A torch extinguished: Ted Kennedy dead at 77
HYANNIS PORT, Mass. – The greatest heights eluded Ted Kennedy over a lifetime of achievement and pain. No presidency. No universal health care, chief among his causes.
Instead, Kennedy built his Washington monument stone by stone, his imprint distinct on the Senate’s most important works over nearly half a century. He toiled across the Potomac River from the graveyard of his fallen brothers.
The last of the Kennedys who fascinated the nation with their ambition, style, idealism, tragedies — and sometimes sheer recklessness — Edward Moore Kennedy died late Tuesday night at 77. A black shroud and vase of white roses sat Wednesday on his Senate desk, which John Kennedy had used before him.
So dropped the final curtain on “Camelot,” the already distant era of the Kennedy dynasty.
The Massachusetts senator’s extended political family of fellow Democrats and rival Republicans, steeled for his death since his brain-tumor diagnosis a year ago yet still jarred by it, joined in mourning. Kennedy was the Senate’s dominant liberal and one of its legendary dealmakers.
Just last year he jumped into a fractious Democratic presidential nomination fight to side with Barack Obama, giving the Illinois senator a boost that had the air of a family anointment.
“For his family, he was a guardian,” Obama said Wednesday. “For America, he was a defender of a dream.”
The president, vacationing in Martha’s Vineyard, was awakened after 2 a.m. and told of Kennedy’s death. He spoke soon after with the senator’s widow, Victoria, and ordered flags flown at half-staff on all federal buildings.
Kennedy will be buried Saturday at Arlington National Cemetery after a funeral Mass in Boston, where Obama is to deliver a eulogy.
Kennedy will lie in repose at the John F. Kennedy Presidential Library and Museum in Boston before that.
Also buried at Arlington, the military cemetery overlooking the capital city, are John and Robert Kennedy; John Kennedy’s wife, Jacqueline; their baby son, Patrick, who died after two days, and their stillborn child.
To Americans and much of the world, Kennedy was best known as the last surviving son of the nation’s most glamorous political family. Of nine children born to Joseph and Rose Kennedy, Jean Kennedy Smith is the only one alive.
To senators of both parties, he was one of their own.
“Even when you expect it, even when you know it’s coming, in this case it hurts a great deal,” said Democrat Patrick Leahy of Vermont.
Politicians also calculated the consequences for Obama’s push for expanded health coverage. For several months, at least, Kennedy’s death will deprive the Democrats of a vote that could prove crucial for his signature cause of health reform.
His illness had sidelined him from an intense debate that would have found him at the core any other time. Conservative Sen. Orrin Hatch of Utah, his improbable Republican partner on children’s health insurance, volunteerism, student aid and more, said the Senate probably would have had a health care deal by now if Kennedy had been healthy enough to work with him.
“Iconic, larger than life,” Hatch said of his friend. “We were like fighting brothers.”
He was the last of the famous Kennedy brothers: John the assassinated president, Robert the assassinated senator and presidential candidate, Joseph the aviator killed in action in World War II when Ted was 12.
He lost his sister, Eunice Kennedy Shriver, less than two weeks ago, saw the bright promise of nephew John F. Kennedy Jr. end in a plane crash in 1999 and struggled with excesses of his own until he became a settled elder statesman.
Like Obama, Kennedy was a master orator. But the words that live for the ages seem to be those he uttered in tragedy or defeat.
Older Americans remember his eulogy of Robert Kennedy, when he asked history not to idealize his brother but remember him “simply as a good and decent man who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.”
Remembered, too, is his speech conceding the 1980 Democratic presidential nomination to the incumbent Jimmy Carter. “For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives and the dream shall never die,” he said.
By then, his hopes of reaching the White House had been damaged by his behavior a decade earlier in the scandal known as Chappaquiddick.
On the night of July 18, 1969, Kennedy drove his car off a bridge and into a pond on Chappaquiddick Island, on Martha’s Vineyard, and swam to safety while companion Mary Jo Kopechne drowned in the car. He pleaded guilty to leaving the scene of an accident; a judge said his actions probably contributed to the young woman’s death. He received a suspended sentence and probation.
Kennedy’s legislative legacy includes health insurance for children of the working poor, the landmark 1990 Americans with Disabilities Act, family leave and the Occupational Safety and Health Administration. He was also key to passage of the No Child Left Behind Education law and a Medicare drug benefit for the elderly, both championed by Republican President George W. Bush.
In the Senate, Republicans respected and often befriended him. But his essential liberalism marked him as a lightning rod, too. He proved a handy fundraising foil motivating Republicans to open their wallets to fight anything he stood for.
In 1980, Kennedy’s task of dislodging a president of his own party was compounded by his fumbling answer to a question posed by CBS’ Roger Mudd: Why do you want to be president?
“Well, I’m, uh, were I to, to make the, the announcement, to run, the reasons that I would run is because I have a great belief in this country,” he began.
It’s a question that all savvy politicians ever since make sure won’t catch them unprepared.
In his later years, Kennedy cut a barrel-chested profile, with a swath of white hair, a booming voice and a thick, widely imitated Boston accent. He coupled fist-pumping floor speeches with charm and formidable negotiating skills.
“I think that once he realized he was never going to be president — that that was not the legacy he had to follow — he really worked at becoming the best senator he possibly could,” Leahy said. “And he did.”
He was first elected to the Senate in 1962, taking the seat that his brother John had occupied before winning the White House, and he served longer than all but two senators in history.
Kennedy was diagnosed with a cancerous brain tumor in May 2008 and underwent surgery and a grueling regimen of radiation and chemotherapy.
He made a surprise return to the Capitol last summer to cast a decisive vote for the Democrats on Medicare. He made sure he was there again in January to see his former Senate colleague sworn in as president but suffered a seizure at a celebratory luncheon afterward.
His survivors include a daughter, Kara Kennedy Allen; two sons, Edward Jr. and Patrick, a congressman from Rhode Island, and two stepchildren, Caroline and Curran Raclin.
Edward Jr. lost a leg to bone cancer in 1973 at age 12. Kara had a cancerous tumor removed from her lung in 2003. In 1988, Patrick had a non-cancerous tumor pressing on his spine removed. He also has struggled with depression and addiction and recently spent time at an addiction treatment center.
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Woodward reported from Washington. Associated Press writer Laurie Kellman in Washington, Philip Elliott in Oak Bluffs, Mass., and Bob Salsberg contributed to this report.
Beantown showdown: JetBlue and Southwest face off
By SAMANTHA BOMKAMP (AP)
Article Courtesy of: Associated Press
NEW YORK — The cool kids of the airline industry are giving big-city travelers more opportunities to show who they like more.
For years, JetBlue and Southwest catered to customers in the same way — with cheap fares and good customer service — but avoided much head-to-head competition in major markets. These days, they are trying to distinguish themselves as they ramp-up competition in places like New York, Washington, Baltimore — and starting this weekend, Boston.
Fliers stand to benefit as these airlines expand in the Northeast. This rivalry not only pits one popular low-cost carrier against another; it puts further pressure on other airlines to stay competitive with them.
It also means JetBlue and Southwest must find ways to differentiate themselves. Southwest is touting its fewer baggage fees and more extensive nationwide presence, while JetBlue is highlighting its live TV service and its own comprehensive route system.
