Nice To Know You Are Appreciated

Fifteen editors have been shown the door at the Baltimore Sun — part of the  Tribune Co’s cost-cutting measures. In the case of the fifteen they really were shown the door with security guards ready to escort them from the building.

I had sympathy for Sam Zell when he tried to explain a few months ago to the Tribune bureau in DC that they had too many reporters in the capital. I know that comment will make me unpopular among old media hacks. But the plain fact is that US newspapers have on the whole been overstaffed for years by comparison with UK and European papers — and please don’t tell me that the quality of the US publications is better (Not that I am saying that all European papers are superior to their US counterparts). I still think that the Tribune’s flagship paper in Chicago is over-staffed, even after the recent cuts there. After shedding 53 editorial positions, the news-gathering staff remains at 430. That is a huge number by comparison with the Daily Telegraph or The Times in London.

However, showing good staff the door in the way that happened today at the Sun is tacky.

But the question is why was the Sun not reformed and changed years ago. Of all the metropolitan papers in decline, the Sun has been the most extreme in terms of huge circulation losses and fall-off in advertising revenue. It was clearly heading for demise. And to be frank the paper was increasingly thin and unreadable and boring. It didn’t give you a sense of Baltimore nor of the rapid social and economic changes that have altered the face of the city. The Sun had poor leadership — as with many of the metropolitan newspapers it sat on its laurels and enjoyed its virtual monopoly. The managements of US newspapers have been lacking in vision and innovative thinking, as much as the managements of the US car companies.

What is doubly sad about Baltimore, though, is that belately it did have a challenger: the Baltimore Examiner, which was a zesty newspaper that was enjoying significant increases in advertising revenue. That paper was closed by its ownership in favour of keeping the Washington Examiner open, a paper that is finding it much harder than its sister did in drumming up advertising revenue and a publication that can’t hope to see off the Washington Post or undermine a revived Washington Times.

Who Survives?

An interesting take on who might survive through the economic crisis and beyond among the online news and commentary sites from Matt Pressman at Vanity Fair . His points are fair and his comments about news aggregators such as Drudge and Google News are spot on: what happens to them when content is not free and content providers hide behind a pay-barrier? 

But he could have been more cutting about some of the news sites owned by newspapers. As my friend Jay Byrne, president of v-Influence Interactive, pointed out in a blog a few weeks ago, the newspaper industry has been lacking in practical development sense. I quote him: “What many newspapers don’t realize is that they have yet to perfect the basic mission of successful Web publishing: Link relevant content with relevant audiences for increased ROI opportunities for relevant advertisers. When they do, they may staunch their current hemorrhage and – gasp – perhaps make money online.” 

I think Jay in the blog could have added that newspaper sites are not good at bringing together, too, videos, blogs and Podcasts with text. And many newspapers are employing young hacks who just don’t write well.

 What is missing from Pessman’s piece is a wider viewpoint of producers and how knowledge-based organizations such as universities, NGOs, think tanks and charities, are beginning to be news and commentary platforms in themselves and are thriving in the world of RSS feeds. Of course, they don’t have the same kind of commercial constraints that for-profit news-sites and agrregators face.

Things Can Only Get Worse

Recall the theme song New Labour blasted out in 1997 as it savoured its election victory — Things Can Only Get Better? Well that seems to be the promise that Chancellor Alastair Darling offered in his grim annual Budget delievered today. While outlining the full depth of the economic crisis that still might have the UK having to go cap in hand to the IMF, Darling forecast that the British economy would revive next year with a rapid bounce-back, modest at first with a 1.25 percent growth rate and subsequently rising to 3.5 percent in 2011.

Trouble is, no one with any credibility is predicting such growth rates.

The Bank of England’s forecast for 2011 is 2.5 percent. In its latest World Economic Outlook, the IMF saw no growth for the UK on the horizon next year, arguing that the British economy would continue to shrink. The IMF and Darling are at odds also about the forecasts for this year. The Chancellor maintained that output would shrink by 3.5 per cent 2009 – more than doubling his previous forecast. But the world body believes that 2009 will be even harsher for the UK and is forecasting a slump of 4.1 percent.

Those percentage differences may look small but they will have tremendous consequences for how Britain fares in its attempts to borrow the money it needs to cope with the bank bail-outs and increasing government spending.

The markets reacted even before the Chancellor finished delivering the Budget. The price of British government bonds plunged as investors learned the government will be looking to raise 240 billion pounds this year, far more than expected. Most analysts thought the government would be looking for 180 billion pounds. The pound also fell in value on the currency markets.

And taxes…forget 45 percent for high earners. The Chancellor announced a top rate of 50 percent. Belgium looks cheaper, especially with better public health care!  




Oh, Please…

“You could be forgiven for thinking that the Obama White House is the most masterful image-making machine in politics since the Reagan era. And you’d be half right,” Richard Wolffe, a fellow Brit in Washington DC opined in his blog for the Daily Beast.

