INDUSTRY-NEWS COMMERCIAL REAL ESTATE CAPITAL MARKETS NEWS & INFORMATION

SPONSORED BY
	Bryan Shaffer \| 310-867-2906
	(bshaffer@gspartners.com)
Commercial Real Estate & Multi-Family Loans - Both Debt & Equity - California & Nationwide
Retail - Office - Industrial - Hotels - Multi-Family - Student Housing - Single Tenant SBA Loans
Distressed REO Properties - Whole Loans

April 2011

William S. Becker: The Oil War at Home

by on April 30, 2011

Huffington Post…

Whom should we blame for high gasoline prices? The president? Oil companies? Price gougers? Protestors in the Arab Spring? People who drive Hummers? The answer to that question is one of the first serious issues of the 2011 presidential campaign. (Sorry, Trump. Sorry, Birthers.) It’s an issue that could — and perhaps should — become an oil war at home, politically speaking. The issue is heating up because gas prices affect us all, whether we’re buying fuel, food or consumer goods. Rising gas prices threaten our recovery from the recession and our ability to put Americans back to work. To anticipate how the price of oil might unfold as a campaign issue, we can look to California in 2006. One of the initiatives on California’s ballot that year was Proposition 87 to establish a new tax on petroleum extracted from the state’s oil fields. The tax would have raised $400 million annually to fund alternative energy programs, with the goal of cutting the state’s oil consumption 25 percent over 10 years. Proposition 87 contained a clear prohibition against oil companies passing the cost of the tax to consumers by raising fuel prices. The tax would have to come out of profits. In July 2006, polls indicated that 51 percent of California’s voters supported the initiative. Then in August, opponents launched an aggressive campaign of television ads supported in part by more than $30 million from Chevron. The ads claimed Proposition 87 would result in higher gasoline prices — despite the prohibition in the initiative. One of the ads featured the president of the California Chamber of Commerce warning that Proposition 87 “would impose a $4 billion tax on oil produced in California, a tax that would lawfully be passed on to the rest of us.” By October 2006, voter support for Proposition 87 had dropped from 51 percent to 41 percent. The measure was defeated in the November election. Fast forward to Washington in 2011. Republicans are warning again that a “tax increase” (actually subsidy reform) for oil companies will push gasoline prices higher. Some are blaming President Obama for expensive gasoline. To his credit on the issue of oil subsidies, the president stirred the pot with an April 26 letter to leaders in the House and Senate, urging them to “take immediate action to eliminate unwarranted tax breaks for the oil and gas industry and to use those dollars to invest in clean energy to reduce our dependence on foreign oil”. Obama included the same proposal in his last two budget submissions to Congress. A day later, 29 Democrats in the House wrote to Speaker John Boehner, asking for an up-or-down vote on oil subsidy reform. Boehner said no. His spokesman explained: “The Speaker wants to increase the supply of American energy to lower gas prices and create millions of American jobs. Raising taxes will increase gas prices and make it harder to create jobs.” In that response, Boehner’s spokesman managed to squeeze three big untruths into two short sentences. They came straight out of the dog-eared playbook the oil industry and its supporters continue using to frighten voters about jobs, taxes and energy prices. The president has proposed repealing tax breaks for oil companies, not increasing taxes for consumers. Repealing the subsidies will result in higher gasoline prices only if oil companies want to shake down consumers. Four billion dollars a year is chump change in the oil industry. It would shave very little off its profits. In the first three months of this year alone, Exxon-Mobil earned nearly $11 billion. Chevron netted more than $6 billion. When Rep. Diane DeGette asked the Energy Information Administration several years ago whether subsidy cuts would cause an increase in gasoline prices, EIA told her that oil revenues were so large that eliminating the industry’s taxpayer subsidies need not make a difference in the price at the pump. The third misstatement in Boehner’s response was that subsidy reform would discourage oil companies from drilling. So long as there’s money to be made, oil companies will drill. Again, $4 billion a year will not make a dent in their profits. In regard to the blame game, Politico reports this week that: Americans are paying more than $4 a gallon for gas, ExxonMobil announced a 69 