Just over a month after Southwest began flying out of New York’s LaGuardia — eight miles from JetBlue’s base at John F. Kennedy International — Southwest begins service on Sunday from Boston’s Logan International Airport. In September, Southwest starts service between Boston and Baltimore.
A few years back, their flights mostly crossed paths in places like Burbank, Calif., and Orlando, Fla.
The move to New York was a game-changer for Southwest. Formerly it concentrated on smaller, less-congested airports, where it could count on quick turnarounds, a key to its low-cost model.
And with Southwest breathing down its neck, JetBlue has had to make a more aggressive defense of its traditional turf, cutting fares and mulling new routes.
Expect to see low fares discounted further on routes where Southwest and JetBlue will compete out of Boston — especially to Northeastern markets, Chicago and Los Angeles.
When Southwest announced it would fly from Boston to Baltimore for as low as $49, JetBlue said a week later it would launch the same route — offering tickets for $10 less.
“It makes me think of gunfighters in the Old West — who is going to be the last man standing?” said Harlan Platt, a finance professor at Northeastern University who follows the airline industry.
Dallas-based Southwest is the biggest U.S. airline by the number passengers flown. JetBlue is tenth, but it’s No. 2 at Logan.
Much of JetBlue’s model of low fares and quick turnarounds came right out of Southwest’s playbook. It’s no wonder. JetBlue founder David Neeleman started JetBlue in 1999 after he was fired from Southwest.
In 1993, Southwest bought a little-known discount charter airline called Morris Air, based in Salt Lake City. Its co-founder — Neeleman — came to Southwest.
But that didn’t last long. Southwest founder Herb Kelleher — a cigarette-smoking, Wild Turkey-drinking Texas lawyer that revolutionized the airline industry in the 1970’s — fired Neeleman after just five months. Neeleman, a Brazilian-born Mormon father of nine who’s never touched booze, had new ideas for expanding Southwest that were scoffed at by long-time executives there.
JetBlue (originally NewAir) was started with $130 million from investors — the most ever for a startup carrier. Neeleman attracted several Southwest executives to the new airline as well. Three Southwest veterans are with JetBlue today. One worked with Neeleman since his days at Morris Air.
JetBlue started with a single flight to Fort Lauderdale, Fla. It now has 650 daily flights to 56 cities. Its rapid growth has now started to plateau, but JetBlue is still steadily adding new service in markets larger carriers have turned away from — like the Caribbean.
JetBlue has been in Boston for five years, although it’s only recently targeted the city as a focus of its expanding operations.
Southwest will start Boston service with five weekday nonstops to Chicago-Midway and Baltimore-Washington International, with connecting and direct service to 48 other spots including Houston, San Francisco, Las Vegas and Los Angeles.
Boston is familiar with Southwest because of its service in nearby Manchester, N.H., Providence, R.I., and Hartford, Conn. — three markets it has been serving for about a decade.
Both carriers’ low fares and brand loyalty should give them a leg up against major carriers in Boston. It’s already worked for JetBlue. The airline has worked its way up to second place at Logan in passenger traffic, behind American and ahead of US Airways, which operates a Boston-New York and Boston-Washington shuttle service.
“When you enter a town the size of Boston as really the sole low-cost carrier (like JetBlue did), you really can pick off a lot of the legacy carriers,” finance professor Platt said. “But when the last two gunfighters are JetBlue and Southwest, you’ve got another game.”
Platt thinks Southwest eventually will win the discount competition with JetBlue in Boston because of its large network and image as an anti-fee airline with ads that say “Your Bags Fly Free.” Southwest lets two bags fly free, but charges for a third checked bag. JetBlue charges for the second checked bag.
JetBlue wants more business travelers, as does Southwest, which has tried to lure them with its “Business Select” option launched two years ago. Passengers that pay a premium can go to the front of the boarding line. Neither airline offers business or first class seats.
JetBlue said in July that although it has not focused on courting business travelers in the past, it’s landing more of them in New York and Boston as companies cut travel budgets.
Because of their cheap fares and high customer service rankings, both airlines have legions of loyal travelers. Part of that loyalty can also be traced to fresh marketing that tries to put some fun in flying. JetBlue’s tongue-in-cheek ads have urged executives to get off their private jets and fly JetBlue. In Southwest TV ads, CEO Gary Kelly told customers “It’s On” in New York.
Both airlines are on YouTube. Blogs and Twitter are also important parts of their brands.
Kelleher and Neeleman no longer run the airlines they started. Kelleher, 78, stepped down as chairman last year, but he is still under contract until 2013. Neeleman, 49, runs Azul Airlines in Brazil — a venture he started after he was pushed out of JetBlue in 2007 following the company’s bungled response to a Northeast snowstorm, leaving 130,000 passengers stranded or delayed.
But the airlines they started still have the low-cost, passenger-savvy traits of their founders. Both have flown farther and lasted longer than some of their larger competitors. Platt thinks the big airlines may have something to worry about now in Boston — and JetBlue will have to ramp up its game, too.
“Boston has really been a two-horse town with (two major carriers dominating service there),” he said. “Just the mere presence (of another low-cost carrier) is going to change the landscape.”
Copyright © 2009 The Associated Press. All rights reserved.
‘Yes We Can’ vs. ‘Tell Washington No’:
Public passions seen rising on health care overhaul
Public passions are rising on health care overhaul
WASHINGTON — Booed, jeered and occasionally cheered in a raucous session with the public, a Democratic senator said Monday that other lawmakers can expect the same as they face voters on the divisive issue of overhauling health care.
“I wouldn’t be surprised if that’s the harbinger of things to come,” Pennsylvania’s Sen. Arlen Specter said a day after facing the rowdy crowd in Philadelphia. A House member who was surrounded by protesters shouting “Just say no!” to Democrats’ health plans in Texas over the weekend accused Republicans of organizing the opposition.
“This mob … did not come just to be heard, but to deny others the right to be heard. And this appears to be part of a coordinated, nationwide effort,” Rep. Lloyd Doggett, D-Texas, said in a statement. “What could be more appropriate for the ‘party of no’ than having its stalwarts drowning out the voices of their neighbors by screaming ‘Just say no!’”
With Congress’ monthlong recess looming, lawmakers are encountering growing public doubts about President Barack Obama’s push to remake the system for providing medical care, evident in polls that find confidence in the president’s handling of the issue has fallen since January.
Turn Your Head and Gag!
The White House is determined to frame the debate on its terms this month and counter fears about government-run insurance plans, a growing federal deficit, the impact on small businesses, abortion and end-of-life provisions — all issues that have dominated the health care debate. Political parties and special interest groups will add to the cacophony by spending millions of dollars on competing ads.
For lawmakers such as Specter and Doggett, the weekend events captured the public mood and the obstacles for the Obama administration.
At Specter’s forum Sunday in Philadelphia, some chanted Obama’s “Yes we can” campaign slogan, while others carried signs that said, “Tell Washington no.”
Specter and Health and Human Services Secretary Kathleen Sebelius faced an antagonistic, standing-room-only crowd at the National Constitution Center. Specter said he thought political organizations orchestrated some of the commotion, but individuals with serious concerns — some in dire medical conditions — were there as well.