But according to Wolffe many of the “iconic images that emanate from the White House each week” are due more to “opportunism and the projection powers of one Barack Obama” than conscious image-making. There is no equivalent in the Obama White House of a Michael Deaver, the legendary Reagan image adviser, whose finest choreographed event arguably was the Great Communicator’s funeral. 

Is Wolffe pitching for work with his puff piece? When not being an MSNBC political commentator, the Ex-Financial Times journalist Wolffe hangs his hat as a senior strategist at Public Strategies, a PR shop with Democratic Party sympathies.

More on Taxes

You would have thought that Brown and Darling would have learnt a lesson about tax hikes. Back in early 2008, Britain’s Labour leaders had to back-track on some of their plans to “crackdown” on rich foreigners resident in the UK but not domiciled there for tax purposes. Inadvertently, he provided a major object lesson on the importance of tax competition.

Unnerved by the Conservatives, who promised that in government they would impose a levy on rich foreigners, Brown and Darling, announced just before Christmas that come spring, tax rules on foreigners resident in the UK would change. Under the previous regime, foreign residents could claim “non-domiciled” status and avoid paying tax on overseas earnings and offshore assets. Only money brought into the UK or generated there was liable to income tax or capital gains tax.

Brown’s new proposal would have all non-domiciled foreigners resident in the UK for more than 7 years paying an annual tax charge of 30,000 pounds (now about $45,000 but then $60,000).

According to the government’s theory, hugely wealthy foreigners wouldn’t up and leave just because of a mere $60,000, although, of course, for families it could be a lot more than $60,000, if spouse and adult children were taken into account.

To make matters much worse, the British government also started to talk about introducing new residency rules and rules on taxing offshore trusts.

In February 2008, I wrote this for the Cato Institute blog: “Government spokesmen, along with supporters of the tax crackdown, including rather strangely the editorial writers at the Financial Times, pooh-poohed the notion there would be an exodus of the wealthy and entrepreneurial just because of the tax changes. They have been arguing that London is too important, what with its deep pool of financial and international legal expertise. Low-tax cantons in Switzerland or non-tax Monaco or offers of generous tax treatment in, say Greece, would hardly compensate for what London has to offer.

Foreigners apparently have been thinking otherwise. Many of the country’s richest foreigners have already started to relocate to Geneva, Zurich, Barbados or Ireland. This week, Irish paper king Dermot Smurfit announced he was planning to move to Switzerland and there were reports that dozens of Greek shipping magnates were exploring the possibility of moving back to Athens – a transfer that would cost the British economy annually $10 billion alone, and in the long term maybe two or three times more. The $60,000 annual levy per non-domiciled foreigner would bring in annually $1.6 billion.

Belatedly, the alarm bells have started to ring. The British government is poised to announce, possibly tomorrow, an embarrassing back-down. Taxing offshore trusts is now likely not to happen, although the $60,000 levy per non-domiciled foreigner will remain.

The reversal highlights the importance of tax competition. But there still might be long-term consequences from Brown’s botched handling of the affair. Non-doms who have already moved overseas are unlikely to return and the London-based Greek shipping magnates, who control a quarter of the Greek shipping industry, are now being courted energetically by Athens, with offers of generous tax treatment and subsidies.”

The Law of Diminishing Returns

Bad news for Britain’s Labour government right on the eve of tomorrow’s unveiling by Chancellor Alistair Darling of the annual Budget.

The IMF now estimates that the cost of the bail-out of Britain’s banks will amount to 13.4 per cent of the UK’s entire economic output of £1.46 trillion in 2008. Of OECD countries, only Ireland will pay more as a percentage of its output to rescue its banks. So much for Prime Minister Gordon Brown’s proud boast of having ended boom and bust cycles.

And the respected British think-tank the Institute for Fiscal Studies has warned that tax hikes are unlikely to help pay for the bailout or mitigate the consequences of recession. The institute warns that raising the top rate of tax to 45p as proposed by Brown will prompt an exodus of top earners as well as greater use of tax avoidance schemes.

The Treasury has sniffed at the institute’s prediction, saying ,“The Treasury remains confident in its forecast revenues for the new 45p rate of tax as set out.” Now is that the same Treasury that came up with all those glowing forecasts about how Britain under New Labour had found that magic to escape busts?


Guns and Ammo and Homeland Security

A glib comparsion maybe but I do find it fascinating that there is apparently a run on the purchase of guns and ammos at the same time as Homeland Security — in a highly controversial move that incurred predictably the wrath of Fox News — has been warning of the danger from some extreme right-wing groups. Here is the link to just one of many press reports on the dramatic increase in the purchasing of weapons

And here is the Huffington Post on the recent Homeland Security report

Janet Napolitano, the head of DHS, issued this comment about the Homeland Security threat assessment, pointing out that this is one of a series of studies trying to identify both home-grown and foreign terrorist threats

 The U.S. has a long history of violent radicalization (both on the left and right) during troubled economic periods and it is hardly surprising that Homeland Security is sounding a warning note now. Years ago, before the Oklahoma bombing, I wrote a news story roughly calculating how many pipe bombings there were in the States on average per year: and there were many.  Despite the hue-and-cry from some on the fringes of the right-wing — and some not on the fringes — about the Homeland Security report, it does strike me as something we should expect the department to be assessing — threats at home and abroad. Of course, security services on both sides of the Atlantic have been over-reacting horribly and lacking balance in their handling of security when it comes to civil liberties. But it is worth remembering that of the two worst terrorist attacks on the U.S., one was the work of domestic extremists.

