Higher minimum wage would be a step toward economic justice

January 20, 2014

On this national holiday honoring the legacy of the Rev. Martin Luther King Jr., it is worth remembering that he focused on more than racial justice. The next big issue on his agenda was economic justice.

King was murdered in 1968 while in Memphis to help striking sanitation workers get better pay and treatment. At the 1963 March on Washington for Jobs and Freedom, where King delivered his “I have a Dream” speech, one of the key issues was raising the minimum wage enough to lift many workers out of poverty.

While America has made great strides in racial equality and opportunity, it finds itself in a similar economic situation to what those marchers faced 50 years ago. The income of the wealthiest Americans has soared over the past three decades, while middle-class wages have stagnated and many low-wage workers have fallen into poverty.

The gap between the rich and everyone else is wider than it has been for a century. There are many reasons for this, from manufacturers moving overseas for cheap labor to the decline of unions and tax code changes that favor non-wage income, most of which goes to wealthier people.

The minimum wage hasn’t risen in five years, and low-wage workers’ earnings have continually fallen behind inflation. The Economic Policy Institute estimates that 28 million workers — the bottom 20 percent by income — earn less than $10 an hour.

The minimum wage of $1 to $1.25 an hour that marchers in 1963 said was too little would now, with inflation, be worth more than today’s minimum wage of $7.25. The $2 minimum wage the marchers were seeking would now be worth more than $15.

President Obama favors a plan by Congressional Democrats to raise the minimum wage to $10.10 over three years, with future increases automatically tied to the rate of inflation.

At least seven Nobel Prize-winning economists and eight former presidents of the American Economic Association have endorsed the move. But the idea has met opposition from Congressional Republicans, whose economic agenda can best be described as Robin Hood in reverse.

Assuming political gridlock keeps Congress from acting, the General Assembly should adopt a similar proposal by House Speaker Greg Stumbo, D-Prestonsburg, to gradually raise Kentucky’s minimum wage to $10.10.

Opponents of raising the minimum wage argue that it causes many companies to hire fewer workers, but there is little evidence to prove that. A number of studies by respected economists show little job loss from minimum-wage increases.

Another argument is that higher minimum wages lead to higher consumer prices. But studies show price increases, when they occur at all, amount to only a fraction of the wage increase.

Another argument is that few people actually earn the minimum wage, and many of them are teenagers. After years of high unemployment, many workers at or slightly above the minimum wage are adults supporting families.

Increasing the minimum wage tends to have a ripple effect on slightly higher wage rates at the bottom of pay scales, and that also would be a good thing.

What I find most galling is that many low-wage workers at some of the nation’s biggest and most profitable corporations earn so little that they qualify for public assistance.

Bloomberg News estimated last month that Walmart employees get $2.66 billion in government assistance each year because of their low wages. University researchers in Illinois and California reported last year that Kentucky’s 32,000 frontline fast-food workers make such low wages that 46 percent qualify for public assistance that costs taxpayers $115 million.

Why should taxpayers be subsidizing profitable companies? Shifting some of the burden back onto employers in the form of a higher minimum wage only seems fair.

In addition to being good for low-wage workers, a higher minimum wage would help the whole economy. Low-income people spend a much greater share of what they earn than do wealthier people. So, when they have more money to spend, it helps the whole economy and generates more tax revenues.

The minimum wage is long overdue for an increase. If Congress won’t do it, Kentucky lawmakers should.

As King once said: “The time is always right to do what’s right.”

 


Some Kentucky business stories to watch in 2014

January 6, 2014

Kentucky’s economy begins 2014 with a vigor not seen since the real estate bubble and Wall Street greed crashed the economy more than five years ago. Still, happy days are hardly here again.

Economist Paul Coomes issued a report for the Kentucky Chamber of Commerce last month that showed uneven recovery across Kentucky, based on the growth of wages and salaries. The state as a whole starts the year about 34,000 jobs (2 percent) below 2007, the year before the collapse.

Lexington and Louisville have been slower to rebound than the state as a whole. Owensboro had the strongest job growth, thanks largely to a major hospital construction project and a downtown riverfront redevelopment project financed by a local tax increase and $40 million in federal money.

Federal spending also was responsible for Hardin, Madison and Christian counties being the state’s leaders in terms of wage and salary growth. They benefitted from nearby military bases and the destruction of chemical weapons at the Bluegrass Army Depot.

Eastern Kentucky’s economy is usually the state’s weakest, and that is especially true heading into 2014. The region has lost 6,000 coal jobs recently because of four big factors: cheaper western coal, even cheaper natural gas, dwindling coal reserves in the mountains and stricter regulations to limit the environmental damage and health effects caused by mining and burning coal.

Overall, private business around Kentucky seems to be coming back to life. Although interest rates remain extremely low, community bankers grumble that regulations intended to rein in the excesses of Wall Street and biggest banks have made it difficult for them to lend money.

David Adkisson, president of the Kentucky Chamber of Commerce, said the state’s business community overall is poised to do better in 2014 than in recent years. But there are lingering concerns about the financial impact of health care reform.

“There’s growing optimism, but there’s not enthusiasm yet,” Adkisson said of the state’s business climate, noting that Kentucky’s central location is a plus. “That’s an advantage nobody can take away.”

Business people will be keeping a close watch on the General Assembly session that begins Jan. 7. The state budget will again be the biggest issue, with a lot of attention focused on restoring recent cuts to educational investment. But, as usual, there is likely to be little appetite among lawmakers for comprehensive tax reform to address chronic state funding shortages.

Adkisson said some beneficial tax changes are likely, and Kentucky should reap some savings from recent reforms to prisons and state employee pensions.

Here are some economic stories to watch in 2014:

■ Lexington’s huge medical services industry should see a lot of action as major construction projects progress and the Affordable Care Act expands the availability of health insurance.

University of Kentucky Chandler Medical Center’s $1 billion expansion should see the completion of its 64-bed cardiovascular floor. Baptist Healthcare Lexington, formerly Central Baptist, will be going full tilt on its $230 million renovation and addition, scheduled to be finished in late 2015. Shriners Hospital is moving forward with plans for a new facility near Kentucky Children’s Hospital on the UK campus.

■ The Federation Equestre Internationale will announce this year whether the 2018 World Equestrian Games will be held at the Kentucky Horse Park. That was the site of the 2010 Games, which were successful thanks in large part to the active sponsorship of Alltech, the Nicholasville-based nutrition supplement company. Alltech also is the main sponsor of the 2014 Games, Aug. 23-Sept. 7, in Normandy, France.

With so many excellent competition facilities already in place, Lexington would seem to be in a good position to again host the Games, providing another big boost to Kentucky’s economy.

■ After five years of delays, construction is supposed to begin soon on the huge CentrePointe hotel, apartment, office and retail development in downtown Lexington. Developer Dudley Webb demolished a block of historic buildings for the project in 2008 but couldn’t get financing to build.

The first step in construction will be excavating a huge underground parking garage without breaching the century-old culvert containing Town Branch Creek. Because CentrePointe is getting some tax breaks, the city required Webb to show proof of construction financing and put up $4.4 million to restore the site in case he runs out of money. The goal is to keep CentrePasture from ending up as CentrePit or CentrePond.

■ This year will see more details about proposals for redeveloping Rupp Arena, Lexington Center and the huge surface parking lots surrounding them. And then there is the visionary plan to create Town Branch Commons, a connected greenway along the path of long-buried Town Branch Creek. They are ambitious proposals that will require even more ambitious financing plans.

