United States aren’t important – but by the early 1930s these issues had pretty much been settled.

In 1933 the Federal Budget of the United States was approximately $4.6 billion, with revenue of just under $2 billion – leaving a (then considered terrible) deficit of $2.6 billion. Of the Federal budget, Defense constituted $1.4 billion – of which more than half ($700 million) was spent on Veterans – mainly pensions and benefits to veterans of the First World War. Of the remaining $600 or billion in current defense spending, the greatest share went to the Navy.

The US Army, by way of contrast, was a relatively tiny force. With approximately 200,000 men (and they were almost all men) in uniform in 1933, the US Army ranked considerably below Greece or Czechoslovakia in military firepower.  But of course, in 1933, the USA really didn’t need much in the way of a large standing army. The navy (plus two conveniently wide oceans) would keep any potential aggressors at bay. And the US was sufficiently large, and well supplied with natural resources, to have much to fear from a maritime embargo.

The first two four years of Roosevelt’s Presidency were marked mainly by an attempt to prevent the total social collapse of the US as a nation. When we worry about unemployment today (around 10%) we need to keep in mind the 30% of the Great Depression. And while we pity homeowners stuck with underwater mortgages, we’re still a lot better off than the savers who lost everything when their banks failed in those pre-FDIC days.

One little-known episode of the Great Depression was the Bonus March of 1932. Some 17,000 Veterans of WWI, along with their families, marched on Washington and demanded that certificates entitling them to a cash payment be paid early (the certificates had a maturity date of 1945.) President Hoover ended up ordering the Army to remove the marchers – which they promptly did, resorting to bayonets, tanks, and a primitive teargas containing arsenic. The oepration was commanded by then Army Chief of Staff Douglas MacArthur. His deputy was (later President) Dwight Eisenhower, and the cavalry charge that rousted the bonus marchers was led by George Patton. (See, I told you how small and clubby the pre-war Army was..) Reading about these events, from the benefit of almost eighty years of hindsight, one can only wonder what Fox News would make of such events.

The Gloomy Science gets even Gloomier Pt.1

The White House released yesterday it first full year budget proposal. The news is so bad, I wonder if it is not an de facto suicide note.

The Budget Proposal projects spending of about $3.8 trillion, while raising $2.2 trillion – a deficit of $1.6 trillion. The “good” news is that the budget is likely fairly honest, and specifically in some areas a vast improvement in what went before. The bad news is the budget document projects huge deficits stretching out pretty much forever, dipping somewhat in the late second decade, before mushrooming again in 2020.  The potentially catastrophic news, if that is possible, is that the American electorate is likely, in the months and years ahead, to respond to this by electing politicians who will only make the situation even more dire.

Before we come to grips with the enormity of the problem, it may be beneficial to take a look at the modern economic history of the United States, to refresh our understanding of how we got into this mess. I’ll deal with that in part II.