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Mitt Romney Compares California to Greece

Mitt Romney at a rally in Des Moines, Iowa, Jan 3, 2012. (JEWEL SAMAD/AFP/Getty Images)

Hmm. Looks like Mitt Romney might have given up on these here parts. A RealClearPolitics average of recent polls puts Obama up by 17.2 points in California, and while campaigning in Iowa today, the candidate jokingly compared the state to Greece. And he wasn’t talking about the sunny beaches, either. (Watch CSPAN’s video of Romney’s Iowa speech here. The California remark occurs around 13:50 of the video.)

AP reports on the jest…

Republican presidential candidate Mitt Romney took a potshot at California’s bedraggled economy, comparing it to the crisis in Greece, as he warned voters on Wednesday that Barack Obama is leading the nation down a similar path of huge debt.

“Entrepreneurs and business people around the world and here at home think that at some point America is going to become like Greece or like Spain or Italy, or like California – just kidding about that one, in some ways,” he added, to laughter from his audience in Iowa.

The remark seemed likely to bruise egos in a state wrestling with the prospect of tax increases and painful budget cuts. But Romney may have little to lose there – polls show Obama with a comfortable lead in California, where Democrats control the governorship and the Statehouse.

A spokesman for California Gov. Jerry Brown, a Democrat, disputed Romney’s assessment. Gil Duran said the state’s credit outlook has improved under Brown and that borrowing costs, a major issue facing Italy and other financially struggling European nations, have dropped by hundreds of millions of dollars.

“This is just a paper-thin Republican talking point that doesn’t really stand up to scrutiny” Duran said. “He should get some better speechwriters who actually know what they’re talking about.”

Spreading the Wealth: America’s Geography of Jobs

 

Opening speaker at Silicon Valley's DEMO Conference for new technology

Stephen Brashear/Flickr

KQED’s Forum host Michael Krasny held a provocative conversation Tuesday with UC Berkeley economics Professor Enrico Moretti about Moretti’s new book “The New Geography of Jobs.” The Italian-born economist describes the growing chasm between prosperous cities in the United States that are centers of education, innovation and technology — and struggling cities that were once powerhouses of manufacturing but are now losing ground.

In theory, the shift from an industrial economy to one driven by innovation was supposed to make geography matter less. In fact, Moretti says, we are witnessing a “great divergence” where the resource gap between places like San Francisco, Boston and Raleigh on the one hand, and Detroit, Cleveland and St. Louis on the other.

Moretti offers a case in point through the story of a young Silicon Valley engineer, David Breedlove:

The year is 1969 and Breedlove, just like many other professionals at the time, is thinking that urban areas were not good places to raise a family. He has a house, he has a good job in Silicon Valley, but he wants something quieter. At the time Visalia is not that all that different from a place like Menlo Park. Sure, wages are slightly higher in Menlo Park and there are slightly more professionals. But at the time, both cities have a mix of residents, both cities have decent schools and both cities have a variety of social classes.

If you look at the two cities today, 40 years after Breedlove made his choice, it’s almost like looking at two different continents. On the one hand, Menlo Park has become one of the most vital and prosperous innovation hubs of the world –Menlo Park including the communities around it, the entire Silicon Valley area. Visalia hasn’t grown in 40 years. It hasn’t added any college graduates to its population. Its wages are falling, schools are very problematic. Crime, that used to be higher in Menlo Park, is now twice as high in Visalia. Pollution is much worse there.

It exemplifies what has been going on with many American communities. They were very alike in the ‘60s and the ‘70s and they’ve been growing apart and now they’re almost different continents.

The key predictor of a community’s economic success today, Moretti says, is the education level of its workers — in particular the number of college graduates in the workforce.

“It didn’t use to be like that,” he adds. “Sixty or seventy years ago, infrastructure and physical capital were the key predictors of a community’s success. Workers in Detroit were well paid because they had access to great infrastructure and great physical machines.”

But in the information age, Moretti says: “new ideas and successful innovation are rarely born in isolation” and clustering educated, innovative people has a multiplier effect.