■ The state Transportation Cabinet is likely to decide by late this year whether to recommend construction of the I-75 connector highway between Nicholasville and Interstate 75 in Madison County. Boosters say the $400-plus million project would be good for business. But opponents call it a special-interest boondoggle, a waste of public money that would cause substantial environmental damage to a section of the scenic Kentucky River Palisades south of Lexington.

■ A lot of excitement was generated Dec. 9 when more than 1,500 people gathered in Pikeville for a public forum launching a bipartisan effort to create new economic development strategies for Eastern Kentucky. Gov. Steve Beshear, a Democrat, and U.S. Rep. Hal Rogers, a Republican, are leading the project, called Shaping Our Appalachian Region, or SOAR.

The coming year will show whether the effort called SOAR, or Shaping our Appalachian Region, amounts to a breakthrough or just more empty talk.

■ Another ambitious economic-development effort is the Bluegrass Economic Advancement Movement, or BEAM. Mayors Jim Gray of Lexington and Greg Fischer of Louisville launched it with the goal of attracting more advanced manufacturing jobs to the 22-county region around and between the two cities, which already includes Toyota Motor Manufacturing Co. and many of its suppliers.

In late November, Gray and Fischer unveiled a BEAM strategic plan around the ideas of embracing innovation, increasing Kentucky exports and improving education and workforce development. It’s a sensible vision, but whether Kentucky leaders will find the political will to invest in making it happen remains to be seen.

Staff writers Janet Patton and Cheryl Truman contributed to this report. 


Will SOAR be a new beginning, or just more talk about Appalachia?

December 8, 2013

You have to wonder: Will the Shaping Our Appalachian Region summit Monday in Pikeville be the start of something big, or just another feel-good effort that doesn’t amount to much?

More than 1,500 people have registered to attend the conference called by Gov. Steve Beshear and U.S. Rep. Hal Rogers, who said they wanted ideas from throughout Eastern Kentucky for strategies to diversify the region’s economy.

There have been dozens of conferences on this topic over the years, but this one offers some hopeful signs. For one thing, it is the first high-level, bipartisan effort. Politicians who usually dance to the tune of the all-powerful coal industry are actually asking other people what they think.

But once the talking is over and the reports are written, will leadership, public investment and private capital get behind the good ideas? Will anything really change?

soarlogoCreating a sustainable, broadly prosperous economy in a region that has never really had one will be a monumental challenge.

Eastern Kentucky has never lacked for intelligent, hard-working people. But it has been handicapped by isolation, lack of education and opportunity, corrupt politics and powerful economic forces beyond its borders and control.

Since the late 1800s, the region has gone from subsistence farming to large-scale timber extraction to increasingly destructive methods of coal mining. The result has been a classic colonial economy, where most of the wealth flowed out of the region, or to a small local elite, while a large underclass survived on welfare and charity.

This cycle of poverty and dependence has led to hopelessness, drug abuse and other social problems, as was outlined in the most recent chapters of the excellent series Fifty Years of Night, by Herald-Leader reporters John Cheves and Bill Estep.

Can a new and different chapter be written for Eastern Kentucky?

In calling this summit, Beshear and Rogers cited the loss of more than 6,000 coal jobs over the past two years. But they wisely avoided their usual “war on coal” rhetoric, which blames the industry’s problems on long-overdue environmental regulation and enforcement.

The main reasons for declining coal production are cheaper Western coal and even cheaper natural gas. Besides, coal employment in Eastern Kentucky has been falling for three decades, from a high of 37,505 in 1981, primarily because of industry mechanization and a shift from deep to surface mining.

Eastern Kentucky’s current coal employment is 7,951, the lowest in generations, and that is unlikely to improve much. Coal will continue to be a presence. But because the large, easy-to-mine reserves are gone, most of the coal jobs will never return.

There are no “magic bullet” solutions to replacing Eastern Kentucky’s coal-based economy. (Not that coal itself was ever a magic bullet. Even when coal employment and production were at their peaks, the coal counties were still among the nation’s poorest.)

The citizens group Kentuckians for the Commonwealth has some good ideas about what a new Eastern Kentucky economy should aspire to. Those principles would be a good starting point for Monday’s conversations.

KFTC’s vision calls for a “just” transition that promotes “innovation, self-reliance and broadly held local wealth.” It urges more citizen participation in decision-making, and calls for restoration and protection of the environment and public health. It also urges leaders to “consider the effects of decisions on future generations.”

Tourism and outdoor recreation are often mentioned as potential economic opportunities, but that will require cleaning up some of strip mining’s environmental damage. Kentucky should lobby for money to do that work from the federal Abandoned Mine Lands fund, which could keep thousands of former coal miners employed for years.

Home-grown entrepreneurship and technology jobs are other often-mentioned possibilities to building Eastern Kentucky’s middle class, but they will require serious state investments in education and infrastructure to attract private capital. Kentucky’s tax-phobic politicians and the citizens who elect them have never been willing to make such serious investment, and that must change if anything else is to.

Shaping a new Eastern Kentucky economy will require a lot of creativity, commitment and hard work, not to mention leadership, inclusion and accountability.

There will be many obstacles to overcome, not the least of which is cynicism. It will be a long process. But Monday in Pikeville is as good a time and place to start as any.


Governor’s Scholars alumni hope to create powerful network

September 10, 2013

Randall Stevens was a shy kid from Pikeville when he was chosen for the second class of the Kentucky Governor’s Scholars Program in the summer of 1984. It literally changed his life.

“I think I became me in those five weeks of that program,” Stevens said. “It’s a huge confidence builder. It’s a social awakening with an academic background that really develops leadership.”

The experience inspired Stevens to study computers and architecture at the University of Kentucky, he said. Since then, Stevens has created several software programs and the companies to produce and market them. He also started Base 163, an incubator work space for Lexington technology entrepreneurs.

RStevens

Randall Stevens

Stevens has met many other Governor’s Scholars over the years whose experiences were similar to his. That got him thinking about the potential of an alumni network, both for the former scholars and for Kentucky’s future.

He recently helped start the Governor’s Scholars Program Alumni Association, which will have its first gathering Sept. 27 and 28 at the Kentucky Center in downtown Louisville. The event is affiliated with the annual Idea Festival there that week.

Speakers at the event include several former scholars: U.S. Rep. Thomas Massie, a Republican who represents Northern Kentucky; Drew Curtis, founder of the online humor site Fark.com; Jeff Fugate, president of Lexington’s Downtown Development Authority; and Rebecca Self, founder of FoodChain, an urban-agriculture nonprofit in Lexington.

Former scholars interested in attending the event or becoming affiliated with the alumni group can get more information at Facebook.com/gspsync or GSPsync.tumblr.com, or by email at gspsync@gmail.com.

The Governor’s Scholars Program began in 1983, with 230 rising high school seniors from across Kentucky who were brought together on Centre College’s campus in Danville for a summer enrichment program. The program is the oldest of its kind in the nation. This summer, about 1,100 students participated on three college campuses.

Scholars are chosen through a competitive process. The program is free to them and is financed by state government and private donors. Governor’s Scholars are eligible for big-dollar scholarships at virtually all of Kentucky’s public and private colleges and universities.

Stevens figures that there are now 25,349 Governor’s Scholars Alumni with three decades of accomplishments, life experiences and personal networks that could have enormous value. Simply publicizing what other former scholars are doing could spark ideas and create job opportunities.

The idea of the Governor’s Scholars Program was to keep Kentucky’s “best and brightest” from leaving the state. Surveys show that about half of all scholars now live here. But Stevens and others think that original goal was too narrow.

gsplogo“It’s not good to try to keep them in Kentucky,” he said. “Just keep them connected to Kentucky.”