percent boost in earnings, and President Barack Obama is struggling with the fact that he can’t do much about any of it… Political experts of all stripes say (high gas prices are not) good news for Obama. Politico cites a new Washington Post /ABC poll in which 60 percent of Independents said they “are concerned enough about gas prices to say that they definitely will not back Obama for reelection.” But if President Obama can’t do much more about gasoline prices, why should he be blamed for them? The administration has deployed the few countermeasures in its arsenal to reduce our dependence on oil and the price we pay for it. Among other things, it has instituted aggressive new efficiency standards for vehicles. The president doesn’t benefit from spikes in the price of oil. On the contrary. We can be certain he will do all he can to keep the recovery on track. If it’s not “the most powerful leader in the world”, then what really affects oil prices? As former Labor Secretary Robert Reich explains: It’s a global oil market. Even if 3 million additional barrels a day could be extruded from lands and seabeds of the United States (the most optimistic figure, after all exploration is done), that sum is tiny compared to 86 million barrels now produced around the world. In other words, even under the best circumstances, the price to American consumers would hardly budge. The Atlantic offers more detail : Fuel taxes make up 12 percent of the retail price of gasoline. Gas taxes averaged 48.1 cents per gallon as of last January. The federal portion is 18.4 cents per gallon; state taxes averaged 28.6 cents. The federal tax supports the Highway Trust Fund, which is used to build and maintain the interstate highway system, with smaller portions going to mass transit. It’s unlikely these revenues can be reduced without further damaging the nation’s deteriorating transportation infrastructure. The American Society of Civil Engineers estimates we are spending $110 billion too little each year to maintain the transportation system even at current levels. Meantime, the Congressional Budget Office predicts the Highway Trust Fund will run a $7 billion deficit this year and will continue to have deficits through 2020. The biggest factor by far is the price of crude oil . It accounts for 68 percent of what we pay at the pump. It also affects our trade and budget deficits. The Congressional Research Service estimates that when petroleum costs $100 a barrel — a price we’ve already exceeded — our oil imports increase the U.S. trade deficit by $100 billion. Every $10 increase in the price of oil costs our military (in other words, taxpayers) $1.2 billion a day. The balance of gasoline prices — 20 percent — goes for refining, distributing and marketing the fuel. The biggest factor in price volatility is supply and demand. Also in the mix are increases in U.S. oil consumption during the summer, speculation in oil markets, what’s happening in the Middle East and other countries from which we import petroleum, and the strength of the dollar. The least of the factors — so small that it’s overwhelmed by the others — is domestic oil production. Gasoline pricing is complex, but the politics are simple. Secretary Reich puts it this way: This gusher (of oil profits) is an embarrassment for an industry seeking to keep its $4 billion annual tax subsidy from the U.S. government, at a time when we’re cutting social programs to reduce the budget deficit. It’s especially embarrassing when Americans are paying through their noses at the pump. If that doesn’t dissuade Republicans and oil-state Democrats from going to war on this issue, then we should ask some questions: o How can the members of Congress who condemn federal budget deficits support subsidies the oil industry doesn’t need? o How do oil subsidies, some of which have been in place for generations, square with conservative mantras that the federal government shouldn’t be picking winners or engaging in corporate welfare? o How can Congress justify oil subsidies when they’ve been warned repeatedly by experienced senior military experts that, “Dependence on oil undermines America’s national security on multiple fronts”? Without question, there are issues on which the interests of the oil industry and the public coincide. The obligation of our political leaders is to detect where those interests diverge and, when a choice must be made, to choose on the side of the American people. If gasoline prices become a huge issue in the 2011 elections, we will see who favors the blame game over solutions and who represents the welfare of oil companies over the welfare of the American people. I can see the first bumper sticker now: John Boehner. R-Ohio or R-Oil?

