Senate acts to ensure commercial real estate meltdown

The Senate has passed a bill aimed at spurring commercial real estate development (specifically, science parks) that would allow the Commerce Secretary to guarantee up to 80% of loans over $10 million taken out for new construction.

So what’s wrong with that? As Paul Kedrosky notes...

Whoa, good thing that. After all, we don’t have nearly enough vacant office space in the U.S. Rates are only running at a near-record 16.5% (according to Reis), with many cities at 20% vacancy and higher. And commercial real estate loans extant are merely teetering and threatening to bring down the regional banking system, so adding a few million more square feet will just give the system a helpful shove into complete insolvency.

I get that bill sponsors Olympia Snowe (R.) and Mark Pryor (D.) want to be helpful and create legislation to drive innovation. And I get that building science parks is fun and cool and way easier than actually doing science. So I understand the temptation entirely.

But are you people completely mad? What are you thinking by adding subsidized office space to a market already under severe stress? Total vacant sublease space in the U.S. is already 82m square feet, and total vacant space is around 800m square feet (according to Colliers). The idea that the government would tromp in adding more space at this point is … well, nuts. (And don’t even get me started about the white elephant nature of science parks, let alone their chronically high vacancy rates.)

How long until the Senate holds hearings demanding to know who caused the double dip-inducing crash of commercial real estate values that sunk us into another spiral of bank failures?

Yet another bowl black eye

Do we really still need any more evidence that the bowl system is all about money?

Current and former employees of the Tostitos Fiesta Bowl said they were encouraged to donate money to specific political candidates and were reimbursed by the bowl through bonus payments, an allegation the bowl game’s CEO denies, The Arizona Republic reported.

The newspaper reported that five current and former high-level employees of the bowl game, speaking on condition of anonymity, said they made contributions at the urging of Fiesta Bowl CEO John Junker and were reimbursed through bonus checks. Three of the five said they were reimbursed after giving to specific candidates.

The donations totalled more than $38,000, according to the report.

State and federal campaign laws prohibit corporations from funnelling corporate donations to political campaigns through individuals.

“If employees are giving contributions and they were being reimbursed, it’s illegal, and it’s something we definitely would review,” state elections director Amy Bjelland said, according to the report.

Same old same old. It is not longer a surprise that college sports is dollar motivated. And really I don’t even mind it. But I can’t stand the pretense. So again let’s cut the B.S. and just admit we are running a very profitable business here, and not worried about student athletes. It would save so much time vs. defending a morally corrupt but very lucrative industry.

Max Baucus has to go!

Lady's man.

What am I missing? I basically like Max Baucus, and certainly don’t have anything against him. But he just has to step down, right?

Let’s review the facts. This powerful Senator gets romantically involved with a staffer, and as that is happening gives her a huge raise and, despite her lack of any foreign policy role, takes her on a trip to Southeast Asia and the Middle East. Both the raise and the trip were on he taxpayer dime.

And to top it off, he nominates his girlfriend for the job of U.S. attorney for Montana. Seriously? Is this the sort of judgment needed to be a Senator?

Baucus has tried to downplay that last part, saying that he had the girlfriend withdraw her name from consideration as things started to get more serious instead of just hot and heavy. But now it appears that might be a lie as well…

Jodi Ravi, a former reporter for the Missoulian revealed over the weekend that the paper informed Baucus in March that it was poised to publish a story about Hanes’s relationship with the senator and the fact that he had nominated her for the U.S. attorney job.

The next day, Hanes withdrew from consideration. According to the Missoulian, Baucus’s office never acknowledged a relationship between the two, and the paper did not run a story.

Which of course only goes to prove that Baucus is not an idiot, and indeed realized there was something wrong with his actions. And that knowledge, and his reaction to the prospect of getting caught, should be argument enough for him stepping down.

Again, I have nothing against Max Baucus. But actions are supposed to have consequences. This guy works for the same government that gets ticked off if civil servants accept holiday gifts worth more than $10. And he is doling out raises, nominations and foreign trips to someone who is sleeping with him.

This isn’t partisan. Maybe the affair in and of itself is no big deal. Frankly it isn’t a big deal to me. But the rest of this? The nominations, the trips, the attempted cover up before it hits the light of day? We the people can’t just accept that and move on, can we?

The case against the mortgage interest tax deduction

Harvard economist Edward Glaeser, speaking to Money Magazine, gives a great, straight-forward explanation of what is wrong with the mortgage interest deduction.

It’s very strangely designed. If the goal were to encourage homeownership, you’d want to target the people on the margin between renting and buying, people early in their lives. But because a tax deduction is worth more to higher earners, we have a policy that gives 10 times more benefits to Americans earning more than $250,000 than to households earning less than $75,000. It’s an enormously regressive policy. And its benefit rises with the size of the house and the debt you take on. Why should the government be complicit in urging people to buy larger homes?