For one thing, Stevens said, when scholars leave Kentucky to achieve their dreams, they can end up in good positions to help future scholars achieve theirs.

Former scholar Darlene Hunt of Lebanon Junction went to Britain, Chicago and Los Angeles on her way to becoming a successful actress, producer and television writer. Matt Cutts of Morehead went on from UK to earn a doctorate in computer science from North Carolina and is now a top executive at Google.

“Having a Matt Cutts at Google is better for the network than if he had stayed here,” Stevens said.

Also, he said, Kentuckians often have a habit of achieving success elsewhere and moving back to home, bringing back knowledge and sometimes jobs and investment capital.

Some high-profile examples include Alan Hawse, a top executive with Cypress Semiconductor, whose move back from California led to creation of a technology development center in downtown Lexington. Self, the FoodChain founder, and her husband, Ben, moved back to Lexington from Boston after a company he helped start ran President Barack Obama’s 2008 online campaign. He and three partners then started West Sixth Brewing Co.

“The network is more valuable than just having people here,” Stevens said. The oldest scholars are now reaching mid-career and rising to positions of wealth and influence, he said. “The real power could be what happens when they do want to come back.”


Tax reform group has some good ideas; will they go anywhere?

December 10, 2012

Tax reform in Kentucky has always reminded me of that old quip about the weather: Everybody talks about it, but nobody does anything about it.

After nearly a year of study, the Blue Ribbon Commission on Tax Reform that Gov. Steve Beshear appointed to study Kentucky’s tax code and suggest changes finished its work last Thursday and announced recommendations. A final report is due to the governor by Dec. 15.

Will Beshear embrace his task force’s recommendations and try to sell them to the public and legislators? Will the General Assembly’s leaders exercise the leadership needed to build political consensus and make change happen?

You have to give the task force credit. Rather than proposing safe but inadequate “revenue neutral” tax reform, task force members had the courage to recommend a plan that would add $690 million in revenue during the first year.

That’s still short of what Kentucky needs, but it’s a start. Pension obligations will eat up at least $350 million and the state budget has already been cut a dozen times for a total of more than $1.6 billion.

Among the task force’s good recommendations:

■ Raise the cigarette tax to $1 a pack, up from 60 cents. Given the high public cost of smoking-related diseases in Kentucky, it should be even higher, such as the $1.60 that some task force members proposed. But at least Kentucky’s cigarette tax will no longer be the lowest in the region.

■ Amend the state constitution to allow local-option sales taxes. This is a big issue for Lexington, Louisville and other cities desperate for additional revenue to meet the needs of their urban populations and economies.

■ Make the state income tax more progressive, easing the burden on low-income wage-earners and putting more of it on high-income taxpayers. Much of that would be done by limiting deductions and exemptions.

The task force also recommended creating an earned-income tax credit to give relief to low-wage families. It would be modeled on the federal earned-income tax credit, a Republican idea that has been an effective, low-cost tool for reducing poverty among the working poor.

■ Eliminate two taxes that have always seemed like insults to two of Kentucky’s signature industries, horses and bourbon. The first is the sales tax on horse feed. Cattle feed is not taxed, but horse feed is, which has never seemed fair.

The other is the property tax on barrels of bourbon aging in warehouses. Bourbon has become a worldwide phenomenon, and Kentucky makes more than 90 percent of it. But this tax gives both established and new distillers a reason to look to elsewhere to build production facilities, which could risk Kentucky’s industry dominance.

■ Expand the 6 percent sales tax on goods to include some services. This could broaden Kentucky’s tax base as the economy continues to shift from goods to services. It is essential that Kentucky tax revenues grow with the economy, and this is one way to do it.

The task force also recommended cutting corporate taxes by abut $100 million. It is an article of faith among some business people that corporate taxes need to be as low as possible. But that seems unnecessary, because studies have shown that Kentucky’s corporate taxes already are competitive with peer states.

“What are we going to gain by making them lower?” asked Jason Bailey, a task force member and director of the Kentucky Center for Economic Policy, a Berea-based research group. “The corporate income tax is a very small part of doing business.”

Rather than cutting Kentucky’s already-low corporate taxes, Bailey thinks more jobs could be created by investing that money in education, health and infrastructure. Those are areas that companies look at when choosing a good place to do business, and they are areas where Kentucky is behind many other states.

Overall, though, the task force recommendations are the most positive talk in decades toward real, much-needed tax reform. Whether Kentucky’s political leaders will do anything about it remains to be seen.


Lexington entrepreneur hopes to revolutionize consumer credit

September 3, 2012

Shane Hadden spent more than a decade in New York City, figuring out ways for corporate clients of Credit Suisse to lower their borrowing costs. That work gave him some ideas about how to do the same for average consumers.

So, three years ago, the 43-year-old Danville native moved back to Central Kentucky with his wife and three young daughters to create Float Money LLC. After three years of development and testing, the Lexington-based company backed by local investors launches this month in Kentucky and two other states. Here is how it works:

Float members use the company’s Web site to make purchases, either from online retailers such as Amazon or by buying gift cards to local merchants and chains such as Meijer, Macy’s, Kmart, CVS and Speedway. Merchants pay a commission on those sales, which is how Float makes its money.

In return for their purchases, Float members build up a line of credit they can borrow from without any interest or fees, Hadden said. The more of their spending Float members do through the Web site, and the better their standard FICO credit score, the higher their line of credit grows over time. Credit lines range from a few hundred dollars to $20,000.

The idea is to give consumers a no-cost borrowing alternative to credit cards. But people who use credit cards to earn rewards, such as airline points or cash back, can still use them to buy through Float.

Float members can draw on their credit line at any time for any purpose, essentially taking out 10-month personal loans that must be repaid at the rate of 10 percent per month, Hadden said.

Like any loan, repaying the line of credit is a legal obligation. But what happens if a loan isn’t repaid on time? Credit that members earn with future purchases through Float goes to pay off their loan rather than increasing their line.

“Even if you owe money, you’re still going to need to spend money on essentials,” Hadden said. “Those future purchases are an asset you have, and we’re unlocking it.”

Float has signed more than 1,000 merchants so far to participate in the system, Hadden said. About 300 initial members have been testing the system since last November. Floatmoney.com is now accepting new members.

Hadden thinks Float will be popular, because a lot of people get in trouble with credit cards, whose high interest rates can rapidly compound debt on unpaid monthly balances. Americans now have more than $2.5 billion in outstanding consumer credit, about $866 million of which is with credit cards and other forms of revolving credit, according to Federal Reserve Bank of Philadelphia.

Hadden’s concept isn’t really new: It is essentially the old-fashioned kind of credit that small stores once gave regular customers, or the no-interest loans retailers still give customers to make major purchases, such as a new car, furniture or appliances.

What’s different is that the Internet now provides a way to combine the buying power of huge numbers of customers. As Float adds members and merchants, it hopes to use that buying power to get higher commissions for itself and discounts for members.

Hadden said he isn’t aware of any other companies with the same business model: the ability to create absolutely free, general-purpose credit in return for making everyday purchases.

Float isn’t a bank; legally, it is a state-regulated finance company. The company plans to expand nationwide as it is licensed and recruits local retailers in each state. In addition to Kentucky and neighboring Ohio, Float is launching in Massachusetts because its own lender, Developer Finance Corp., is based there.

Given the size of the consumer credit market, Hadden is optimistic about Float’s long-term growth potential. He plans to keep the business based in Lexington.

Hadden said the company’s other investors include: W.T. Young LLC; Cheddars restaurant owner Lee Greer; Internet entrepreneur and West Sixth Brewing partner Ben Self; and Donald Mullineaux, a longtime banking and finance professor at the University of Kentucky.