“I do think there’s a big concern in America,” Specter said in an interview Monday. “We heard it yesterday about the growing deficit and national debt.”
Specter is a recent Republican-turned-Democrat who indicated earlier this year that he’s open to a government health insurance plan that would compete with private insurers, an idea backed by Obama and many Democrats.
Four of five congressional committees have approved versions of health care bills, but lawmakers fell short of Obama’s deadline for the House and Senate to vote on bills before their August recess. That sets up a September showdown on the legislation and all sides have moved into high gear.
The House has begun its recess, with the Senate to follow on Friday, as lawmakers continue to work on bipartisan legislation.
Frustrated with the pace of those talks, Democratic leaders promised to push a sweeping health care bill through the Senate whether they get Republican support or not.
Sen. Chuck Schumer, D-N.Y., the third-ranking Senate Democrat, raised the prospect of the leadership crafting a bill to Democratic specifications and using a rare legislative procedure to expedite it.
“We will have contingencies in place,” Schumer told reporters on a conference call. “These plans will likely be considered as a last resort, but they are on the table.” He would not elaborate.
After numerous delays, three Democrats and three Republicans on the Senate Finance Committee are facing a Sept. 15 deadline to wrap up secretive talks and come up with a plan.
“If we cannot produce a bipartisan solution by then, you have to wonder if the Republicans will ever to be willing to agree to anything,” Schumer said.
However, one of the negotiators — Republican Sen. Mike Enzi of Wyoming — said Monday he did not recognize such a deadline, and another, Sen. Olympia Snowe, R-Maine, said: “I don’t like deadlines.”
After those objections were voiced, Finance Chairman Max Baucus, D-Mont., said that senators were looking at a target date internally but “the main thing is we got to get it right.” Baucus said a draft bill would be ready by the end of this week.
Senators have plenty of action on the Senate floor this week, including a vote on Judge Sonia Sotomayor’s Supreme Court nomination, but health care is still a focus. Senate Democrats are lunching at the White House Tuesday and will hear from White House adviser David Axelrod and Deputy Chief of Staff Jim Messina at a closed-door session Thursday.
Schumer said Democratic leaders continue to look at invoking a procedural maneuver that would allow them to pass the health bill with 51 votes instead of 60. That route is viewed as a last resort, in part because it would probably limit the breadth of policy initiatives.
On the same call, Sen. Robert Menendez, D-N.J., accused Republican leaders of trying to hinder bipartisan progress to deny Obama a political victory.
Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, R-Ky., scoffed at the complaints. He noted that Schumer himself hasn’t committed to supporting whatever the Finance Committee negotiators produce and that other Democrats have also criticized the plan that’s taking shape.
“Seriously, how can any Democrat who doesn’t support what the bipartisan group of Finance members is working on complain about there not being a bipartisan approach?” Stewart asked. “Has Sen. Schumer or anyone in the Democrat leadership offered a bipartisan bill?”
Schumer and many other liberals favor a strong new government-run insurance plan that would compete with private insurers, and all the plans approved so far have included that. But Republicans nearly uniformly oppose a new public plan, saying it would drive private insurers out of business, so the Finance negotiators are looking at a system of nonprofit health co-ops instead.
Schumer said negotiations on the Finance bill were continuing.
“No one’s drawing any lines in the sand right now, but I feel very strongly we need a public option and that fight is continuing,” he said.
Associated Press writer Erica Werner contributed to this report.
White House reviewing ‘cash for clunkers’ program
WASHINGTON – The White House said Thursday it was reviewing what has turned out to be a wildly popular “cash for clunkers” program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.
Transportation Department officials called lawmakers’ offices earlier Thursday to alert them of plans to suspend the program as early as Friday. But a White House official said later the program had not been suspended and officials there were assessing their options.
“We are working tonight to assess the situation facing what is obviously an incredibly popular program,” White House press secretary Robert Gibbs said of the Car Allowance Rebate System. “Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”
Gibbs said the administration was “evaluating all options” to keep the program funded.
A Transportation Department official said the department was working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly about the discussions.
The CARS program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.
Congress last month approved the program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers
Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting talk of a possible suspension.
A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.
“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.
Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, said he was worried that the government wouldn’t pay for some of the clunker deals his dealership has signed because they aren’t far enough along in the process.
His dealership has done paperwork on about 20 sales under the clunker program, but in some cases the titles haven’t been obtained yet or the vehicles aren’t yet on his lot.
“There’s no doubt I’m going to get hammered on a deal or two,” Helfman said.
The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.
So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.
Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.
“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”
Michigan lawmakers planned to meet on Friday to discuss the program.
Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”
General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”
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AP Auto Writer Tom Krisher in Detroit contributed to this report.
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Dealers riding clunkers to the bank
Allure of $4,500 boost for trade-in pulls buyers into auto showrooms
Cash for CLUNKERS
By Sean Sposito, Globe Correspondent | July 30, 2009
Massachusetts auto dealers say the new “cash for clunkers’’ voucher program is giving them a much-needed boost in business this week.
The federal promotion – which offers buyers an instant discount of up to $4,500 when a qualifying vehicle is traded in for a new, fuel-efficient model – was rolled out over the weekend, and by yesterday dealers were reporting a jump in sales. Buyers have an additional incentive, too – avoiding the 25 percent increase in the state sales tax that takes effect Saturday.
While there have been complaints that the program is too complicated and won’t ultimately cure automakers’ ills, for now area dealers are just happy to see customers flocking to their showrooms.
“It’s the best week in several years for people in the automotive industry,’’ said Dan Quirk, president of Quirk Auto Dealerships. Quirk said the prospect of shaving thousands of dollars off the price of a car is driving up activity at his 10 showrooms.
Quirk said he usually sells about 1,500 cars a month, but expects to do significantly better in July. “We’ve probably sold 350 just this weekend, 120 through cash for clunkers,’’ he said.
Kevin Haggerty, 60, of Pembroke was shopping at Quirk Chevrolet in Braintree on Monday, hoping to trade in his 1999 Ford F-150, which he estimates is worth around $1,600, as a clunker. The Chevrolet Colorado he was eyeing had already been sold, but Haggerty expects to eventually buy a new car under the voucher program.
“I’m 90 percent sure that I’m going to make a move, unless something is too pricey,’’ he said.
Juan Banos, lead sales manager at Expressway Toyota in Dorchester, said his dealership closed about 30 cash for clunkers deals over the weekend alone. Banos said that even if the program increases monthly sales modestly, he’ll consider it a success.
“An extra 10 to 30 deals, we make at least an average of $1,000 per deal, that’s $30,000 for the dealership just in one weekend,’’ he said. “That could either make it or break it, as far as quotas go.’’
Gregg McCutcheon of Brockton said he was motivated to shop by the promise of cash for clunkers, formally the Car Allowance Rebate System, or CARS. The $1 billion program, which will run through Nov. 1 – or as long as the funds last – allows $3,500 to $4,500 trade-ins on cars that get less than 18 miles per gallon and are less than 25 years old. The money can be applied only toward new cars, and there are other restrictions.
“Cash for clunkers is what got us out here,’’ said McCutcheon, 57, after he bought a car from Mansfield Jeep-Chrysler. But McCutcheon ended up with a 2007 Chrysler Town & Country van instead of a current model.
