Arizona's Own Espresso Pundit

Like Enron...but with Nuclear Weapons.

Does anyone really think that these massive levels of government debt are sustainable?  Just look at Glendale's disastrousforay into stadiums, California's public pension crisis, or the US commitment to Social Security and Medicare.  The only reason that governments have been able to buy all the little baubles that keep incumbents in power is that China has been willing to finance them.   

Someday soon, that's going to end. 

China's fortunes over the past decade are reminiscent of Lucent Technologies in the 1990s. Lucent sold computer equipment to dot-coms. At first, its growth was natural, the result of selling goods to traditional, cash-generating companies. After opportunities with cash-generating customers dried out, it moved to start-ups -- and its growth became slightly artificial. These dot-coms were able to buy Lucent's equipment only by raising money through private equity and equity markets, since their business models didn't factor in the necessity of cash-flow generation.

Funds to buy Lucent's equipment quickly dried up, and its growth should have decelerated or declined. Instead, Lucent offered its own financing to dot-coms by borrowing and lending money on the cheap to finance the purchase of its own equipment. This worked well enough, until it came time to pay back the loans.

The United States, of course, isn't a dot-com. But a great portion of its growth came from borrowing Chinese money to buy Chinese goods, which means that Chinese growth was dependent on that very same borrowing.

The Inevitable Progression

First, there was K-12.  That covered kids from about 5 to about 17.   Now the Governor has announced a continuation of Governor Napolitano’s P-20 program--that’s Preschool to age 20.  Soon we really will have the proverbial cradle to grave—leaving only one possible additional iteration--Erection to Resurrection.

The View from Across the Pond

The Financial Times has an interesting take on the California budget crisis that included this line.

It is an enduring mystery why US pundits should see a difference between the philosophy of Democrats (who stand for spending more than you raise) and the Republicans (who stand for raising less than you spend).

It's not supposed to be that way, but I can see how FT has developed that perspective.

Same Job, Different Title--updated.

Republic Editorial Board writer Jennifer Johnson, a victim of the most recent round of Gannett lay offs, has become spokeswoman for the Arizona Democratic Party.  'Nuff said. 

One of the commentors has reminded me that Johnson was an "editor", not an editorial board writer.  My mistake.  Not that the difference changes the post much.  Say, didn't Democratic Party Junkyard dog/Spokeperson Emily Bitner come from the Republic too?

The Planets are Out of Alignment

How do you discover a huge star that you can't see?  Although that problem plagued scientist for years the solution was actually rather easy.  Things with a huge mass--hidden stars, black holes--exert an obvious gravitational force on the surrounding objects, so when heavenly objects are not acting right, you know that they are responding to a massive and yet unseen object.

That's how I know that Jan Brewer isn't running for Governor.

I'm not part of Brewer's solar system, but I can see it and I can tell you that the political planets--heavy weight Republican lobbyists, consultants and candidates--are not in proper orbit.  I don't think that they actually know that Brewer isn't going to run, but too many of them are drifting ever so slightly out of her orbit.  There is an unseen force acting on them and that unseen force is the knowledge--or at least the suspicion--that she's not going to be on the 2010 ballot.

There's too much chatter about Ken Bennett and Mary Peters.  A-Team lobbyists and consultants are making private calls backing alternative scenarios and they are doing so with impunity.  The inner planets are not responding the way they would respond if Brewer was exerting the gravitational pull that one would expect an incumbent governor to exert.

Maybe I'm wrong.  Maybe the planets will shift back into orbit, the tides will return to normal, the sun and moon will align the way they should, Republican lobbyists will start circulating her petitions and planning fundraisors---but at the moment, things are not as they should be. 

A Rose by Any Other Name

So I'm drinking a double espresso on a the beach in Laguna and I see a guy who looks just like über Public Relations Man Jason Rose.  As he gets closer, I realize it is indeed Rose.  We talk business for a while and then it hits me...dude, this trip is now deductible!

Back at the hotel I brag about my newfound tax deduction and my wife reminds me that the word "primarily" will probably be a bit of a hurdle.  Dang, that's what happens when two CPAs marry each other.

Well, it was a nice conversation anyway.

Supreme Court Overturns Fund Sweep

You will recall that the Legislature swept the interest out of the Early Childhood Development and Health Fund into the state’s general fund.  The court has ruled that the sweep was not within the Legislature's authority. 

Here's a copy decision

For the foregoing reasons we accept jurisdiction, grant relief to the Board, and order the $7 million fund sweep, along with the interest that would have been earned on this amount, be returned to the Fund.