“I thought it was a novel idea that addresses a significant need,” Mullineaux said, noting that credit card interest rates are very high even though bank rates are at historic lows. “When I first heard about it, my initial response was, ‘What’s the catch?’ There’s not one.”


Occupy Wall Street strikes a chord with many

October 16, 2011

Businessman Richard Knittel joined pickets Wednesday evening as part of Lexington's Occupy Wall Street on Main Street. Photo by Tom Eblen

The casually dressed Occupy Wall Street protesters in downtown Lexington last Wednesday evening looked curiously at one another when Richard Knittel approached wearing a suit and tie.

He didn’t want to argue with them. He wanted to join them.

Knittel, 69, of Versailles, explained that he isn’t against capitalism — among other things, he is chairman of a Canadian company that uses environmentally friendly technology to mine metals. But he agreed with the protesters that big money has too much influence in America, especially when it comes to profit-driven disregard for the environment.

“I want people to see that even people with suits on are joining this,” Knittel said before picking up a spare protest sign and waving to passing motorists on Main Street.

Since Occupy Wall Street protests began Sept. 17 in New York’s financial district, similar demonstrations have sprung up in more than 1,300 American cities.

The Lexington protest began Sept. 29 on the sidewalk outside Chase Bank Plaza. Protesters — whose numbers have ranged from two to two dozen — said they have tried to be polite and not make a mess. They have appreciated Lexington police for keeping drunks and troublemakers away. Supporters bring them food, and Gene and Natasha Williams let them use restrooms in their restaurant across the street.

Some people have cast Occupy Wall Street as liberals’ answer to the conservative Tea Party. Both movements include average, passionate people waving protest signs and American flags. Both also have their share of crackpots, are fuzzy about their goals and solutions and are easy for critics to lampoon.

Still, both movements have struck chords with the public because, for so many people, the American dream seems to be slipping away. People on the left, right and in the middle think the system has been rigged against them.

I visited Lexington’s Occupy Wall Street protesters several times last week. Most were 20-something students and low-wage workers, although the group included teachers, retirees, a veteran, a local food activist, an unemployed computer programmer and a man who said he is homeless. Some talked idealistically, but most just seemed worried about the future.

The protesters said they are concerned about economic injustice and political corruption. They aren’t against capitalism, just the crony capitalism and greed that they blame for the financial crisis and widening economic disparity.

Among common themes: The rich have gotten exponentially richer while middle-class workers have lost economic ground for three decades. Financial speculators, who largely caused the 2008 crash and were bailed out by taxpayers, haven’t been brought to justice. Politicians of both parties receive so much corporate cash that they are only looking out for business interests.

“This is about shaping the national discourse so it is more people-based than profit-based,” said Robert Wilhelm, 24, a University of Kentucky student. “People who were part of the Tea Party before it got corporate sponsorship have even come by and said they agree the system is broken.”

Janet Tucker, 64, a retired nurse, said she thought it was important to come out and protest. “But I don’t spend the night here; I leave that to the younger folks,” she said.

“We’re spending trillions on wars overseas, and we can’t afford to deal with all the problems we have here,” Tucker said. “It’s not that there isn’t money; it’s where it is. We need to look at our priorities as a nation.”

Protesters said they have been encouraged because, for every obscene gesture or shout of “get a job” they receive from a passerby, they get 10 thumbs-up or honks of support.

“A lot of folks are struggling, and I think they’re making these connections,” said Greg Capillo, 23, a college graduate who works in a coffee shop. “The ultimate issue is corporate involvement in democracy, because it speaks to the structural elements of democracy itself.”

It is hard to predict the future of Occupy Wall Street. The demonstrations will surely wane as winter comes. Protesters say they don’t want to be co-opted by the Democratic Party the way the Tea Party movement has been by the Republican Party.

The significance of protest movements is never the movements themselves, but how they shape public opinion over time. A national poll last week by Time magazine found that 54 percent of respondents viewed Occupy Wall Street favorably. That compared to 27 percent who viewed the Tea Party favorably, down from 41 percent in December 2009.

Comparing Occupy Wall Street to the Tea Party might not be the best analogy. Better ones might be the Bonus Army veterans who occupied Washington during the worst of the Depression, or even the civil rights movement of a generation ago.

Throughout history, this nation has been forced to address obvious injustice and inequity when enough people objected. The protesters on Wall Street — and on Main Streets across America — seem to be hoping that this time will be no different.


Author finds hit with common-sense money advice

September 19, 2011

High finance has gotten so complicated that many so-called experts no longer seem to understand it. Wall Street has become a computer-driven casino, where huge gains can become huge losses within seconds.

Personal finance can be much simpler. In fact, a whole information industry has sprung up to preach common-sense money management to average people who forgot or never learned time-tested strategies.

Richmond’s Don McNay, a financial consultant and syndicated columnist, is the author of a new book, Wealth Without Wall Street, that has been selling briskly on Amazon.com since it came out in paperback Aug. 25 ($9.99, Kindle $5.99). The hardback ($19.99) debuts Tuesday at a 7 p.m. signing at Joseph-Beth Booksellers.

“I don’t just complain about things; I give people practical advice to do something about their situation,” McNay said. “It’s about taking control of your finances and your life.”

McNay’s timing is perfect: Unemployment is high; many people are struggling with debt; and the public is angry at Wall Street fat cats, who are back to their old shenanigans after receiving $700 billion in taxpayer bailouts three years ago.

It also doesn’t hurt that two of the nation’s most popular personal finance gurus — Clark Howard and Dave Ramsey, whose philosophies McNay generally shares — also have new books out. McNay said his book is benefitting from Amazon’s computer-generated referrals. “People who pull up their books see, ‘You also might like this,’” he said.

McNay, 52, who writes for Huffington Post and several small Kentucky newspapers, owns a company that specializes in what are called structured settlements. He helps people who get big payouts from an insurance settlement, or maybe a lottery win, manage and conserve their money.

His slim, easy-to-read book isn’t technical; it’s more like common-sense advice from a wise uncle.

McNay said he has learned how to explain things simply after years of working with accident victims, many of whom have little education and many financial problems. Plus, he and his own family have made a lot of mistakes over the years.

For example, McNay said, he became a successful broker in the 1980s and splurged on all the trappings — a Mercedes-Benz, a big house and a fancy office in downtown Lexington. Then he lost it all through a complicated real estate investment he didn’t understand. He had to dig himself out of debt.

The book tells several other painful stories that taught McNay lessons. “It’s embarrassing,” he said, “but it’s real life.”

Here is a sample of McNay’s advice:

Avoid credit cards: McNay said most of the pushback to his book has come from readers who say credit cards can be great tools when managed properly. But he avoids them because he doesn’t want to be like too many Americans and let credit cards become a debt trap. McNay, who said he has always struggled with his weight, compares credit cards to keeping fattening food out of his house; if it’s there, he will eat it.

Work for yourself: Not everyone is cut out to own their own business, but if you are, do it. It’s hard work, but it gives you more control over your life and future.

Get rich slowly: To McNay, that means don’t spend more money than you make. Avoid debt. Save through conservative investments. Consult an attorney when necessary. Have a will and life insurance to protect your assets. Not only does this make you richer, it will remove a lot of stress. “It takes power away from those who can control you,” he said.

Move your money from a big bank to a small one: Wall Street has so much power, McNay said, because so much of Americans’ money is invested in big banks. They were behind most of the risky activities that tanked the economy. Big banks also make only 28 percent of small-business loans, while small banks, defined as those with less than $1 billion in assets, make 34 percent.

