Thursday, December 18, 2008

There is a Santa Claus

What follows is the woeful economic news I culled from just one day’s New York Times, for December 17, 2008. For the last year, stories like these began trickling into newspapers and other media, and they have now reached Niagara Falls proportions. The world is drowning in red ink and pink slips. Or at least the world outside of Portsmouth is.

The New York Times reported on December 17, 2008, among other things, that Goldman Sachs suffered a $2.1 and Morgan Stanley a $2.36 billion loss. I see also that Yale’s endowment has dropped over 13%, creating a $100 million shortfall for the coming school year. A survey revealed $107 billion worth of income-producing properties nationwide are already or potentially in default. Because of declining sales, Best Buy electronic stores are sharply cutting their workforce and their competitor Circuit City borders on bankruptcy. Unemployment claims have reached their highest levels in decades, forcing some states to plead for federal assistance. Funds for the jobless are drying up in New York State. On December 16, the Federal Reserve cut the rate for overnight loans to almost zero percent, sending more bad news to those who prefer putting their money in a low-yield saving account rather than speculating with it on the stock market and in their 401K’s. “The ripple effects of the recession and Wall Street’s slide have now fully engulfed the New York theater,” the Times reported. "The play's the thing," Hamlet said, but there are few angels willing to invest in new Broadway productions.

The bad news is not just national; it is international, according to the Times affecting every part of the global economy. “Japan’s Manufacturing Confidence Index Drops Sharply.” Honda projects a 64% drop in profits. “British Unemployment Up 137,000 at 1.86 Million.” OPEC is about to cut oil production, again, and with falling oil prices their plans for large scale projects are unlikely to begin any time soon. “The oil cartel has been stunned by the speed of the downturn, which has created a sudden nightmare for producers,” the Times reported. And Russia devalued the ruble for second time in a week. “Global Car Industry Fearful for Detroit,” read one headline. The source of the fear is that the financial crisis at Detroit’s Big Three is going to mean that their more successful units abroad are about to be battered. “There are growing concerns that the automakers’ problems in the United States will weigh down their more successful units in Europe, Asia and Latin America,” the Times pointed out. Speaking of Detroit, that city’s major newspaper, trying desperately to avoid going under, will stop home deliveries four days a week. (I wonder: Did the Portsmouth Daily Times realize it couldn’t afford to continue Art Kuhn as managing editor anymore because he was driving down circulation even further by angering readers by his shameless shilling for the City Center?) Here are a few more stories from the December 17 issue of the New York Times: “Retail Spending Weak in November,” “No Question We’re in a Financial Pickle,” “Job Losses in City Reach Up Ladder,” “Oil Demand Down; 1st Time Since ’83,” “U.S. Trade Deficit Grew in October as Exports Slowed,” and “Jobless Claims at Highest Level in 26 Years.”

In addition to all this depressing news, the Times also reported on the financier Bernard L. Madoff’s incredible Ponzi scheme by which he bilked gullible investors, including charities, of billions. “Wall St. Fraud Leaves Charities Reeling,” the Times reported, and “S.E.C. Issues Mea Culpa on Madoff." Charity begins at home, they say, but it is apparently Madoff's home, or homes, it begins at.

I mention all this not to spread gloom but to point, by contrast, to some not just good but remarkable financial news. Portsmouth appears to have escaped the economic tsunami that has washed over the rest of the world. I recall attending a Portsmouth City Council meeting early last January, as the crisis was getting under way. Our upbeat City Auditor Trent Williams reported Portsmouth was in reasonably good financial shape and mayor Kalb concurred. That apparently is why Mayor Kalb was able to put in his order for a new automobile for himself and why the city council and the mayor proposed spending $15 million (at least) on two new city building complexes, and why the city council made a large appropriation (to be paid for by property taxes) for a new fire engine and why at the last meeting, I've been told, they talked about buying another fire engine, maybe because there are going to be so many fire sales as a result of the recession.

Instead of being in the red, the city was in the black, and the auditor felt that city would have about a million in the General Fund by the following November 30. If the city didn’t, the city would be in trouble he said. I recently asked the auditor whether the city had that million by November 30 and he reported it had that amount, or very close to it, $955.171 to be exact. So the city is not in financial trouble, if the auditor is correct. The reason this is remarkable is that Ohio has not escaped the financial crisis. At every level of government, cutbacks, layoffs, and panic prevail. Education, assistance to the poor, social services of all kinds will be affected. A while back, a New York Times reporter began a story with the lead, “In the bellwether Ohio city of Chillicothe, population 22,000, residents are worried about the economy.” Having visited the Chillicothe city hall and met its mayor and auditor a few years ago, I think of it as Portsmouth's sister city, the sister city that did not become a woman of the streets, municipally speaking. Mayor Sulzer told the Times that “ the state of Ohio just tried to borrow $150 million dollars for low-income housing. But no one was interested in buying those bonds. So what will happen when the city of Chillicothe has to borrow a couple of million dollars to build a new bus garage?”

Chillicothe can’t afford a new bus garage? Chillicothe can't raise a couple of measly million dollars? How pitiful! Mayor Sulzer should pick up the phone and call Mayor Kalb for some financial advice and learn how it is possible for an Ohio city in this terrible crisis to afford to build two new city buildings, and buy two fire engines, and a new car for Mayor Kalb to boot. Don’t they have property owners in Chillicothe to pay for these things?

Portsmouth has drawn regional if not national attention in the past few years for unflattering reasons. Every month seems to bring news that we are leaders in the state if not the nation in some unpleasant category or other – for poverty, drugs, corruption, and filching historic rocks. But what about our financial miracle? Why doesn’t our city government get credit for that? What other city, in the middle of the greatest financial crisis since the Great Depression, can afford to tax its property owners $15 million to provide the mayor and other city officials with spacious new offices, and provide His Honor with a new automobile as befits the dignity of his position? Why doesn’t Governor Strickland recognize the miracle in his own backyard? Why doesn’t he hire Auditor Williams as a consultant and make his old friend Mayor Kalb part of his brain trust?

We should feel sorry for those who don’t believe in Santa Claus, or who suspect that our auditor and mayor are engaged in some kind of Ponzi scam, that we are in fact not better but far worse off than Chillicothe and the other cities in Ohio and around the nation that are howling with pain. Yes, a Bernard Madoff could fool some of the smartest people in the world with his scam, but it is hard to believe that our city officials could fool the people of Portsmouth in that way. True, we no longer have Managing Editor Art Kuhn of the Daily Times around to explain to us how a 440% tax increase is not really an increase, but with unelected public servants like Mike Mearan to assure us that the city is in good financial condition, as he did in that council meeting last January, and who more recently said at a council meeting that if any resident of Portsmouth believes he or she can’t afford the 440% tax increase to build a City Center and a Justice Center on his client’s property, then he or she should move out of town. But why would anyone want to move out of a town that has miraculously escaped the current crisis? Not even an Alfred E. Newman would be stupid enough to move out of Santa’s Ohio getaway.