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Tagged as: boehner, california, countries, democrats, fuel, house, industry, military, political, united-states

{ 0 comments }

Mayors To Washington: ‘We Need Money’

by on April 30, 2011

Huffington Post…

CHICAGO — Near the end of a two-day summit here that brought together mayors and federal officials to talk about city design, the mood turned confrontational. It started when Philadelphia Mayor Michael Nutter , in the middle of a Friday discussion on the federal government’s role in city development, turned toward the Washington officials who were sitting with him on stage and expressed his disappointment. “Mayors could never get away with the kind of nonsense that goes on in Washington,” he said. “In our world, you either picked up the trash or you didnât. You either moved an abandoned car or you didnât. You either filled a pothole or you didnât. Thatâs what we do every day. And we know how to get this stuff done.â That evidently hit a nerve, as cheers erupted through the Grand Ballroom of the Hilton hotel, where many in the audience were mayors. Manny Diaz, former mayor of Miami, who sat on stage with Nutter, gave an impromptu speech criticizing Washington lawmakers. Other mayors stood up and took the microphone during the question and answer session — not to ask questions, but to get things off their chests. The event, co-sponsored by the National Endowment for the Arts, the American Architectural Foundation and the U.S. Conference of Mayors, became, for a few minutes, a forum for mayors to express a difficult truth: Two-and-a-half years after the worst financial crisis since the Great Depression, the nation’s cities still struggle with chronic budget gaps that can’t easily be filled. Tax revenue has plunged as property values have fallen and payrolls have shrunk. Local governments, many of which are legally required to balance their budgets, have made cuts that a few years ago would have been unthinkable. Municipal budget woes stem partially from crises on the state level, which in turn aren’t helped by a lack of federal assistance. Federal dollars from the American Recovery and Reinvestment Act covered less than half of states’ combined budget shortfall during this fiscal year, according to a recent report from the nonpartisan Center for Budget and Policy Priorities . Come next fiscal year, which for many states begins this July, states’ combined shortfall will exceed $110 billion, with only $6 billion in federal aid available, according to the report. That leaves cities out in the cold, as states focus on solving their own problems. In Newark , aid from the state of New Jersey fell by 40 percent between 2008 and 2010, contributing to a budget crisis that eventually prompted the city, one of the country’s most dangerous according to FBI data, to lay off 13 percent of its police force late last year. In Milwaukee County , a community that has contended with a decade-long erosion of bus service, a transit cut in the coming state budget could deal a critical blow to the region’s public transportation. “We get the brunt of what the recession really entails. We’re also the last to come out of that,” Ed Pawlowski, the mayor of Allentown, Pennsylvania, said in an interview after the panel discussion. “While the economy is getting slowly better, cities are still struggling in a significant way.” Mayors want federal money. They say they can put it to quick and efficient use, creating jobs and helping improve the economy from the bottom up. Nutter gave an example: He closed Philadelphia’s crumbling South Street Bridge in 2008, initiating a two-year repair project that was completed on budget and a month early last fall, he said. But federal funds are running dry, as Washington lawmakers have become seemingly obsessed with a desire to cut the federal deficit. In April, lawmakers almost shut down the federal government as they argued over a few billion dollars in spending cuts. Now, some are saying they will not vote to increase the debt ceiling, and risk leading the nation into default, just to enforce budget austerity. The four federal officials who sat on stage during the discussion — Derek Douglas, special assistant to the president on the White House Domestic Policy Council; Roy Kienitz, under secretary for policy at the Department of Transportation; Salin Geevarghese, senior advisor at the Department of Housing and Urban Development; and Rocco Landesman, chairman of the National Endowment for the Arts — became punching bags. “You guys need to keep your day jobs. You’d make lousy mayors,” said Jennifer Hosterman, mayor of Pleasanton, California, addressing the federal officials as she stood on the ballroom floor. “To hear from the four of you all of your gyrations and concerns and discussion about how we communicate with local government — we at local government just have to make it happen.” The moderator, Carol Coletta, the former executive director of the NEA initiative the Mayors’ Institute on City Design, tried to ease the tension. “What are you asking them to do?” she said. “I mean, what is it that they’re keeping you from doing?” Hosterman talked about her efforts to come into compliance with California’s Global Warming Solutions Act. She described months of intense, focused efforts to make her city more efficient. She has specific goals in mind, she said, but she needs more resources. “Love the dialogue — thank you very much for that,” she said. “But we need money.” The audience laughed in assent, clapping loudly. The federal officials on stage were speaking in broad, theoretical terms. But the mayors wouldn’t stand for that. They knew what needed to get done, they said. What they wanted from Washington was the dollars to do it. “We should not be expecting or depending on top-down permission from the White House or Washington to have us advocate for this stuff,” said R. T. Rybak, mayor of Minneapolis, who stood up and addressed the other mayors. Earlier, Mayor Nutter had complained about the seeming hypocrisy of federal lawmakers who go to ribbon-cuttings and ground-breakings, even if they never supported the legislation for those projects. Rybak heartily commiserated. “I’ve seen those guys at the ribbon cuttings. And it pisses me off,” he said. “But I go out and organize at election time and tell people exactly who delivered and who did not.” Douglas, of the White House Domestic Policy Council, said federal officials are doing what they can to help. But political gridlock can muck up the process. “We do hear you,” he said. “If you look at the president’s budget proposal for FY12 and you go look at the transportation section that he proposed — this is what he’s asking for — the stuff you’re talking about is in there. That’s what he requested. Is he going to get what he requested?” “We can ask for everything under the sun,” Douglas added. “But just because we ask for it doesn’t necessarily make it so.” But the mayors were not satisfied. Diaz, the former mayor of Miami, said that the conversation in Washington is the opposite of what it should be. Instead of cutting spending, he said, lawmakers should be finding ways to support job-creation and help the economy grow. It’s the mayors, he said, who create jobs. But the mayors aren’t getting the federal support they need. “Weâve got to figure it out. All of us have very, very difficult budget times right now. But notwithstanding that, we have to figure out how to do it,” he said. “As a matter of fact, thereâs a greater argument to move the country forward now, because weâre in the dumps, than when things were hopping five, 10 years ago.â Kienitz, of the Department of Transportation, suggested that Diaz run for U.S. Congress. “You could provide that leadership that we need,” Kienitz said. “Thanks,” Diaz replied, “but I donât want a job in Washington.â