“A lot of this really is common sense, and it’s about balancing power in your favor,” McNay said. “These are things that could spark a revolution.”

 


Lexington, Louisville partnership makes sense

August 15, 2011
Mayors Greg Fischer, left, of Louisville and Jim Gray of Lexington. Photo by Mark Cornelison

Mayors Greg Fischer, left, of Louisville and Jim Gray of Lexington announce the project in Louisville last Thursday. Photo by Mark Cornelison

LOUISVILLE — The Bluegrass Economic Advancement Movement was announced Thursday with all the fanfare that two cities’ business leaders could muster.

A furry University of Louisville cardinal mascot escorted Lexington Mayor Jim Gray to the stage of a Galt House ballroom as a furry University of Kentucky wildcat did the same for Louisville Mayor Greg Fischer. More than 1,000 people from both cities applauded, and a marching band played the Superman movie fanfare, symbolizing the goal of creating a super-region for advanced manufacturing.

The hype might have been goofy, but the ideas behind the effort and the process for achieving it could be an economic game- changer, not only for Louisville and Lexington, but for the entire state.

Brookings, the public- policy think tank, chose Lexington-Louisville as one of seven regions where it will work with business, government and educational leaders to develop a plan for regional economic development. The idea is to focus on business sectors that already are strong and have potential to become major players in international trade.

Brookings thinks regions, rather than individual cities, are the economic powerhouses of the future, especially as the world becomes more urbanized. More than half the world’s population now lives in urban areas, up from 30 percent in 1950 and 2 percent in 1800. By 2030, it could be 60 percent.

Kentucky mirrors the trend. More than 55 percent of Kentuckians live in urban areas, which account for 72 percent of the gross state product of $50.5 billion a year. More than 2 million of Kentucky’s 4.3 million people live in the 27 counties that make up the Louisville- Lexington region, which includes Elizabethtown. Metro Louisville accounts for 31 percent of gross state product; metro Lexington, 14.2 percent.

Fischer got the ball rolling with Brookings. A review of 11 previous economic studies quickly identified advanced manufacturing as an area for focus. Manufacturing employs 65,000 people, or 11 percent of the work force, in metro Louisville, and 30,000, or 8 percent of the work force, in metro Lexington.

The biggest manufacturing niche is the auto industry, with the Toyota assembly plant in Georgetown, two Ford assembly plants in Louisville and suppliers across the state.

Manufacturing jobs were key to creating the American middle class a century ago, and it is no coincidence that the middle class has declined as manufacturing has moved overseas. But some of that high-end manufacturing is moving back to the United States, and Kentucky has the potential to attract it, Fischer said.

“This is a can-do region with enormous assets,” said Amy Liu of Brookings. “We think there’s a real opportunity to succeed here.”

So what could make this different from so many well-intentioned but marginally successful economic development efforts in Kentucky? Several things.

Brookings brings a level of expertise to which Kentucky has rarely had access. The institution is donating its services, valued at about $750,000. Kentuckians are providing about $250,000 in support services and expertise, which will be paid for with private donations.

Fischer and Gray — two new mayors with similar entrepreneurial backgrounds and political outlooks — are powering the initiative. Sports entrepreneur Jim Host will chair the effort. Host is one of Kentucky’s most capable leaders — a drill sergeant with a strong record of getting things done in both cities. His most recent accomplishment: building the KFC Yum Center in downtown Louisville.

Host will lead a 15- to 20-member committee the mayors will appoint soon. And if the mayors are smart, two of those appointments will be the presidents of UK and U of L, which will be vital to this effort’s success.

The committee will develop a specific business plan to be announced by the end of 2012. The key to execution will be forming partnerships among government, industry and education groups. The public may offer suggestions at Facebook.com/bluegrassmovement.

Beyond the goal, though, this cooperative effort could be a big deal for Kentucky. That is because Louisville and Lexington — cities only 70 miles apart but long separated by cultural differences and sports rivalries — will be working more closely than ever before.

The effort also will focus statewide attention on the economic importance of the Louisville and Lexington metro areas. After all, 40 cents of every tax dollar generated in Louisville goes to the rest of the state, as does 23 cents of every Lexington tax dollar, Host noted. When the cities succeed, the whole state benefits.

“The leverage potential this has, we don’t even know,” Gray said. For example, he noted, Jefferson County school board members invited Fayette County school board members to the announcement luncheon. What might a closer working relationship there lead to?

“Greg and I naturally see alliances as a big deal,” he added. “And in this case, one-plus-one could add up to three, four or five. That’s what all of this really represents.”


Debt obsession will only make economy worse

August 8, 2011

If your home caught fire, would you put out the flames, or ignore them and focus on fixing a leaky pipe that could eventually flood your basement?

You would call firefighters, of course, and deal with the pipe after the emergency had passed. Unless, that is, you were a member of Congress.

Think of government debt as a pipe that has been springing leaks for a decade. If not fixed, it will eventually ruin the house. The fire in this analogy is America’s stagnant economy and high unemployment rate.

With that in mind, here is the best way to describe what Congress and President Barack Obama did last week: They wrapped tape around a small piece of the leaky pipe and poured gasoline on the fire.

The debt-ceiling fiasco did little to solve America’s real debt problems, although they were a start. But the bipartisan compromise will make our economic slump worse instead of better. Fears of a relapse into recession sent stocks plunging last week in the steepest market slide since October 2008.

The only realistic way to reduce government debt is to cut some spending, increase tax revenues, bring down soaring health care costs and make long-term adjustments to entitlement programs that will put them on sound financial footing. It is not rocket science; more like basic plumbing.

“We don’t have a revenue problem!” Republicans like to say. “We have a spending problem!” They are only partly right.

We do have a spending problem. We have committed what could become $3 trillion fighting wars in Iraq and Afghanistan, and now we’re messing around in Libya and who knows where else on the sly. The military industrial complex spends untold billions on high-tech weapon systems we don’t need. Waste and fraud abound.

The same skyrocketing health care costs that are breaking families and businesses are making the Medicaid and Medicare programs unsustainable. Social Security must cut benefits, raise the dedicated tax or both.

But we also have a revenue problem. Sorry, Tea Partiers: you may think you are “Taxed Enough Already,” but you are taxed less than you have been in decades.

Thanks to huge 2001 tax cuts, plus tax breaks and loopholes for special interests, tax revenue as a share of gross domestic product is at its lowest point since 1950. After reaching a peak of 20.6 percent in 2000, it is now 14.8 percent, according to an analysis by the Center for American Progress.

The United States has lower taxes than most developed countries, especially for wealthy people and corporations. Top marginal tax rates, tax rates on investments and corporate tax revenues as a share of GDP are the lowest they have been since World War II.

Trickle-down economic theory — what President George H.W. Bush famously called “voodoo economics” — won’t revive the economy. It will just continue a 30-year trend of stagnant middle-class wages and huge income growth for the rich.

A big reason America’s economy is stalled is that too many average people don’t have jobs. Many who do have jobs still don’t have much disposable income. Until a lot more people have more money to spend, the economy won’t recover.

Republicans’ obsession with paying down debt — and Democrats’ willingness to cave in to them — will only make the economy worse, at least for the next year or two. Republicans hope to use that for political advantage. Democrats seem scared of their own shadows.

Since banks and corporations have recovered, neither political party seems to care much about the rest of us. I guess we know who they really represent.

This obsession with reducing debt in a weak economy risks a replay of the malaise Japan suffered in the 1990s when it followed that strategy. The same thing happened here in 1937, when debt-obsessed politicians stopped much of the New Deal spending that was getting America back to work from the Great Depression. The result: a double-dip depression that didn’t end until World War II.