Howler of the Week

Check out this convenient bit of revisionism from the Arizona Republic Editorial Board.

Unlike our neighbor, Arizona's biggest challenge isn't sky-high spending but nose-diving revenue. For the first 11 months of the fiscal year, through May, they were 18 percent below 2008.

Hmm, I don't expect editorial to be balanced, but they should at least be honest.  Governor Napolitano spent one-time bubble revenue on ongoing programs and now the reality that those programs were never sustainable is sinking in. 

The Republic's very own Bob Robb has a pretty balanced assesment here.

After the last recession, state revenues stabilized in 2003. State general fund spending that year was $6.6 billion.

State spending peaked in 2008, at $10.5 billion, or a 60 percent increase in just five years.

To be sure, Robb points out that revenue has fallen faster and farther than anyone expected, but the underlying culprit is spending.

It's not like the budget crisis is a surprise.  Many people--ATRA andTom Jenney for example--sounded the warning that the budget was unsustainable.  Here's an example from a column I wrote calle "The Road To Bankruptcy" that I ran in February of 2008.

But the easy choices have already been made; the gimmicks will soon be gone; the rainy day fund will soon be spent.  It's time for real leadership.  Instead, the Governor is saying "Nothing Down! No Payments until 2010."

Of course, she'll be gone in 2010 and we will be the ones paying off the credit cards.

 

Well, that didn't work...

People often ask me how to make money via the Internet.   I actually have no idea, but last March, I profiled a few business models that I was watching.  One of those models was Gannett Blog.

Gannett Blog is a good case study because it's a reasonably successful blog, written by a professional journalist who wants to make a profit and is willing to disclose his progress. 

Jim Hopkins' Gannett Blog was also a good case study because his goals were so modest.  He wasn't trying to replace his six-figure USA Today salary.  He was just trying to make $2,000 a month while working nearly full time.  You will no doubt have noticed that I'm using that past tense, that's because Hopkins pulled the plug on Gannett Blog earlier this month.  

Frankly, that's really disapointing news for anyone who is trying to make money selling content on the web.  Hopkins had a unique product, original content, professional training, modest goals and a large audience and he couldn't make as much as the average Target employee. 

The other model I profiled was the Arizona Guardian.  The Guardian has gone a different direction; they have assembled a team of professional reporters who provide real content and provide it consistantly.  Unlike Hopkins who essentially went in commando and attempted to live of the land, the folks at the Guardian have built a real product, but in return, they will need a really income.  Anything less than $150,000 a year will not feed the five or six professionals that they have on staff.  If anyone can make it work, they can.  I wish them luck, and I'm interested to see if it works out. 

Grunge Ban

When Senate President Bob Burns announced earlier this year that he would close the Senate Press Room I commented that it was about time.  The press room is obsolete but I also pointed out that it should be closed because it is filthy.

Finally, Bob Burns should shut the press room because the journalists have abused the privilege so badly that they don't deserve to have the space. 

The press room is a pig sty.  Whatever happened to basic professionalism?  The room is filled with trash; the floor is stacked with piles of old papers, every desk is a mess, and the walls are covered with bumper stickers, old cartoons and juvenile drawings.

Several reporters were offended by my remark and contacted me in a huff to complain about it my criticism of their "basic professionalism."

However, now that the pressroom is closing they have adopted the "It's Not a Bug, It's a Feature" theory and are looking back with Animal House nostalgia at the mess they made. 

"It was grungy and grimy and raw," said Star education reporter Rhonda Bodfield, who covered the Capitol in the '90s and early 2000s as a UA student, for the Tucson Citizen and later for the Star. "I had come up as a college student expecting reasoned discourse and thoughtful exchanges. The gritty reality of the pressroom really kind of set the right tone."

Sometimes the items plastered on the walls are not only odd but disgusting. Like the loogie that someone (no one will confess) hawked on the wall back during the Symington years.

"No one wanted to go near it because it was so gross," said Pat Flannery, a former Gazette reporter who is now an editor at the Arizona Republic. "So it just sat there. I think it's petrified now."

Ah yes, the loogie on wall, those were the days. 

As an aside, I thought the article pointed out an interesting point that there appear to be only five journalists left who are based in the press room--four from the Republic plus Howie Fischer.  Talk about an inefficient use of prime space.  Burns is going to convert it to a caucus room for 18 Republican Senators with room for staff and the general public.