Of course something so widely used and popular will be near politically impossible to kill, regardless of what good or harm it does or whether it should exist. Glaeser suggests smartly that we could eliminate the most regressive aspects of the tax by lowering the cap on what is deductible from the current $1 million of mortgage debt to a more reasonable amount, like perhaps $250,000.

As for the recently-extended $8,000 tax credit, Glaeser says “It’s not the job of government to make housing more expensive. Its job is to get rid of distortions in the market that make housing too expensive.” Well said, though the economist does say he wouldn’t mind keeping the credit in place if it is accompanied by his suggested reform of the interest deduction.

Let’s just cut the B.S. out of college athletics

Deadspin is doing a good job advancing the growing hostess scandal sparked by the New York Times coverage of an NCAA investigation into Tennessee. The results sound like something out of a bad movie, but unfortunately are not all that surprising…

The hostesses were never given orders about what to do—remember the trust?—but they were also never told what not to do. One of the group members told the paper that the hostesses were never given guidance about what constituted a recruiting violation. After all, if they knew what the rules were, then the girls might have to follow them.

Similar tales came out of Oregon and other programs, with many women saying that while the school didn’t ask them to do inappropriate things, the recruits themselves often felt entitled to more than just a nice meal. (“One high-profile recruit, she says, tried to lure her to his hotel room, saying, “The girls at Kentucky and Georgia did it.”)

I used to be against paying student athletes. I, as someone who did not get a free ride to college, naively held on to a belief that providing a free education to a kid was compensation enough, and if someone was too short-sighted to take advantage of that opportunity that is their problem. Of course that view, and the antiquated idea that big-time college athletics has anything to do with receiving a college education, is dead.

The thing is, there are still countless student athletes who are just that. Players in non-revenue sports who have little chance to compete professionally who simply want to keep playing the sports they love while getting an education. And good for them. There are also ample players in revenue sports who know they have no chance of going pro, and are just playing for the fun of it. (I had a friend in college who used a little bit of basketball talent to get a scholarship at what was one of the worst programs in division I, which turned into a pre-med degree and eventually produced a doctor.)

Unfortunately, all of these athletes are tainted by the separate world of big-money college sports, where the hostess stories are just the tip of the iceberg. With that in mind, I offer a solution: If you are willing to cut the pretense, go ahead and pay them. By that I mean I would support paying college athletes, if the schools in turn would DROP requirements that those players attend classes and study towards a degree. If they want to be students, allow them to get compensated via a scholarship instead of a paycheck. But if they don’t want to go to school, don’t make them go.

The status quo in a utopia is giving kids who might not otherwise go to college a chance at an education. The status quo in reality is is forcing kids who have no desire to get an education into paying for free for a few years while the college benefits. Let’s drop the B.S., and stop cheapening the degree of every person who went to these universities and who actually studied. Time to call it as it is: Pay the players, and stop calling them student athletes.

What if health insurance was like auto insurance?

Over the weekend I took my car in to the dealer for a servicing. $800 later (new brakes, fuel injection something-or-other and an oil change) I was thinking about healthcare.

I’ve talked before about the potential comparisons between health insurance and auto insurance in respect that, freed from employer coverage, we would be able to shop for our own coverages and make our own deals, based on what we need and want and are willing to pay for. But the comparison also points to how inefficient and foolish it is to try to have all-in insurance, as we do for healthcare, instead of more specialized coverage like what we get for our car.

I obviously just handed over the credit card for the $800 in repairs. No insurance paperwork to file, no claims to submit. Auto insurance does not include maintenance, obviously. It covers the catastrophic. But why does health care? Would we not be better off if we could buy health care that was similar?

The analogy does not quite work perfectly. There is a more pressing need for “routine maintenance” in healthcare, or at least a more dire result if it is ignored. Some sort of barbell coverage would seemingly be necessary: Wellness visits/yearly physicals would be covered, as would be trips to the emergency room or surgeries. But what if we eliminated coverage for the routine but not wellness visits, the trips to the doctor for an ear infection or stomach bug or what have you?

There would be cost savings. By pushing those visits outside of coverage, it would make consumers who need the service more cost conscious and likely encourage the growth of minute-clinics in pharmacies and other doctors but not quite doctors freed of the overhead of the doctor’s office. Some doctors might decide to compete on price against the minute clinics and try to keep their patients coming in for strep throat and the like, but I have a hunch that most would simply let the business go elsewhere.

Which brings me to the real savings of such a scheme. The biggest problem with the healthcare reform being suggested, indeed the fatal flaw of universal coverage, is our elected officials are living under a delusion that we can increase the demand for health services, the number of patients, without doing anything to meaningfully address the supply of services, the number of doctors, without seeing prices increase. Instead somehow this supply/demand imbalance is supposed to bring prices down. Which is impossible.

But by freeing doctors from dealing with routine illness visits, you are opening up times for more physicals, more specialty practice, which all means more doctor capacity. Simply put by relieving doctors of some of the burden, you can create more doctor capacity to soak up some of the new demand without actually having to dramatically and overnight increase the amount of doctors. It might be a temporary fix, but it would be an important temporary fix if we are to offer additional supply while steps can be taken to increase the number of doctors over time.