That’s bad news for a place like Flint.

So what are we to do to secure American prosperity? One solution, Moretti believes, is that the United States must put more resources into education and support for research and development:

It’s clear that there are two engines that are supporting U.S.prosperity right now. It’s human capital — meaning people and education — and innovation. And it’s clear that we’re not investing enough in either one. We all know about the problems of not investing in education. The U.S.used to be a leader in high school graduation and college graduation and for the past 30 years it has been surpassed by a number of countries.

The second under-investment we’re doing is in innovation.America does have some of the greatest innovation hubs of the globe. But at the same time we are grossly under-investing in R & D and that is costing us right now in jobs and it’s going to cost us jobs even more in the future. In the same way that there’s a market failure in the creation of human capital, there’s a market failure in the creation of innovation.

When a company, for example when Apple invents a new product like the iPad, it generates private profit in the form of its sales but it also generates an external benefit for all the other companies in the same industry that can see the new product, can learn from it and will copy the new product. Apple doesn’t get compensated for that part of innovation. That’s why the federal government provides R & D tax credits for innovation because there is a private benefit from investing in innovation but there is also a public benefit. The problem is this tax credits are not large enough and they are not permanent.

We really need to put more resources in investing in human capital and more resources in subsidizing innovation, because they both are activities that generate vast benefits for us as a society. It’s not a fairness argument; this is just a purely pragmatic self-interest argument.

 Another idea for revitalizing America’s Rust Belt (and beyond) in the post-industrial age, comes from journalist and historian Cathy Tumber, who’s new book, Small, Gritty and Green: The Promise of America’s Smaller Industrial Cities in a Low-Carbon World, argues that there’s hope for smaller American industrial cities to be revitalized through a green economy. Of course more investment in education and innovation may still be key.

Corporate Misdeeds and the Role of Government

Barclay's Bank branch

Flickr/Some Driftwood

In Wednesday’s New York Times, business columnist Eduardo Porter probes what he calls “The Spreading Scourge of Corporate Corruption,”in the wake of the scandal in which Barclay’s Bank admitted trying to manipulate key interest rates to its benefit (at a cost to consumers, businesses and investors), and implicated other banks.

Porter says misconduct in the financial industry has become so commonplace that it seems to have lost its shock value:

Perhaps the most surprising aspect of the Libor scandal is how familiar it seems. Sure, for some of the world’s leading banks to try to manipulate one of the most important interest rates in contemporary finance is clearly egregious. But is that worse than packaging billions of dollars worth of dubious mortgages into a bond and having it stamped with a Triple-A rating to sell to some dupe down the road while betting against it? Or how about forging documents on an industrial scale to foreclose fraudulently on countless homeowners?

Porter debates whether corporations have become less ethical in recent years or whether their misdeeds are just more visible to us lately. He suggests “the temptation to bend the rules is probably highest toward the end of an economic upswing, when executives must be most creative to keep the stream of profits rolling in.” And he ticks off some of the forces that can lead to corruption:

  • Complex balance sheets at big companies make it easier to hide fraud;
  • Government’s urge to bail out banks that are “too big to fail,” can encourage them to take self-serving risks;
  • Globalization can spur “tooth and claw” competition for new markets;
  • The surge of corporate cash into the political process (see: Citizens United) can influence politicians to make laws friendlier to business desires.

Whatever the case, the United States at this point is no beacon of ethical behavior, Porter asserts. He cites an international watchdog agency:

In 2001, Transparency International’s Corruption Perceptions Index ranked the United States as the 16th least-corrupt country. By last year, the nation had fallen to 24th place. The World Bank also reports a weakening of corruption controls in the United States since the late 1990s, so that it is falling behind most other developed nations.

Weakening corruption controls… what are those controls? They’re the laws and regulations that require transparency and fair dealings… and the regulatory agencies that enforce those rules. California’s “Homeowners Bill of Rights,” which Gov. Jerry Brown will sign into law Wednesday, is an example.