Political leaders need to stop admiring their taped-up pipe and notice that America’s house is burning down.


Chamber can have big influence on improving Kentucky

July 18, 2011

I am increasingly impressed with the leadership of the Kentucky Chamber of Commerce. Rather than just taking care of business, it seems to realize that improving life in Kentucky will help create economic prosperity.

That was apparent at last week’s annual meeting in Louisville. The agenda focused on substantive discussions of two of Kentucky’s biggest issues, coal and education.

For example, the keynote speaker on coal was journalist James Fallows, whose Atlantic magazine cover story last December was one of the best things I have read on the subject. “Coal is inevitably going to be a major part of the world’s energy solution for the foreseeable future,” he said. “But that role will be and has to be different.”

While Fallows characterized his remarks as a “good news speech,” it was nothing like the hot air we usually hear from the coal industry and its cheerleaders.

No matter how successful the world is at developing alternative energy, coal will remain a vital fuel for decades, Fallows said. But he stressed that global economic, scientific and political trends will require that coal be mined and burned in more environmentally friendly ways. It is smarter to lead change than be trampled by it.

Solutions built around market incentives — such as the ill-fated “cap and trade” proposal — would be better than regulation because they would encourage business creativity and flexibility, Fallows said. But if business wants market-driven change rather than regulatory change, he said, “high-level industrial leadership is important.”

Fallows was followed by Michael G. Morris, chairman of American Electric Power, whose remarks were titled “Coal Under Attack.” While saying that coal must get “cleaner,” his rambling presentation was filled with the usual clichés about new environmental rules being unfair and unreasonable.

Morris bragged about how much less pollution coal-fired power plants emit now than they used to — as if that were the result of industry leadership rather than government regulations that most utilities fought every step of the way.

Morris repeated an earlier claim that new regulations will have a “devastating effect” on AEP, shutting down 6,000 megawatts of generating capacity. But as another speaker pointed out later, two-thirds of that capacity was going to be retired anyway because of a 2007 pollution settlement with the Bush administration.

I was impressed that so many chamber members seemed wise to Morris, even ignoring most of his attempts at applause and laugh lines.

Morris was followed by Rodney Andrews, director of the University of Kentucky’s Center for Applied Energy Research. He gave an excellent but rushed presentation that echoed many of Fallows’ points and made a persuasive economic and environmental argument for making coal-fired power plants more efficient. I would like to have heard more from him.

The chamber announced some initiatives that could have a big impact. The New Agenda for Kentucky Campaign focuses on action plans in five areas: improving schools, modernizing government, remaining competitive in energy resources, doubling international exports within five years and improving Kentuckians’ health and wellness.

Perhaps the most impressive effort is the Kentucky Leadership Institute for School Principals. AT&T and other companies are giving money to send many Kentucky school principals to the respected (and expensive) Center for Creative Leadership in North Carolina to get the kind of high-level leadership training that business executives receive.

The chamber also unveiled a follow-up to its 2009 “Leaky Bucket” study, which underscored how huge increases in state spending for public employee health care, Medicaid and prisons were contributing to a short-change of education.

That report provided encouragement — and political cover — for landmark legislation earlier this year to rewrite Kentucky’s criminal code. It will reduce the number of non-violent offenders in jails and prisons, send more drug offenders to treatment and save a lot of taxpayer money in the process.

The chamber’s new report, called “Building a Stronger Bucket,” offers more suggested policy changes, including moving new state employees to a 401(k)-style pension plan.

Too often in the past, Kentucky has fallen behind the rest of the nation when narrow economic or political interests wielded too much power. Building a better future will require that many perspectives be considered and many voices be heard.

Still, no single group can do more to make this state a better place to live than a progressive organization that represents a broad spectrum of the business community. The Kentucky Chamber of Commerce seems to be stepping up to the challenge.


How lazy can we be if we’re 4th best city for business?

July 6, 2011

Soon after Men’s Health magazine made Lexington an international laughingstock by naming it America’s most sedentary city, Forbes magazine has given the local business community something to brag about.

Lexington’s No. 4 ranking in Forbes’ annual Best Places for Business list is up from No. 9 last year. Louisville is ranked No. 14.

Forbes ranked Lexington better than all of the cities that Commerce Lexington’s annual Leadership Visit has gone to recently: Greenville was No. 60; Madison, No. 63; Pittsburgh, No. 69, Austin, No. 7; Boulder, No. 44 and Oklahoma City, No. 28.

Forbes said it arrived at its rankings by weighing a series of metrics, such things as job and income growth, costs, quality of life and educational attainment. Read more about the methodology here.

In my Business Monday column, I will discuss these rankings — which are more about magazine promotion than anything else — and how comparing one place to another is more difficult than it seems.


Chamber knows Kentucky art is good for business

February 27, 2011

FRANKFORT — When the Kentucky Chamber of Commerce decided to renovate and enlarge its headquarters to create more public space, chamber president David Adkisson said, “I kept saying I wanted something really Kentucky.”

He considered asking architects to design the 7,000-square-foot addition to look like a fancy Bluegrass horse barn, or even a bourbon distillery warehouse.

“They convinced me that wasn’t the way to go,” Adkisson said, as he gave me a tour of the beautiful, but conventional, new space.

What is happening instead is a better reflection of Kentucky’s uniqueness: the Chamber is filling its new building with a diverse collection of original art and furniture by the state’s contemporary artists and craftsmen.

Since the new space opened in April, it has been a big hit, with members of the business advocacy group and with other Kentucky organizations that have used the new meeting rooms, Adkisson said.

He said the project has more than achieved his goal of making the Chamber’s headquarters, near the intersection of Interstate 64 and U.S. 60, a prominent “front door” to Frankfort.

“We’re in the business of showing off the best of Kentucky, so this was a natural,” Adkisson said. “We made a conscious effort to create a gallery-like atmosphere that would showcase the artwork. Now, when groups come here, the art immediately becomes the focus of attention.”

The project also has been a significant boost for Kentucky artists — and not just because the Chamber has so far spent about $50,000 buying and commissioning pieces. Louisville distiller Brown Foreman gave $40,000 toward the art project, and most of the rest so far has come from building-project money, Adkisson said.

Lori Meadows, executive director of the Kentucky Arts Council, worked closely with the Chamber to identify artists and pieces for the building.

“It’s incredibly important for the Chamber to recognize that to complete a building, you need art,” Meadows said. “A lot of time went into the selection of pieces to make sure they were appropriate for each spot.”

The additional space was built onto the front of the Chamber’s existing 10,000-square-foot building. The two sections are connected by a new, light-filled lobby. The upper parts of the tall lobby walls are covered with panoramic Kentucky scenes by Jeff Rogers, a Lexington photographer best known for his two Kentucky Wide books.

The Chamber’s new board room is dominated by a round conference table designed by Brooks Meador of Interspace Limited in Lexington and produced by furniture maker Shawn Strevels of Faulkner Fain in Nicholasville.

The board room’s largest wall displays four large seasonal landscape paintings of Kentucky wilderness by John Lackey of Lexington. Light from a corner window illuminates a leaded-glass sculpture by Dan Neil Barnes of Lexington.

The building’s largest meeting space — the AT&T Teleconference Room — has a 10-painting suite by Lexington artist Dan McGrath, depicting scenes of commerce across the state.

The new addition also features paintings by Chris Segre-Lewis of Wilmore and Darrell Ishmael of Lexington, and mixed-media pieces by Kathleen O’Brien of Harrodsburg. There are decorative platters made by porcelain artist Wayne Bates of Murray, and a coffee table in the reception area made by Mark Whitley of Smith’s Grove.