“I’m 6-foot-6,’’ he said. “The dashboards on the new ones seemed to come out a little bit further, so I picked up a used one.’’
Not buying a new car meant McCutcheon wasn’t eligible for the CARS program, however.
Despite the upbeat moods in showrooms, some dealers said the paperwork associated with the federal program has been overwhelming. Reidar Davies, general sales manager of Prime Honda in West Roxbury, said his dealership has already written more than 40 cash for clunkers deals, but it has required a lot of extra effort.
“The paperwork is extremely, extremely rigorous and demanding,’’ he said. “It requires a ton of data entry.’’
And submitting the deals for government approval online has been painfully slow, Davies said.
Melissa Steffy, general manager at Herb Chambers BMW and Mini in Boston, said sales made with customers over the weekend are just now getting processed online.
“It’s a matrix to put these deals together,’’ Steffy said.
Even signing up to participate in the program was a headache for some dealers. Karen Aldana, a spokeswoman for the National Highway Traffic Safety Administration, said more than 20,000 of the nation’s 25,000 auto dealers have enrolled in the program. But the demand was so high that some dealers could not get onto the agency’s website, she said.
Some local auto industry officials are trying to put the promotion in perspective. With Chrysler merging with Fiat to survive, and General Motors emerging from bankruptcy propped up by $50 billion in taxpayer funds, no one is saying automakers’ troubles are history.
“It’s a $1 billion program and the money will go fast,’’ Quirk said of cash for clunkers. The funding translates to about 225,000 vehicles – just one week of sales across the country.
Sean Sposito can be reached at ssposito@globe.com. 
Harvard pres.: School has tough choices in decline
By MELISSA TRUJILLO – 18 hours ago
Courtesy of: Associated Press
Billions of lost endowment dollars later, though, Faust faces a much different reality.
“We can’t have chocolate and vanilla and strawberry. We have to decide which one,” she said.
It’s a question few at Harvard expected Faust to be forced to answer in the infancy of her presidency.
Her appointment in 2007 was hailed as a historic turning point for the 373-year-old university. Faust, then the dean of the Radcliffe Institute for Advanced Study and a Civil War scholar, would be the first woman to step into the country’s most high-profile presidency and appeared perfectly suited to cool tensions within the faculty after the controversial five-year tenure of Lawrence Summers.
She would have the nation’s richest endowment to work with — $34.9 billion in 2007.
But by last fall, the crashing economy began to pull down even the country’s most famous university. Its endowment fell to $28.7 billion, and the university estimated it would drop 30 percent for the fiscal year that ended Tuesday. The steep decline is particularly difficult for Harvard, which gets roughly one-third of its budget from endowment earnings.
Much of Faust’s time now is spent figuring out how Harvard can weather the downturn, through layoffs, early retirement packages, cuts in services, even changes to breakfast menus for undergraduates. She said further reductions in the endowment distribution next year will mean more cuts.
“People say to me often now, ‘This must not be what you expected,’ and my response is that it would be foolish not to expect surprises in a university presidency,” Faust said recently, sitting in her office in Massachusetts Hall.
“I’ve used the metaphor of marriage about this, saying I signed on for sickness or health or richer or poorer. And it’s turned out to be quite a ride,” she said laughing.
Most faculty and students still strongly support Faust, despite a general unease on campus about Harvard’s finances. For many, Faust’s warm and inclusive demeanor remains a welcome change from her predecessor.
Summers, now President Barack Obama’s top economic adviser, was pressured to leave after a series of high-profile clashes with faculty — conflicts that worsened after his comments that innate ability may partly explain why few women reach top science posts.
“I think the crucial issue that undermined his leadership was he was extremely abrasive,” said J. Lorand Matory, a professor of anthropology, African and African American studies now planning a move to Duke in the fall. “He did not display a talent for listening to his fellow administrators.”
Faust cited listening as a key component of her leadership, not an easy task at a university notorious for its segmented colleges, schools and institutes, all with their own management.
“I learn what people are telling me, but I also learn where they are politically, where they need to be moved towards in order to get done what we need to get done,” she said.
Faust says part of her desire to look at all complexities of an issue comes from her background as a historian. Her most recent book, “This Republic of Suffering: Death and the American Civil War,” looked at how the vast numbers of soldiers who lost their lives during the Civil War changed how Americans understood and coped with death. It was a finalist for both the National Book Awards and the Pulitzer Prize for history.
“I think historians understand how we’ve been affected by attitudes and assumptions that have shaped our institutions and our families and our socialization,” she said.
She cited her decision earlier this year to save money by pausing construction of a new $1.2 billion science building, the first phase of a planned 50-year expansion into Boston’s Allston neighborhood across the Charles River from Cambridge. The university is now reviewing how much — if any — of the project to continue.
“It’s a very fraught question. It involves the city, it involves the community, it involves constituencies with totally different interests,” she said. When the decision is made, she said, “I think that people will feel that we’ve really thought it through in a considered and responsible way. Moreover, I will know that we will have thought it through.”
Faust has been criticized, though, for being too cautious at the beginning of the economic crisis and for failing to strongly communicate her vision for a new, leaner Harvard. Anger spread on campus last week, for example, when Faust announced the layoffs of 275 employees.
“Because of this sort of mild demeanor, we’re kind of wondering what’s going to happen,” philosophy professor Warren Goldfarb said. “She hasn’t stepped up and said, ‘This is what we’re going to have to do.’ ”
Added student Andrea Flores, president of the Harvard Undergraduate Council: “I can kind of see where they’re coming from in the sense that I don’t think Harvard is being very forward thinking, but I think that’s because we’re covering things that needed to be addressed in the past.”
Faust said it has been a challenge to keep people focused on the university’s strengths, from its commitment to financial aid for all students who need it to its ability to gather experts from multiple schools and disciplines to tackle large problems like global health or global warming.
“It’s a challenge in this environment to keep people’s eyes on the really important issues that give us all something to believe in,” she said. “I’m thinking a lot about that this summer.”
Regardless of how much anger bubbles on campus over layoffs, budget cuts and faculty reductions, Harvard Law School professor Alan Dershowitz said Faust also has a great deal of goodwill, which should help her weather the economic downturn. Goldfarb and Flores also expressed overall approval for her tenure thus far.
Once the crisis ends, Dershowitz said, Faust will be in position to push her own bold agenda.
“You have to give her time. … Everybody would be thrilled if we end up in a few years not worse than it is today,” she said. “Everyone wants Drew to succeed, everybody is rooting for her.”
Copyright © 2009 The Associated Press. All rights reserved.
Montana resort for elite sold for $115 million
By MATTHEW BROWN (AP) – 1 day ago
BILLINGS, Mont. — Montana’s ultra-posh Yellowstone Club is in new hands, following a $115 million deal that the new owner hopes will close the door on the resort’s much publicized descent into bankruptcy.
Eight months ago, the millionaires-only club was on the verge of liquidation, a victim of its prior owners’ excesses and the broader economic downturn that choked off the flow of money fueling the club’s rise.
On Friday, CrossHarbor Capital Partners of Boston bought the 13,600-acre private ski resort about 50 miles south of Bozeman at what was considered a bargain-basement price.
The firm’s managing partner, Sam Byrne, had offered to buy the club last year for $470 million and had already invested more than $200 million in club real estate over the last several years.