An accompanying article on the New York Times business page reports that regulators with the Commodity Futures Trading Commission have just approved new rules aimed at reining in the derivatives industry and “preventing a repeat of the financial crisis.” The Securities and Exchange Commission last week approved similar rules, which are a key part of enacting the Dodd-Frank financial regulatory law.

But the same article points out that one member of the commodity futures commission voted against the plan because he said “the fine print created loopholes wide enough for Wall Street to exploit,” and it said the commission wrote exemptions to the new rules “after months of frenetic corporate lobbying.”

On the one hand, it seems we need regulation to keep business and finance operating on the up-and-up to protect consumers and investors. On the other hand, businesses argue that regulation can become unwieldy and put them at a competitive disadvantage. So what’s the proper balance? And who will get us there? To help you understand the philosophies about regulation of presidential candidates Mitt Romney and Barack Obama, the National Journal recently came up with this explainer.

The whole debate brings to mind a 2008 radio piece produced jointly by NPR News and This American Life. Called “The Giant Pool of Money,” it does a good job explaining the mortgage meltdown and connecting the dots between the world of high finance and the homeowners who lost their homes to foreclosure. The program is an hour long, but it’s clear and entertaining.

Here’s reporter Adam Davidson describing what happened to an Iraq war veteran and to others like him:

Richard actually qualified for a Veterans Administration Loan at a really good rate. And he had money to put down. But the broker convinced him to take a mortgage that turned out to be much worse, but did have a much higher commission.

Mortgage brokers were walking around east Flatbush knocking on doors, telling just about anybody, hey, we can get you a house. If you have a house, we can get you a big home equity line of credit. This happened in poor neighborhoods all over the country.

And while the FBI and other law enforcement folks say they don’t have the exact numbers, it’s clear that fraud, like that fraud on Richard’s application, was ubiquitous.

What’s at stake when business regulation fails? Eduardo Porter ties it to a broader breakdown in trust, a fraying of the social compact that underlies our whole democracy:

It’s hard to fathom the broader social implications of corporate wrongdoing. But its most long-lasting impact may be on Americans’ trust in the institutions that underpin the nation’s liberal market democracy.

An overstatement? A mis-reading? Or grimly accurate? What do you think?

 

Voter-Approved Pension Reform — First of Many?

San Diego and San Jose both passed measures Tuesday to reform pension benefits for public employees. Photo: Michel Boutefeu/Newsmakers

By Peter Jon Shuler

Overwhelming voter support for pension reform measures in San Diego and San Jose could open the floodgates for rollbacks to rising pension costs in other cities and counties. It could also give a boost to Governor Brown’s proposals for statewide pension reform.

Both city measures are designed to rein in pension costs for existing employees and create less generous retirement packages for new hires. Cities around California have been watching the measures closely.

“I have no question we’re going to be seeing lots of different agencies attempting to adjust benefits very similar to what San Diego and San Jose did,” said Marcia Fritz, president of the California Foundation for Fiscal Responsibility. She calls the Tuesday elections a mandate.

San Jose and San Diego unions quickly sued to block the measures. But Fritz says voter sentiment may take the issue to the state level and force Democratic lawmakers in Sacramento to take up Brown’s proposals.

Listen to the radio version of the story:

Mitt Romney Brings Campaign to Solyndra

MItt Romney

Mitt Romney took reporters on "magical mystery tour" of Solyndra. Photo: Peter Jon Shuler/KQED

The Romney camp loaded select reporters on to a bus early Thursday and took them on a mystery field trip. (read: a press conference at an undisclosed location that by many reporters’ accounts was simply “weird”). The secret location ended up being Solyndra, the now infamous and bankrupt solar company that received  $528 million in federal loans. Here’s a compilation of social media chatter on the outing, much of it from the journalists actually on the bus.
Continue reading

Focus Groups: Behind the Two-Way Glass

It’s a Wednesday evening at a non-descript office park in Concord, the largest city in Contra Costa County, about 30 miles east of San Francisco. Ten voters – all Democrats – are led into a meeting room and seated around a large conference table. A two-way mirror runs along one wall, behind it a room where we were allowed to watch. Only first names are used to encourage participants to speak freely.