See original here:
Mayors To Washington: ‘We Need Money’

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Tagged as: Business News, california, department, economy, fbi, federal, global-warming, mayors, pennsylvania, president, stuff, transportation, white

{ 0 comments }

Ian Fletcher: America’s Fate Under Chinese Hegemony: A Review of Eamonn Fingleton’s Jaws of the Dragon

April 30, 2011

The news has recently hit the press that China’s economy, measured on the purchasing-power basis that adjusts for price differences between nations, may surpass the U.S. in only another five years or so. Surprisingly, China has still shown no signs of morphing into the cuddly liberal and democratic nation, devoted to American ways from Coca-Cola to democracy, whose eventual appearance has been assumed by American policy for thirty years now. Our policy during this period has, after all, enthusiastically cooperated with China’s efforts to build up its economic power–which entails, of course, every other kind of power, including the military kind. So our assumption of a benign China had better be right, or else we have been abetting the creation of a monster. A hostile China will be arguably even worse than the USSR, because it will not do us the favor of sabotaging its economy by adhering to a dysfunctional economic ideology. The above realities are the subject of Eamonn Fingleton’s book In The Jaws of the Dragon: America’s Fate Under Chinese Hegemony . Fingleton is a Tokyo-based Irish journalist who has lived in East Asia for over 25 years, and he has a long and distinguished record of telling truths about the region’s politics and economics that the establishment (on both sides of the Pacific!) would rather the public did not learn. This is one of those books that one wishes the President would read. While it is hardly news that America is facing a Chinese challenge, the seriousness of this challenge is still poorly appreciated. For example–this was my big takeaway from the book–China is not just another despotism. It is the implementer of a systematic and sophisticated political philosophy, which Fingleton calls Confucianism, which will almost certainly constitute a serious threat to liberal democracy in the years ahead. Confucianism, as the reader may recall from a comparative religions class taken long ago, is the political philosophy derived from the ancient Chinese sage Confucius. It was the official ideology of the state in Imperial China for thousands of years. Now Confucius wasn’t a bad man, but he did base his political philosophy on taking authoritarian government as a given and trying to civilize it. He did not, as Western political thinkers since the dawn of democracy in Ancient Greece have done, base his political ideology on trying to prevent despotism in the first place. As a result, he simply wasn’t that interested in concepts like individual freedom or limited government. The bottom line, after a few thousand years of history and some astonishing ideological twists and turns, is an approach to politics that is systematically opposite to liberal democracy. It is the velvet glove on the iron fist, and increasingly a very sophisticated one. It has tamed capitalism and mastered modern media. It is not headed for collapse or metamorphosis any time soon. If anything, it is currently more successful at imposing its will on us than we are at the reverse. To be fair to poor old Confucius, the political system of contemporary China is not a direct extrapolation of any blueprint he drew up, and its flaws should not blind humanity to the genuinely civilizing aspects of his teachings (which are real). But, as Fingleton shows in considerable detail, a Confucian mentality underlies the politics of not only China, but also, in a soft-authoritarian version that has mastered the surface rituals of democracy, the politics of neighboring nations like Japan, Korea, and Singapore. Make no mistake: East Asia is on a fundamentally different civilizational track than the U.S., and it isn’t going to get off any time soon. And why should it, when East Asians are currently watching America decline? If the U.S. had not chosen, by its unconditional embrace of economic