There are plenty of wrinkles to be worked out. It is dangerous to tamper with healthcare because people by their nature will be more likely to ignore symptoms if they have to pay for whatever the diagnosis is. That is a risk of any reform, and certainly a risk here. But the current reality leaves too many uninsured, and the alternatives being debated are full of worries and holes. We need to keep thinking about this, and debating new ideas. Taking a few pages out of the auto insurance world might be a step in the right direction.

Shock! Baseball players are still using performance enhancers

They are just getting more creative in how they get them…

The number of Major League Baseball players who received a diagnosis of attention deficit disorder last season continued to exceed the national average and was by far the most common reason a player was allowed to use performance-enhancing drugs, according to baseball’s drug testing administrator.

The raw data is this: 1o8 players received ADD exemptions, or about 9% of the 1,200 major leaguers. By comparison outside of baseball, according to a 2006 National Institute of Mental Health, about 4.4% of adults aged 18 to 44 experience systems of ADD.

The most logical explanation is that this, at least for many involved, is a way around the rules preventing players from taking performance enhancing drugs. No doubt there are ADD players in baseball who need the medication, but is it really 10% of the active players?

The problem with performance enhancer policing is that the enhancement crowd is always on the offensive. The best the authorities can do is react. So the game goes on.

The government needs bubble-era incomes

Felix Salmon is translating the words of  Timmy Geithner, and scores points for brutal honesty in doing so…

Remember too that when you have a progressive tax system, especially when there are surcharges on people making seven-figure incomes, you also have a system where for any given level of national income, the greater the inequality, the greater the government’s tax revenues. And indeed federal revenues have been rising faster than median wages for decades now, thanks to the rich getting ever richer.

Given the government’s insatiable appetite for cash, it’s only natural that it would prefer to tax plutocrats, spending some of that money on poorer Americans, rather than move to a world where poorer Americans earn more (but still don’t pay that much in taxes), and the plutocrats earn less, depriving the national fisc of untold billions in revenue.

The government’s interests, then, are naturally aligned with those of the plutocrats — and when that happens, the chances of change naturally drop to zero.

In other words, don’t expect the era of outrageous incomes to die just because of one lousy recession and a turn in popular opinion against Wall Street.

Upside to a nasty divorce in U.S. soccer

Interesting column by Kartik Krishnaiyer on the benefit of a pending move by most of the big clubs involved in the United Soccer Leagues to the upstart North American Soccer League. The bottom line: The USL will have a chance to do what it has always done best, which is develop young talent, and move away from what it has always done worst, which is run a strong, nationwide league.

Perhaps, the burden of running a professional division in the face of an indifferent soccer press whose understanding of the sport beyond MLS is limited was a hindrance. Perhaps, it was USL’s own odd business model which allows the league to be managed by an outside entity. Perhaps it was USL’s failure to integrate its club leadership in the decision making process. Or perhaps, the league and its entities were just too big, and dispersed throughout the continent.

Whatever the case, USL has failed in satisfying the owners of the clubs in its biggest markets. Nothing is going to change that fact now, so my thinking is that the league needs to get back to what it has done best for so many years: player development at both the youth and semi professional levels.

USL can continue to do what MLS does not do: Developing youngsters, sponsoring high level national youth soccer tournaments, and giving college kids a place to play during the closed season. European leagues are littered with players who participated in one USL program or another in their formative years. This is USL’s legacy and it will continue into the future, no doubt.

The loss of several major professional clubs may hurt USL’s image but may actually free the league up to concentrate on what’s best for its future and the future of American Soccer.

On World AIDS Day, hope from South Africa

My wife has traveled to South Africa for work in recent years, leading us both to have a particular interest in the country. And one of the sad things about such a promising land was the denialist attitude of former President Thabo Mbeki when it comes to the serious AIDS problem in his country. The government denied links between HIV and AIDS, and refused to embrace treatments that are used around the globe. Their recommendation? People should eat garlic to fight HIV.

By some measures, as many as 300,000 South Africans have died prematurely because of the government’s inaction.

Fortunately, there are signs of change in the administration of new president Jacob Zuma. The president said today that his government would get serious about fighting the disease that has cost his country so much…

Speaking in the country’s capital, Pretoria, Zuma announced policies that would see more people treated for HIV, including treatment for all HIV-positive babies under the age of one. He also announced a campaign to mobilize all South Africans to be tested for HIV.

“We need extraordinary measures to reverse the trends we are seeing in the health profile of our people,” he said.

The UN has estimated that 5.7 million South Africans have HIV, more than any other country in the world, and Zuma acknowledged that the disease is responsible for falling life expectancy in the country.

He compared the fight against AIDS to the struggle for liberation against apartheid and said he would be tested for HIV himself as part of the new campaign.

South Africa is a land of great contrasts and great potential. This is but one small step, though it is an important one.