Mark Baldassare of the non-partisan Public Policy Institute of California leads the voters through a 2-hour, open-ended conversation about government – what they like and don’t like, what they want. A similar group of Republican voters will follow. Baldassare starts by asking each participant to complete a sentence: “I’m feeling _________ about the way things are going in the U.S. these days.” Both groups expressed frustration, and even fear for the future.

There’s plenty of bipartisan dissatisfaction – with politicians and government. Jeff, a 52-year-old manager for PG&E, spoke for many of the Republicans in his group: “The government oughta be working on balance the budget – but back everything across the board. And let all the departments deal with that as it may.”

Several Republicans, including Jeff, said they had little faith that politicians of either party would ever really cut spending or shrink government. Many Democrats also said they lacked faith in government. But for different reasons. Some felt elected officials were beholden to special interest groups and rich donors. Keely, a 48-year-old homemaker, wondered about waste.
 
“I will pay more taxes, but I want someone to open the books. Show me what’s going on. What happened to all this money?”
Continue reading

Election Road Trip: Inland Empire Voters Seek a Voice in Wake of Recession

Riverside Foreclosure Auction/Scott Shafer

Outside the courthouse in the city of Riverside housing speculators sit in lawn chairs — protected from the mid-day sun by little blue awnings — and place their bids in the daily home foreclosure auction.

The same scene plays out every week day in San Bernardino, Chino, Fontana and other Inland Empire cities. Behind each auction is someone who reached out for the American Dream but couldn’t hold on.

On a road trip to take the political pulse of this growing region, The California Report’s Scott Shafer talked with homeowners losing their grasp and investors scooping up properties at a discount — who say they are re-energizing the area’s economy and helping it recover from the crushing effects of the recession.

But it will take a long time for the Inland Empire to bounce back from the mortgage meltdown. The region boomed in the last decade, then suffered the second highest home foreclosure rate in the country. It still struggles with 13 percent unemployment, higher than the state average.

The recession has left many in the Inland Empire feeling politically irrelevant and overlooked, in spite of the fact that the region is home to 4 million people, larger than many states.

In his reporting, Shafer found people working to create a stronger political voice for the region. And this election year could be key.

Though the Inland Empire has long been a Republican stronghold, many of the new arrivals from coastal cities are more likely to be Democrats. That means that several congressional elections here are now hotly contested. And with both parties campaigning hard, the Inland Empire could get what it’s been craving: attention from politicians.

Listen to Shafer’s story:

 

In Inland Empire Economic Distress May Drive Voters

Each weekday at noon, on the front lawn of the Riverside Courthouse, hundreds of thousands of dollars change hands in the auction of homes recently foreclosed in Riverside County. Events like this one are held each day here — and in San Bernardino, Chino, Fontana and other Inland Empire cities hit hard by the housing bust.

Bidders, many working for housing speculators, sit in lawn chairs with little blue awnings to protect themselves from the brutal noon sun.

Behind each auction is a story. A person, a family. People who reached for the American dream, but couldn’t hold onto it.

As the auction continues, I ask one of the bidders — Long Beach realtor Jesus Quintaro — if he ever thinks about the former owners who lost the homes he’s bidding on. “I do think about it,” he says, “but a lot of them got a lot of money out of their homes. They refinanced. Some may be victims — but a lot of them made the choice to refinance, get money out, or get into a home they couldn’t afford in the first place.

Another bidder, John Chang from Orange County, sees complains that the media portray investors who buy up foreclosed homes as vultures. He says they’re making a contribution — putting people to work. Continue reading

First Up on KQED’s Election 2012 Road Trip: The Inland Empire

Scott Shafer reporting in the Inland Empire

The California Report’s Scott Shafer just returned from the first stop on a statewide “listening tour” to take the pulse of California voters this election year.

The November election is shaping up to be a referendum on government… “How much government do we want? And who’s going to pay for it?” So we’re framing our election coverage with the question “What’s Government For?”