“Our goal is to buy one new piece each year,” Adkisson said. After a few more pieces are purchased, he said, the Chamber plans to publish a brochure for visitors, telling about each artwork and the artist who created it.

“I think it’s exciting that they are realizing the value of art and supporting it,” said Ishmael, who in addition to being a successful artist is an executive with East Kentucky Power Cooperative in Winchester. “I think it’s really refreshing, and I wish other businesses would do it.”

Meadows said the Chamber’s collection has inspired several executives to contact her for help in acquiring original Kentucky art for their companies’ buildings. “That’s exactly what we want to see happen,” she said.

Click on each thumbnail to see complete photo:


How to avoid contributing to modern slavery

February 23, 2011

GEORGETOWN — Slavery is a hot topic at Georgetown College, and it is not a history lesson.

A group of faculty and students is spreading the word that modern slavery can be an ingredient in the chocolate we eat and the coffee we drink. It can be found around the world — and, sometimes, around the corner.

Leaders at the Baptist-affiliated college say it is an issue of economics and faith, and the cause has captured students’ attention like few they have seen before.

The college’s Student Abolitionist Movement will sponsor a talk at 7 p.m. Monday by Dave Batstone, president of Not For Sale, a non-profit group that raises awareness of modern slavery. At 7 p.m. March 8, there is a talk by Soreyda Benedit Begley, a Lexington fashion designer who began her career at age 14, sewing garments in a sweatshop in her native Honduras. Both events at John Hill Chapel are free.

Last week, Dr. Jeffrey Barrows, a physician, spoke about a form of slavery that is shockingly close to home: child sex trafficking. The founder of Gracehaven ministry said that at least 100,000 American children are forced into the sex trade each year, including some his Columbus, Ohio, shelter gets from Central Kentucky. One way to stop it, he said, is to teach medical professionals, educators and social workers to look for the signs of abuse, because victims are often too ashamed to seek help.

These events are part of a yearlong series of Georgetown College programs on modern slavery. Six faculty members are working the subject into course curricula in several departments. Bryan Langlands, the campus minister, also is involved.

“This is not just something for liberal activists to get huffy about,” Langlands said. “It has very literal implications for our faith as Christians.”

This effort began about six years ago, when Regan Lookadoo, an associate professor of psychology, was teaching a course on the psychology of slavery. The more the discussions moved from historic to modern bondage, she said, the more she researched the subject.

About the same time, Alison Jackson Tabor, an assistant professor of education, was reflecting on her experiences studying in Ghana, West Africa, a decade ago.

“During that time, I saw some things I didn’t understand,” she said, such as why some children never went to school, because they worked for low wages on banana plantations.

“It wasn’t until I got back to the states that I began connecting some of the dots between labor issues and consumer choices,” she said.

Their passion for the issue has attracted many others. While slavery is a complex global issue, they say, individuals can make a difference.

Coffee, chocolate, cotton, fruit, tea, sugar, rice, wine, cell phones and gold are among the most common consumer goods sometimes produced overseas by people who are paid very low wages and exposed to hazardous chemicals. Child labor is sometimes used to make goods such as soccer balls and carpets.

The best thing consumers can do, the professors say, is to buy products labeled “fair trade.” Fairtrade International, a non-profit organization, certifies producers to ensure that workers are paid and treated fairly, and not exposed to dangerous working conditions.

“There’s a lot to be said for contacting the managers of stores where you shop and asking them to carry fair-trade products,” Lookadoo said. “A lot of them are willing to do it if you just ask. And that filters up. Companies will change the way they do business when they know there’s a consumer demand for it.”

The next best thing to fair-trade food is certified organic. It minimizes the chance that workers — and you — will be exposed to hazardous chemicals, Lookadoo said.

They acknowledge that fair trade and organic products often cost a little more, but there are other ways to economize. Besides, they say, this is about more than money.

“A lot of this is about helping people to make connections between our ethical values and the things we buy,” said Langlands, the campus minister. “It’s making people realize that we’re addicted to cheap stuff, and there are moral consequences to that.”


‘Watson’ lawmakers might pull us out of jeopardy

February 19, 2011

Since the U.S. Supreme Court has decided that corporations are people, why can’t computers be politicians?

Watson for president! Better yet, let’s make clones of Watson – the computer IBM engineers built to clobber two human Jeopardy! champions last week – and put them to work in Congress and state legislatures.

Machines programmed to make decisions based on facts and logic would be an improvement over many of the human robots controlled by special interests who now run our government.

Big-money influence has always been a problem in politics. But the floodgates were opened last year when an activist Supreme Court majority expanded the legal idea that corporations are people. They overturned decades of campaign finance law and allowed corporations and unions to spend huge amounts of often-anonymous money to influence elections.

Computer politicians could help solve this problem, because they lack human greed. All computers really need is a cool room for their servers and a little maintenance. As long as they have a steady supply of electricity, they aren’t hungry for power.

Engineers could design computer politicians much the way they did Watson. They could fill their electronic brains with rich databases of facts and experience. Then they could write decision-making algorithms based on human logic and American ideals. You know, ideals that human politicians laud in speeches but often ignore in practice – fairness, justice, public good.

Consider how a computer politician could help with deficit-reduction. IBM named its Jeopardy! computer after the company’s founder, Thomas Watson. Let’s call our computer politician Webster, after that great 19th century statesman, Daniel Webster.

Webster could begin by analyzing how we got into this mess. His database would tell him that federal surpluses turned to huge deficits between 2000 and 2008 primarily because of massive tax cuts and more than $1 trillion borrowed to fight wars in Iraq and Afghanistan.

Public debt was compounded by a deep recession caused largely by a housing bubble and irresponsible Wall Street speculation. With Wall Street now back to record profits, Watson might suggest a transactions tax on financial speculation to bring in billions to help balance the budget.

Many members of Congress act as if budgets can be balanced and debt eliminated by simply cutting discretionary, non-military spending. Free from human ideology, Webster would use facts and logic to conclude that any serious attempt to solve our financial problems will require ending the wars, curbing health care costs and raising taxes.

Webster’s database would show him that today’s income tax rates are the lowest in decades – lower than during the boom years of the 1990s, and far lower than during the economic boom that followed World War II. His electronic brain would dismiss the “taxed enough already” crowd, because facts show they are taxed less than in the past.

That is especially true of the wealthiest Americans. Because data show that assets held by the richest 5 percent of Americans have grown from $8 trillion to $40 trillion since 1985, Webster would logically conclude that they can afford to pay more in taxes. And that it would be in the best interest of the nation that created the environment that allowed them to prosper.

Webster’s database would show plenty of wasteful government spending to trim – much of it in the huge military budgets that some human members of Congress don’t want to touch.

I suspect Webster’s electronic brain would recognize the folly of slashing low-cost, high-value government programs such as public broadcasting, Teach for America and AmeriCorps.  He would conclude that cutting education is no way to build a more competitive economy. The logic of maintaining oil and coal subsidies while cutting investment in developing the energy technologies that must eventually replace fossil fuels just wouldn’t compute.

Decision-making algorithms based on American ideals would never allow essential aid to the poor, sick and elderly to be slashed, while preserving billions in wasteful military spending and subsidies for industries that don’t need them.

I’m sure some people will argue that machines can never replace human politicians, because even the best computers lack essential human traits, such as empathy. They have no heart.

I don’t see that as a big problem. Many of our current politicians don’t seem to have hearts, either.


Unless economy improves, GOP’s wave will ebb

November 8, 2010

This “wave” election was all about the economy. Republicans would be wise not to make the same mistake Democrats did two years ago and think it was about them and their ideology.