globalization by means of (one way) free trade, to render itself vulnerable to China, the above might not matter very much. After all, for most of its long history, China has maintained a civilization upon principles very different from those of the West, and it didn’t do us much harm. Unfortunately, the U.S. has, in fact, chosen the opposite course, with the result that our own government is increasingly slipping under the control of an ethically alien and geopolitically hostile power. To take just the most obvious example: because political bribery is, by way of political action committees, essentially legal in the U.S., Beijing can manipulate the U.S. Congress and the presidency almost at will. Why? Because it can manipulate the profits of the Fortune 500 companies that do business in China, and they do its bidding as lobbyists here. Because they are still headquartered in the U.S., they find welcome on Capitol Hill, but it is Beijing that is calling the shots. Americans sometimes puzzle over why their government doesn’t “get” the Chinese threat. The answer is simple: because it has been bribed not to by China. The most important issue on which our government has been bribed is, of course, trade. China runs astronomical trade surpluses with the U.S. In fact, a majority of our trade deficit is now with China. This is no accident: it is the product of China’s aggressive embrace of predatory mercantilism plus America’s government being bribed not to take defensive measures. To find an historical parallel, one would probably have to go back to something like the suicide of the old Polish state in the 18th century, carved up by its adversaries after its domestic politics was paralyzed by foreign bribery. America’s defense against Chinese mercantilism is further sabotaged by the fact that, despite our using similar policies earlier in our own history, mainstream American economists are largely blind to the fact that mercantilism even works. Trapped in the same “free” market thinking that led to the 2008 financial crisis, they don’t believe that China’s policies can possibly be a winning move for that country. An economy that has gone from peasant agriculture to superpower in 30 years doesn’t seem to persuade them. Why are China’s economic policies so effective? The aggressive pursuit of exports is a game other nations, like Germany and Japan, also play well. But these are both medium-sized high-wage nations that are already developed, not gigantic low-wage nations still on the early stage of their development path. (China is an economic superpower because it has so many workers, but their per capita output still only qualifies China as a middle-income nation globally, behind nations like Jamaica.) China is unique because it combines standard-issue (if exceptionally cynical) mercantilism with other policies, like forced savings and systematic technology acquisition, made possible by its despotic ex-Marxist political system. For example, it has, by deliberate state fiat, a savings rate close to 50%, while America’s is close to zero. This gives China a tidal wave of investment capital to put into everything from factories to freeways. (It is also enabling China to accumulate ownership of American government securities and private-sector assets.) Japan never took over the world, so some people dismiss the Chinese threat as yet another big wolf-cry. But China has ten times Japan’s population, nuclear weapons, and a hard-authoritarian rather than soft-authoritarian political system. This time, it’s different. Beijing is already extending its political tentacles everywhere from the Middle East to Latin America. Now that Uncle Sam worships democracy (at least in principle) and doesn’t cut dictators the slack he did during the Cold War so long as they were anti-communist, China is the new best friend of despots everywhere. China’s voracious demand for natural resource imports alone guarantees that this rivalry will not remain trivial forever. If worst does come to worst, don’t say you weren’t warned. This is a readable and very important book.

April 2011

Blogroll

Ads by Google…

World Markets

Categories

Recent Entries

The Latest Google News

Categories

Jobs