Byrne acknowledged Friday the club’s once-sterling reputation will need some polishing.
“It’s going to take time to win back the trust of members and the community and re-establish the brand,” he said. “We’re confident that the place has a bright future.”
The resort was nearly pulled apart last year during the bitter and high-profile divorce of its founders, Edra and Tim Blixseth. Later came revelations that the pair had drained tens of millions of dollars from the resort, helping push it more than $400 million into debt.
The collapse was extraordinary for an enterprise that counts Microsoft Corp.’s Bill Gates and hotel magnate Barry Sternlicht as members.
Those who are allowed to join must buy real estate with price tags that can top $10 million, and pay a $300,000 deposit. The privacy members thought their money was buying was shattered when the club’s rolls were made public as part of its bankruptcy case.
With the Blixseths now out of the picture — and fighting each other over the remains of a personal fortune once estimated at $1.3 billion — members are looking to Byrne to get the club out of the headlines.
“There’s going to be a massive sigh of relief, a collective sigh of relief,” said Bill Curtis, a club member and the chief executive of CurtCo Media, which publishes the Robb Report, a magazine that caters to the wealthy.
Only about 300 of the club’s more than 800 available memberships have been filled since it opened in 2000. Just three properties changed hands during its months in bankruptcy.
Curtis said Friday’s deal will shake up the market for the club’s property, but he cautioned that the resort isn’t out of rough waters yet.
“If you ask me what the economy’s going to do, it’s going to continue to make it a challenge,” he said. “Nothing’s going to happen overnight.”
Byrne said more than $150 million on top of the purchase price has been pledged to pay for improvements at the resort.
That’s likely to include the club’s 120,000-square-foot centerpiece Warren Miller Lodge — left unfinished despite a reported $100 million investment.
Byrne also said he persuaded a large group of members to put money behind his plans to recapitalize the resort. He declined to offer specifics.
The club will continue to be managed by the Discovery Land Co., brought in last year when Edra Blixseth took over the operation following her divorce.
Tim Blixseth tried to scuttle the deal between his ex-wife and Byrne until the day the sale became final. He has claimed they colluded to drive the resort into a financial hole so Byrne could scoop it up on the cheap.
Those claims were repeatedly rejected by U.S. Bankruptcy Judge Ralph Kirscher in Butte, Mont., and on Thursday he denied Tim Blixseth’s latest effort to block the deal through a court-ordered stay.
In his opinion, Kirscher said the parties in the sale had acted in good faith. He said Tim Blixseth’s “generalized allegations of misconduct” were irrelevant.
He added that the case — which involved more than 100 lawyers and resulted in several spin-off lawsuits that are still being resolved — “was of a magnitude never seen before in this court.”
Copyright © 2009 The Associated Press. All rights reserved.
Trans-Atlantic tall ship race open to Mass. public
Sail Boston 2009 - Boston Tall Ships
BOSTON—Months of squabbling between the mayor of Boston and organizers of the Tall Ships Atlantic Challenge 2009 ended with a deal that should provide clear sailing for a scheduled five-day visit by the vessels next month.Boston Mayor Thomas Menino and Massachusetts Gov. Deval Patrick on Wednesday announced a deal they brokered to cover security costs associated with the event and allow free public access to the tall ships—usually square-rigged sailing ships with tall masts.
Menino had threatened to keep spectators away from docks and said he would ask the Coast Guard to bar the tall ships from entering Boston Harbor unless Sail Boston, the sponsors of the event, paid the city for security costs. He maintained that the city was being forced to tighten its belt fiscally and could not afford the additional police overtime.
Sail Boston 2000, the last such extravaganza, drew 2 million visitors to the waterfront. That event cost the city $2 million in police overtime, security and other costs, Menino said in 2004.
The plan includes a $1 million contribution by the Massachusetts Convention Center Authority to cover security costs and an agreement by the Massachusetts Port Authority to bear the costs of docking at Massport’s piers.
Sail Boston also agreed to pay $250,000 to defer Massachusetts State Police costs.
“Government works best when all parties work together,” Menino said in a statement. “Hosting a public event that is both
free and open to all will be a welcome attraction this year as many of our residents and families are cutting back on vacation travel.”This year, nearly 50 ships set off in late April from Vigo, Spain, for the trans-Atlantic journey. They will make five other stops—in the Canary Islands, Bermuda, the United States and Canada—before concluding in Belfast, Northern Ireland, in August.
The first of the ships’ two American stops will be in Charleston, S.C., where they arrive June 25 for the city’s Harbor Fest for a five-day visit before continuing on to Boston on July 8.
Some previously planned elements of the event have been scaled back in Boston because of financial constraints. A parade of tall ships into the harbor has been scrapped, as have two fireworks displays.
Prez targets finance system
Seeks to prevent Wall St. abuses
President Obama’s plan to overhaul the nation’s financial regulatory system received support yesterday from key Massachusetts congressional members who said changes are long overdue.
Saying America had allowed a “culture of irresponsibility” to grow within the financial industry, Obama proposed giving the Federal Reserve more regulatory powers and creating a new consumer watchdog agency to review new financial products peddled by firms.
“This was a failure of the entire system,” Obama said at a White House event, referring to last fall’s near collapse of the nation’s financial system. “An absence of oversight engendered systematic, and systemic, abuse.”
U.S. Rep. Barney Frank (D-Newton), chairman of the influential House Financial Services Committee, said the plan is an important step toward overhauling the regulatory system. He predicted Congress will have a bill on Obama’s desk before the end of the year.
Frank, who has parted with the administration over some issues, said there will be changes to Obama’s plan, but he said Democrats agree with the “fundamental” thrust of the package.
U.S. Sen. Edward M. Kennedy (D-Mass.) and Rep. William Delahunt (D-Quincy) won a major victory when Obama agreed to create a new Consumer Financial Protection Agency, something the two Bay State pols have pushed for in recent months.
“The plan announced by the president today will protect consumers and investors by restoring much of the regulatory oversight of our financial system that has been systematically dismantled in recent years,” said Delahunt.
But business leaders and Republicans didn’t like most of the proposals.
David Hirschmann, president of the U.S. Chamber of Commerce’s capital markets center, said the president’s plan adds an extra layer of red tape without really fixing the problems that led to last year’s Wall Street meltdown.
“We can’t simply insert new regulatory agencies and hope that we’ve covered our bases,” he said.
U.S. Rep. Scott Garrett (R-N.J.) said the president’s plan could create a cycle of more bank bailouts.
“It perpetuates what we’ve had in the past, said Garrett,” a member of Frank’s Financial Services committee.
The financial industry, including some of Boston’s most powerful mutual-fund companies, have been wary of too much government intervention in the sector, fearing their interests might be hurt.
Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1179683
US push to overhaul banking worries some
/business/general/view.bg?articleid=1179686
New investors face tough road ahead to right Saab
by The Associated Press
Tuesday June 16, 2009, 11:19 PM
Eric J. Shelton / APSaab automobiles are seen on the lot of Herb Chambers Saab of Boston on Tuesday. Saab Automobile, General Motors Corp.’s struggling Swedish unit known for its family cars, was rescued Tuesday by a consortium led by Koenigsegg Automotive AB, a tiny company that produces only a dozen custom-made super cars a year.