In Riverside and San Bernardino counties, Shafer heard some surprising answers, such as Republicans feeding the poor and asking government to do more. And he found that the region’s elected officials don’t yet reflect the changing political complexion of its current population.

In the presidential lounge at Riverside’s Mission Inn hang portraits of the presidents who have visited over the years. All but one are Republicans. And the Inland Empire has long been a bastion of the GOP. Four years ago, though, voters went for Barack Obama.

Shafer found that many of the new Democratic voters are transplants from coastal cities like Los Angeles. And many of them are Latinos. But low voter turnout prevents them from having the political clout they could. Shafer met some folks who are trying to change that.

Take a listen:

 

California’s Inland Empire

So what is the Inland Empire?

MAJOR CITIES: Riverside, San Bernardino, Fontana, Moreno Valley, Rancho Cucamonga, Ontario, Corona, Victorville, Murrietta, Temecula

POPULATION: 4.2 million (grew by almost one-third over past decade)

RACE and ETHNICITY: Latino 47%, White 37%, Black 7%, Asian American 6%

MAJOR INDUSTRIES: Warehousing/logistics, service sector, manufacturing, agriculture (once-booming construction and real estate/finance jobs dried up with the mortgage meltdown)

ECONOMIC INDICATORS: 13% unemployment, second highest home foreclosure rate in California, highest poverty rate in California for a metro area larger than 2 million people

 

 

Launching New Biz in Tough ‘Hood: Is It Government’s Job?

Eskender Aseged of Radio Africa & Kitchen

What’s Government For? That’s the subtext to KQED’s election coverage this year.The question seems to be cropping up everywhere — from the Tea Party’s tax revolt to Occupy Wall Street rallying for the 99 percent. What do we want? What are we willing to pay for? When do we want government to butt out?

They’re questions that can crop up in the most unlikely of places… such as a radio story about an Ethiopian chef’s new restaurant in San Francisco’s Bayview District. Reporter Rachael Myrow describes the way the city of San Francisco helped Chef Eskender Aseged shift from hosting “pop up” food events to opening the doors of his own place, Radio Africa and Kitchen.

Among the funding sources the city used, were redevelopment funds… making this project perhaps the last of its kind, since Gov. Jerry Brown and the state legislature last year ended California’s redevelopment agencies in order to use those funds for other local government needs.

Do you agree with city consultant Andrea Baker, who Myrow quotes below, that cultivating small businesses like Radio Africa and Kitchen is precisely what government is for?

As I explained in a report for KQED News, Aseged couldn’t afford to launch a brick and mortar restaurant on his own, but he could put down about 35 grand. The city, through a variety of agencies, brought roughly $710,000 to the table and built the restaurant from scratch. It’s a street-level commercial anchor to a new condo complex .

Two months in, Aseged is still in a state of shock over his good fortune. This is a man used to making dinner for about 100 people off of two hot plates.

“We have 12 burners, a grill, griddle, salamander, two ovens. It’s kind of like, overkill over here,” he says.

Aseged is expected to source some of his labor locally. The restaurant is serving dinner now, but soon it will open for lunch, featuring a new crop of young line cooks. They’re being trained nearby at the non-profit Old Skool Café, which works with troubled youth.

Even though the five-year-old Muni T has made this stretch of Third easily accessible, the street intimidates pedestrians, much like Geary and mid-Market do.

“It doesn’t feel walkable,” says Andrea Baker, a consultant for San Francisco’s Office of Economic and Workforce Development. “And therein lies the difficulty. Because small businesses tend to rely on foot traffic.”

While sipping a large cappuccino from the Road House Coffee Company at Third and Thomas, Baker says the city might help launch a bakery next – or something Indian. (These days, there are more Asian Americans in Bayview than African Americans.)

“Why is it government’s job? Why isn’t it, I would say!” She laughs. “In our system, people pay taxes in the hope that if we all put a little something into it we can create big things.”

Read more about Radio Africa and Kitchen and the Bayview’s foodie rebirth on KQED’s News Fix blog.