Ahmadinejad-Obama — Will There be a Sit-Down?

At last Iran might be about to take up President Obama’s olive branch. Iranian president Mahmoud Ahmadinejad told a crowd in Kerman, south-eastern Iran, that he is preparing new proposals to break the nuclear deadlock with the West. He couldn’t resist a dig at the US but still his tone was less aggressive than last week when Obama first raised the idea of negotiations. There are also reports that Obama is ready to drop the Bush-era insistence that talks can’t start until Iran has halted uranium enrichment.

The Iran Nuclear Policy Group, a collection of progressive American academics and former US diplomats, has been calling since the fall for the US to drop that demand. They also came out last week with an excellent White Paper outlining a very practical strategy for how to resolve the nuclear stand-off. Among the paper’s points: America’s most effective leverage over Iran in the current nuclear standoff is to be found not in the bad things Washington can do to Iran, but in the good things – things Iran needs – that America can withhold. The paper builds on the insight that Iran is ultimately likely to prove far easier to co-opt than to coerce.  

Effective U.S. diplomacy requires Washington to do three things, the paper says:

·        Cease raising tensions by publicly hyping the Iranian threat;

·        Ease tensions and build confidence through a broader opening to Iran in other areas (as the Administration is doing); and

·        Re-define U.S. bargaining objectives on the nuclear file to focus on the principal risk, which, in the case of Iran, is not a “breakout” from an openly-declared, IAEA-safeguarded facility, but a clandestine re-start of enrichment and/or weapons development.


The paper is worth a read and can be found here

 One move that Iran could do to assist with the ongoing diplomacy would be to release American freelance journalist Roxana Saberi, who has been held on dubious spying charges since January.







Kojo on Twitter

Good discussion about the political impact of Twitter and other social networking applications on NPR’s Kojo show between myself and Wired magazine’s Nathan Hodge. One point I tried to stress is that the applications are neutral and aren’t necessarily tools that inevitably assist pro-democratic groups or movements and that authoritarian regimes can at least pull the plug on mobile phone services and ISP providers in ways that open socities have to be more restrained even when faced with “undemocratic protest” intent on violence.

Green Shoots of Recovery — Wishful Thinking

The stock market is up. Goldman Sachs has announced a profit.  All of a sudden the chatter on the evening cable shows is of the green shoots of recovery, with declarations being made that we have turned the corner on what only a few months ago was being described as the worst recession since the Second World War…no, the worst slump since the Depression. 


On the Lou Dobbs show on CNN tonight, Cato Senior Fellow Alan Reynolds talked of us coming out of the recession by the third quarter. I know Alan, and like him, but I think he is way off the mark and so too with the other upbeat commentators. The huge response by governments and central banks across the globe – a response Alan criticized – has no doubt slowed the pace of the slump but there remains plenty to worry about.

 The latest economic report from the OECD makes for grim reading. “Economic activity is expected to plummet by an average 4.3 percent in the OECD area in 2009 while by the end of 2010 unemployment rates in many countries will reach double figures for the first time since the early 1990s,” says the OECD’s Economic Outlook Interim Report.

It continues: “Amid the deepest and most widespread recession for more than 50 years, international trade is forecast to fall by more than 13 percent in 2009 and world economic activity to shrink by 2.7 percent. The big emerging economies will also suffer abrupt slowdowns in growth.”

 Several underlying problems remain. Banks are still not lending and investors remain skeptical about investing in banks for good reason: the policies introduced in Britain and the US aimed at cleaning up banks’ toxic debts are too limited.

And the threat of contagion is still there, with the Austrian, Swiss, Swedish and Germans banks highly vulnerable weighed down as they are by loans they made to the credit and investment-thirsty countries of Central Europe.

A second problem rests with what kind of recovery we can expect. The scale of the global recession will have undermined the productive potential of the US and other Western economies with investments not having been made in future efficient production and with the skills base weakened by job losses. All of that means that when the recovery does come – the OECD thinks next year at the earliest – we can only expect it to be very insipid.

Higher taxes needed to pay down the massive debt the governments of the US, Britain and some other Western states are taking on, such as Ireland, will further undermine recovery.

Lastly, nothing is being done about the huge trade and borrowing imbalances that brought us to where we are: in the States, the administration is focusing on stimulating demand (by borrowing, again) and in China the leadership is investing in productive infrastructure to produce the goods Americans will buy with the money they will borrow from China.