DETROIT (AP) — For the new owners of Saab Automobile to make money selling small numbers of cars across the globe, they have to return to the Swedish automaker’s roots, industry analysts say.
Somehow, a consortium of investors led by custom sports car maker Koenigsegg Automotive AB must restore Saab to the quirky, cutting edge and reliable brand once favored by professionals who wanted to look smart rather than wealthy.
“It was seen as a discerning choice,” said Tim Urquhart, senior automotive industry analyst with the consulting firm IHS Global Insight in London. “It was a professional’s vehicle, a doctor’s or an architect’s. A quality vehicle, but not an obvious statement like Mercedes or BMW.”
GM announced Tuesday that it has struck a tentative deal to sell the storied brand, which started as a Swedish aircraft maker. The sale is to include a $600 million funding commitment from the European Investment Bank, guaranteed by the Swedish government. Additional funding would be provided by GM and the new investors.
GM gave no details on the financing but said the sale should close in the third quarter. The troubled Detroit-based GM initially will get no return on its investment and apparently will have no stake in Saab. If the new company turns a profit, GM could receive the $150 million in cash that Saab has left over from GM’s ownership, plus the value of Saab’s assets.
The lack of an immediate payoff for GM is similar to the position of Chrysler LLC’s former owners, New York private equity firm Cerberus Capital Management LP, which exited the Chrysler bankruptcy with nothing to show for its $7.4 billion investment.
Koenigsegg, (KOH-nigs-egg), a tiny company which produces only a dozen super cars a year costing more than $1 million each, was founded in 1994 by von Koenigsegg, a Swedish sports car fanatic and entrepreneur who remains chief executive. Its factory and headquarters are located at a former air force base in southern Sweden.
Analysts say GM, which bought half of Saab in 1990 for $600 million and the rest for $125 million in 2000, was unable to differentiate the brand from its other products or find a sales niche.
Von Koenigsegg, in an interview with Swedish television, seemed to agree, saying that the new owners would try to restore some of the brand’s heritage while finding a place in the market between upscale and mainstream.
“This is neither a luxury or a people’s car, but it has its own niche — a bit of postmodern comfort, sporty, but with environmental thinking,” von Koenigsegg said. “We want to capture the Swedish aspect too. GM had a bit more of an international approach, and Saab drowned a little bit in that context.”
GM CEO Fritz Henderson, in a Web chat with reporters on Tuesday, said Saab was never profitable since the acquisition, despite great vehicles and loyal customers.
“We ran out of money just on the eve of launching the newest generation of Saabs, which we think will be outstanding,” he wrote, adding that GM will continue to make vehicles for the new company as well as provide engines, transmissions and other technology.
IHS analyst Urquhart said GM didn’t seem to know what to do with Saab, and failed to set its models apart from mainstream brands. The Saab 9-7X sport utility vehicle, for example, is very similar to a Chevrolet TrailBlazer, and the 9-3 midsize sedan is a close relative of the Pontiac G6.
“Without being too rude about it, GM sucked all the brand value out of it,” Urquhart said.
But Max Stephenson, owner of a Saab-Cadillac dealership near Milwaukee, said GM made Saab interiors far more luxurious and the performance better than other brands. All he has to do to convince customers is get them to drive one, he said.
“When you get people behind the wheel and you’re in the trenches, they’re like ‘Wow, this is a lot more than a TrailBlazer,” Stephenson said of the 9-7X.
But he said the models were a bit too pricey, especially when money for leasing dried up when credit got tight.
Tom Libby, an independent Detroit-area auto analyst, agreed that Saab lost its uniqueness in the now-crowded luxury segment and will have to find a new niche.
“We know that safety is addressed. We know that performance is addressed. We know that pure upscale luxury is addressed,” he said. Saab has to find a “white space that’s not covered. I don’t know what that is right now.”
Urquhart said the company must return to its roots of innovation. Saab was among the first with front-wheel-drive and turbocharging.
Yet it will be difficult, he said, to make money with Saab’s historically small sales volume of around 130,000 units per year. That volume, Urquhart said, has held steady since GM’s acquisition, dropping to 92,000 last year in the global automotive slump.
Von Koenigsegg dismissed criticism about his company having no experience in large-scale production, saying it isn’t needed because Saab has that knowledge. He said Koenigsegg can contribute green solutions and engine technology.
Saab employs about 4,000 worldwide, while Koenigsegg has a full-time staff of 45.
Shareholders in the new company were listed as Koenigsegg Automotive AB with a 23.4 percent stake, von Koeningsegg’s firm Alpraaz AB with 42.6 percent, Norwegian holding company Eker Group with 11.8 percent and San Diego-based Mark Bishop with 22.2 percent.
Saab went into creditor protection Feb. 20, and analysts say it remains to be seen whether the new group has the money to restore its health. Even Sweden’s Enterprise Minister, Maud Olofsson, who said she was pleased to see new owners, said they will need to show proof of resources.
Koenigsegg told Swedish news agency TT that the group has the resources it needs.
Massachusetts denies $50M for movie studio
PLYMOUTH — Officials with the company building a movie studio in Plymouth are vowing to forge ahead despite the state’s decision not to provide $50 million in bond money for infrastructure upgrades.
Hollywood East Plymouth Rock Studios
Bill Wynne, real estate manager for Plymouth Rock Studios, says the company is “disappointed and frustrated,” but that construction of the $500 million studio will start this summer regardless.
A spokeswomen for the state Executive Office for Administration and Finance tells The Boston Globe the money was denied because the project will not produce enough in tax revenue to cover the bond payments.
The facility, expected to open late next year, will include 14 sound stages, a 10-acre back lot, a theater, a 300-room hotel and an education center.
Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1178282
Has economic twilight fallen on nation’s Sun Belt?
ORLANDO, Fla. – We first heard the term decades ago: The “Sun Belt” was just starting a run of phenomenal growth — and no wonder. It conjured a sunny state of mind as well as a balmy place on the map.
Everybody, it seemed, wanted a spot in the sun.
Industries such as aerospace, defense and oil set up shop across America’s southernmost tier, capitalizing on the low involvement of labor unions and the proximity of military bases that paid handsomely, and reliably, for their products and services.
Later, San Jose, Calif., and Austin, Texas, developed into high-tech nerve centers; Houston grew into a hub for the oil industry; Nashville became a mecca for music recording and production; Charlotte, N.C., transformed itself into a center for low-cost banking and finance; and then there were the new Dixie Detroits, places like Canton, Miss., Georgetown, Ky., and Spartanburg, S.C., that began rolling out Titans, Camrys and BMWs.
Meanwhile, other warm-weather havens offered their own variants of the Sun Belt dream — as Fountains of Youth for 60-and-up duffers, as Magic Kingdoms for fun-seekers, as Cape Canaverals for middle-aged northerners looking to launch their second acts.
Air conditioning, bug spray and drainage canals that transformed marshes into golf-course subdivisions — these innovations, plus the availability of flat, low-taxed land attracted migrants from Brooklyn and Cleveland, Havana and Mexico City to locales once dismissed as too hot, too swampy, too dry, too backwater-ish.
“We Give Years to Your Life and Life to Your Years!” That was the sort of slogan you’d hear from developers pitching the promise that a new start in the Sun Belt might even, in the best of circumstances, extend one’s time on Earth.
In this way, for a generation or more, the Sun Belt thrived like no other region in America — a growth so steady it felt as though the boom would never end. But now it has, replaced by a bust that has left some swaths of the region suffering as severely as anywhere in the current recession.
What brought the dark clouds to the Sun Belt, and are they here to stay?
Interviews with economists and demographers across the region, and data from The Associated Press Economic Stress Index, a month-by-month analysis of foreclosure, bankruptcy and unemployment rates in more than 3,000 U.S. counties, suggest that the answers are not all encouraging.
___
Some cities — Las Vegas, Phoenix, Fort Myers are good examples — hitched their floats to housing bubbles and got caught up in development that depended largely on, well, development itself, rather than sustainable, scalable, productive industry, economic analysts say.
It’s in these places where the economic meltdown “will likely find its fullest bloom,” Richard Florida, the urbanist and author, wrote recently in an Atlantic Monthly article titled “How the Crash Will Reshape America.”
AP Stress Index figures, which calculate the economic impact of the recession on a scale of 1 to 100, illustrate how the downturn has played out in some of these communities:
_In Maricopa County, home to Phoenix, the Stress Index more than doubled from 5.12 at the beginning of the recession in December 2007 to 12.67 in March 2009, worsened by a foreclosure rate that nearly tripled.
_Mounting foreclosures in Las Vegas’ Clark County drove up its Stress Index score from 10.5 at the start of the recession to 19.3 in March 2009.
_In Lee County, home to Fort Myers, unemployment has doubled and foreclosures have soared 75 percent since the recession began, lifting its Stress Index from 10.5 to 19.98.
The boom in parts of the Sun Belt was, Florida wrote in the Atlantic, a “giant Ponzi scheme” — a growth machine that banked on wishful thinking, on the hope that an unending stream of new arrivals would forever inject their money into construction and real estate.
But as often is the case with such schemes, there comes a day when the engine sputters, gasps, and conks out. A day when the faithful stop turning up.
In the Sun Belt’s newer, shallow-rooted communities, the roadkill is most evident: Where once there were “boomburbs,” there now stand “ghostdivisions.” Where property-flipping was once almost a middle-class sport, joblessness and “For Sale by Owner” signs reign.
The fallout is traceable in other ways, too. Nevada — the only state with a lower proportion of native residents than Florida — has seen net migration plunge 61 percent in two years; Arizona, 55 percent.
Were it not for immigrants, many of them from Latin America, and for fertility, the Sunshine State would actually have lost population last year — an “astounding development in the Florida experience,” says Bill Frey, a senior fellow and demographer at the Brookings Institution in Washington, D.C.
He said the end of steady movement of people into the Sun Belt is part of a broader trend of curtailed migration during this downturn. “The merry-go-round has stopped, in terms of people moving from place to place.”
Does this mean we’ve witnessed the Rise and Fall of the Sun Belt? Will those who swept into these Miracle-Gro states get swept out just as quickly, leaving behind a sprawl of hollow houses, cul-de-sac moonscapes and mosquito-infested pools — the stucco ghettos of the 21st century?
Or will the latest downturn merely force the Sun Belt to reinvent itself again?
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The housing bubble in many places revealed an obsolescent model of economic life, in which cheap real estate encouraged low-density sprawl and created a work force “stuck in place, anchored by houses that cannot be profitably sold,” Florida wrote in his March article.
These places, he says, include older, factory towns across the northern Rust Belt but also countless communities in the Sun Belt whose prosperity was built on “fictitious wealth.”
What to do? Scrap policies that encourage homebuying, he suggests, and give incentives to more mobile renters who can go where the jobs are.
In the digital age, he says, industries will likely cluster in “mega-regions” of multiple cities and their surrounding suburban rings (e.g., the Boston-New York-Washington corridor). These areas will surge, lifted by the brainpower of educated professionals and creative thinkers that turn out “products and services faster than talented people in other places can.”
In short: Those that can draw talented, young people with high-quality, higher education will reap the spoils.
There is some evidence to suggest an imbalance in American educational achievement across regions. According to research by two Harvard economists, Edward Glaeser and Christopher Berry, educational attainment is no longer as evenly spread across America as it was in the ’70s.
Places such as San Francisco, Boston and Seattle now turn out two to three times the college graduates of, say, Akron or Buffalo. When examining postgraduate achievement, the researchers found even greater disparities.
If locales that boast premium universities will be able to more quickly pick themselves off the mat, a question arises. In the Sun Belt’s “sand cities,” their expansion now halted, where will the tax money come from to pay for college upgrades?
Parts of Arizona, Nevada and the Los Angeles exurb of Riverside overbuilt and overstretched, said Anthony Sanders, a professor of finance and economics at Arizona State University.
Like Looney Toons characters who, suspended in mid-air, look down to behold they’ve run off a cliff, officials are scrambling to reverse course — either by scrapping government services they’d promised or, at the very least, by hiking taxes to pay for services created in expectation of bigger suburbs, exurbs.
Phoenix is in this fix. Shocked by a 33 percent plunge in home values between October 2007 and October 2008 alone, the city is running a $200 million budget deficit, a shortfall that’s only expected to grow. (It has petitioned the federal government for funds.)
California has an even wider hole in its battered canoe.
That state “went on a spending spree that was incredible,” said Sanders. Now, at a time when many resident retirees are in no mood, or shape, for tax increases, “they’re having to raise taxes or cut back services, both of which are making moving to California a lot less desirable than it has been in previous decades.”
Other Sun Belt states are making similar “mistakes,” Sanders said, adding: “Unless we lower the tax burden, making it simpler for businesses to do more operations, and freeing up the ability to attract workers, the economy here is not going to come back.”
The challenges don’t end there.
Even before the Crash of ‘08, the Sun Belt was being buffeted by outmigration of factory jobs abroad. In the Carolinas, for example, industries that linked up the economy, society and culture for more than a century — furniture making, tobacco and textiles — had been gutted by a decade of decline.
And although the overall expansion of the Sun Belt’s economy has been dramatic, the distribution of the region’s prosperity has been uneven; of the 25 metropolitan areas with the lowest per capita income in 1990, 23 were in the Sun Belt.
That has to change, said Warren Brown, a demographer at the University of Georgia, although he noted that the Sun Belt’s unbridled growth in the ’80s and ’90s was “unsustainable, bound to cool off,” and not just because of bursting housing or migration bubbles.
The limits of natural resources were poised to put the brakes on development in the Land of Sunny Dreams anyway, he said. Two biggies: oil and water.
“Long before we run out of land, we’ll be running out of water,” he said. “Water is a major issue right now.”
___
Doomsaying pundits have played the Sun Belt dirge before.
In 1981, for example, Time magazine declared Florida, a “Paradise Lost.” The state then embarked on an epic boom, in which the Miami-Fort Lauderdale-West Palm Beach corridor ballooned into the seventh-largest metro area in America.
Granted, today’s news from the Sunshine State is hardly cheery: It ranks near the top in foreclosures and near the bottom in high-school graduation rates. There’s a water crisis, an insurance crisis, a budget crisis.
So why do some experts caution that talk of Florida’s demise — and the Sun Belt’s — is exaggerated?
Among other things, Frey, the Brookings demographer, notes that outmigration from metro Miami actually fell last year, and in years to come “we’re going to have large numbers of immigrants in the United States who are going to help us in all kinds of ways,” he says.
Stan Smith, a professor of economics and director of the Bureau of Economic and Business Research at the University of Florida, says tourism, the “momentum” of decades of population growth, and already extensive networks of personal connections will again draw more migrants to Florida.
Frozen credit won’t last, he says. Real estate price declines — as much as 70 percent in some Sun Belt counties — will encourage buyers. And with home heating costs in the “Frost Belt” only expected to rise, Smith says, the attraction of warm weather to retiring Baby Boomers can’t be overestimated.
Florida is one of only nine states without an income tax. Couple that with the fact that its taxes on corporations and financial transactions have many exemptions, he says, and “the effects of the positive factors will continue to outweigh the negative.”
Recovery will take time, though, and few economists see any significant growth in the Sun Belt before 2010. Steve Malanga, a senior fellow at the Manhattan Institute in New York City, agrees that states that have piled up surplus housing “are not going to solve it in this budget cycle or the next budget cycle. It’s going to be with them for five, six, seven years, no doubt about it.”
And yet, to say all areas across the Sun Belt are in for long-term decline is simplistic, he says. Scanning the most recent employment maps put out by the Bureau of Labor Statistics reveals “a ‘belt’ in the middle of the country — Texas is part of it — that is doing quite well.” (The AP Stress Map backs up that finding, revealing a swath of comparatively unscathed counties starting in North Dakota, stretching through South Dakota, Nebraska and Kansas and ending in Oklahoma and Texas.)
Out of the nation’s 100 fastest-growing counties, the majority were in Texas (19), Georgia (14), North Carolina (11) or Utah (nine), according to U.S. Census figures last year. Raleigh-Cary, N.C., and Austin-Round Rock, Texas, were the nation’s fastest-growing metro areas, registering growth rates of 4.3 percent and 3.8 percent, respectively. Both high-tech centers, the two metros are also sites of major college campuses that helped cushion them.
Dallas-Fort Worth and Houston registered the biggest numerical gains, the census figures show. Phoenix and Atlanta ranked third and fourth in growth, respectively, followed by Los Angeles, despite the housing slump.
“Obviously, the best situation is a state that hasn’t had a residential meltdown, still has a low-cost advantage, and has a weather advantage,” Malanga says. High-tax states, such as California, are going to take longer to rebound.
And yet, Sun Belt states will have to offer more than tax incentives to reel in companies in the new, global economy, says Keith Schwer, executive director of the Center for Business and Economic Research at the University of Nevada.
Quality health care, quality recreation, quality education — companies and individuals consider the caliber of amenities before relocating. Cosmetic fixes don’t help, he says. “You can’t hide your warts.”
Does all of this mean the Sun Belt will have to reinvent itself to grow again?
Rethink may be a better term.
As an example, Caron St. John, director of the Spiro Institute for Entrepreneurship at Clemson University in South Carolina, says Sun Belt states now rationing funds ought to consider returning to “First Principles” — that is, channeling what little money they have toward elementary and high schools rather than higher education.
“Elementary and high school children — we can’t scar their lives because of a budget crisis. That has to be the first priority.”
The question is whether the Sun Belt will show the rest of the nation how to retool schools, save water and energy, and better plan its suburbs and exurbs in an era of less.
“By necessity, we’re already being forced to address these issues,” says Schwer, of the University of Nevada. “This crisis is an opportunity, more than anything else, to reset things, to put some balance back into our lives.”
Boston.com
The Associated Press
AP sources: Obama wants Fed to be finance supercop
By Anne Flaherty, Associated Press Writer | May 9, 2009
WASHINGTON –The Federal Reserve could become the supercop for “too big to fail” companies capable of causing another financial meltdown under a proposal being seriously considered by the White House.
The Obama administration told industry officials on Friday that it was leaning toward making such a recommendation, according to officials who attended a private one-hour meeting between President Barack Obama’s economic advisers and representatives from about a dozen banks, hedge funds and other financial groups.
Treasury Secretary Timothy Geithner and other officials made it clear they were not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators. Geithner told the group that one organization needs to be held responsible for monitoring systemwide risk.
“Committees don’t make decisions,” said Geithner, according to one participant.
Officials from the Treasury Department and National Economic Council, which hosted the meeting, told participants that the Fed was considered the most likely candidate for the job, according to several officials who attended or were briefed on the discussions.
The administration officials said a legislative proposal would likely be sent to Capitol Hill in June with the expectation the House Financial Services Committee, led by Rep. Barney Frank, D-Mass., would consider the measure before the Independence Day recess.
The officials requested anonymity because the meeting had not been publicly announced and they were not authorized to discuss it.
A Treasury Department statement provided to The Associated Press on Friday confirmed Geithner’s position that he wants a “single independent regulator with responsibility for systemically important firms and critical payment and settlement systems.”
A spokesman said Geithner also is open to creating a council to “coordinate among the various regulators, including the systemic risk regulator.”
The Fed itself hasn’t taken a position on whether it should have the job, although Chairman Ben Bernanke has said the Fed would have to be involved in any effort to identify and resolve systemwide risk.
© Copyright 2009 The New York Times Company
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New York Times chairman weighs in on Boston Globe
NEW YORK (AP) — Weighing in for the first time on the future of The Boston Globe, New York Times Co. Chairman Arthur Sulzberger Jr. said Thursday he hopes to cut the newspaper’s expenses enough to avoid having to shut it down.
“We hope to place this great newspaper on a path to sustainability,” Sulzberger said at the Times Co. annual shareholder meeting. He batted away specific questions on the Globe’s fate.
The recession — and the advertising downturn that began at many newspapers years before — have pushed the Globe deep into the red. The newspaper had an operating loss of $50 million last year and is on track for a loss of $85 million in 2009.
That has prompted the Times Co., which bought the Globe in 1993, to threaten to pull the plug on the newspaper if it can’t get employee unions to agree to concessions that would cut the company’s annual expenses by $20 million.
“Of all our properties, The Boston Globe has been most dramatically affected by the secular and cyclical forces that are roiling the entire media industry,” Sulzberger said. “More needs to be done to align the Globe’s costs and revenues.”
Times executives have not specified the Globe’s costs or explained how $20 million in concessions can save a newspaper losing more money than that. The Globe’s management this week rejected a proposal from union officials that negotiations be held publicly.
The idea that Boston could lose the 137-year-old newspaper has provoked angry reactions. Employees, union representatives and civic leaders are expected at a rally for the Globe at Fanueil Hall in Boston on Friday afternoon.
Meanwhile, some Times Co. shareholders expressed frustration with the decline in the company’s stock. Shares have fallen from a 2002 peak of over $50 to about $5.
David Norton, the company’s senior vice president for human resources, pointed out that executives are being paid less this year than last, after not having a salary raise in “multiple years.”
In response to a question about whether the Times Co. board had any plans to buy out shareholders, Sulzberger said “we have no plans to take this company private.”
The meeting came two days after the company reported a first-quarter loss of $74.5 million. With advertisers continuing to pull back, revenue dropped 19 percent in the first quarter, and Chief Executive Janet Robinson said the current quarter looks about as bleak.
Copyright © 2009 The Associated Press. All rights reserved.