An increasingly frustrated electorate doesn’t really want conservatives or liberals to “take back” America. It just wants them to fix the economy. Now.

That will be hard, and not just because our complex economic problems were long in the making. Republicans and Democrats are too concerned about their own political power to work together, make tough choices and tell voters the truth.

Neither party has the political courage to say we must cut wasteful spending, invest in physical and social infrastructure, and, yes, raise taxes if we want a strong, sustainable economy unencumbered by debt.

A recent McClatchy-Marist Poll of registered voters found that, by a 77 percent to 22 percent margin, most want Republicans to work with President Barack Obama to solve problems rather than stand firm to the point of gridlock.

Don’t hold your breath. Many of the Democrats and Republicans swept out of office this year were moderates. Hard-liners on both sides have now been joined by a handful of Tea Party conservatives, who will make compromise even more difficult. Besides, Senate Minority Leader Mitch McConnell of Kentucky has said his top priority is making Obama a one-term president.

“I’m afraid we’re in for a period of deadlock over the next couple of years,” said Charles Haywood, retired dean of the University of Kentucky’s Gatton College of Business and Economics, who has helped shape economic policy in this state for decades.

“My expectation for the next two years is that it’s just going to be a campaign for the presidency,” Haywood said. “I hope I’m wrong.”

For one thing, the economy is unlikely to see new stimulus spending. The nonpartisan Congressional Budget Office estimated in August that federal stimulus spending increased the number of people employed by between 1.4 million and 3.3 million and lowered the unemployment rate by between 0.7 and 1.8 percentage points.

But Republicans campaigned against stimulus spending, citing deficit fears. Now they control the House of Representatives, where spending bills originate. That new political reality led the Federal Reserve last week to launch a stimulus of its own, essentially pumping $600 billion into the banking system.

Liberal economists such as Nobel laureate Paul Krugman have argued that the stimulus wasn’t more effective because it wasn’t big enough. Haywood thinks a problem was that federal bureaucracy kept stimulus money from being spent quickly or efficiently enough.

“The anti-government political movement may be right for the wrong reason,” he said. “It’s not that government programs are bad. It’s the failure to get them implemented efficiently.”

Tea partiers’ calls for a balanced-budget amendment to the U.S. Constitution are foolish, Haywood said. Deficit spending is a vital tool for reviving a weak economy; the problem comes when it persists in good times.

Rather than being worried about the federal deficit now, Haywood said, politicians should focus on bringing down the nation’s international trade deficit. That will be hard to do politically, because Americans have become hooked on cheap foreign imports.

Reducing the trade deficit would likely mean allowing the dollar to fall in value, Haywood said. It also would mean changing tax rules to encourage companies to keep manufacturing jobs here — strengthening the middle class and average people’s ability to fuel the economy with consumer spending — rather than shipping manufacturing jobs overseas, where cheap labor boosts corporate profits.

American history shows that neither the political right nor the left have all the answers to creating long-term prosperity. Both Republicans and Democrats must figure out how to temper their ideologies and political ambitions and work together for the good of the country.

If the economy hasn’t improved substantially two years from now, we could see another “wave” election. Republicans and Democrats should both know this by now: the thing about waves is that they go out just as surely as they come in.


Contest, center hope to boost KY entrepreneurs

July 26, 2010

There are three basic approaches to building business in Kentucky: attract ‘em, keep ‘em, grow ‘em. Success requires all three. But over the years, state officials often have focused so much attention on the first two that they have neglected the third.

Kentucky Highlands Investment Corp. has worked on that third approach since 1968, helping home-grown entrepreneurs create more than 10,000 jobs in its 22-county Appalachian service area.

Now the corporation’s efforts are turning it up a notch. Kentucky Highlands is opening a new business- incubation center this fall beside its headquarters near London, and it is sponsoring a contest for Kentucky entrepreneurs who have big ideas that could become successful companies.

“We’re hoping to bring some of these entrepreneurs out of the woodwork,” said Jim Carroll, executive director of the new center.

Kentucky Highlands announced six winners last week among 47 entrants in the first phase of its Big Idea Competition. Each winner received a $1,000 cash prize based on a one-page outline of the idea and a business model.

Kentucky entrepreneurs and small business are now being solicited to enter the second phase of the contest. That involves submitting a three- to six-page executive summary of an idea along with business, marketing, sales and financial plans. Three winners of this phase will receive $2,500 cash prizes. Entries are due Aug. 20.

The final phase will involve oral presentations this fall. The winner will receive $10,000 cash and 12 months of free rent in the Kentucky Highlands Business Innovation and Growth Center. Two runners-up will receive prizes of $5,000 and $2,500 and offers of free work space in the center for six months.

For more information, go to Kentucky Highlands’ Web site.

Winners of the competition’s first phase were a diverse group:

■ Awesome Labs of Lexington has created technology to turn store windows into interactive touch-screen displays.

■ B2 Solutions of Somerset has developed software to manage documentation required for new products to be approved by the U.S. Food and Drug Administration.

■ Monumental Builders of Jamestown makes a patented product that uses recycled materials to create a cultured-stone concrete block system for construction.

■ NuForm Thermal Management of Sadieville turns coal ash into a ceramic material that can replace chemical flame retardants in insulation.

■ Olde Kentucky Logs of Corbin makes concrete wall facing molded to look like 150-year-old construction logs.

■ STATShift.com of Versailles has developed Web-based software to match health-care facilities with qualified workers.

“We were glad to see that diversity,” Carroll said. “We all tend to gravitate toward techy-type things, and it was good to see that (the judges) saw that more traditional types of business have an opportunity to be successful and create jobs.”

The competition, which is open to entrepreneurs or businesses with 20 or fewer employees, is being judged by a panel of investors, economic development professionals and representatives of the contest’s supporters. Among those supporters are the state Cabinet for Economic Development, Kentucky Science & Technology Corp., Lexington Venture Club, Silicon Hollow Association and Mountain Association for Community Economic Development.

Among the criteria that judges were asked to consider was each idea’s ability to create jobs in Kentucky and generate revenue from outside the state. Those factors have always been a key to Kentucky Highlands’ approach to entrepreneurship.

The new-business incubator hopes to help do that by providing office space, technical infrastructure and mentoring to entrepreneurs. The 9,700-square-foot center will rent private suites, cubicles and “rough” work space, and it has two dry labs and two wet labs.

In addition to providing start-up companies with office space, printers, fax machines and other technical support, the center offers mentoring from experienced staff members and a network of volunteer professionals in the region.

“Entrepreneurship is the future of our economy,” Carroll said. “We have to focus on growing local companies.”


We won’t fix economy unless we can change

October 25, 2009

Paul Volcker, who was chairman of the Federal Reserve under presidents Jimmy Carter and Ronald Reagan and is a top adviser to President Barack Obama, has earned a reputation as one of the rarest of creatures: a straight-talking economist.

Volcker was true to form Thursday, when he came to Kentucky to speak at the Shakertown Roundtable, a gathering of about 60 of the state’s most influential leaders in business, government, education and philanthropy.

The 82-year-old economist was blunt in his assessment of what caused this economic crisis and what’s needed to fix it. And he brought things back into focus when some executives tried to point fingers, shift blame and complain about recovery strategies.

“We spent, as a nation, more than we were producing,” Volcker said. Mix that with a real-estate bubble, reckless financial manipulation and too little government oversight, and it was a recipe for disaster.

“We were leveraging the economy … and then it all unraveled,” he said, adding that the recovery will be a “considerable slog” that could take years.

Volcker has advised Obama to restore legal restrictions, enacted after the Great Depression but repealed in the 1990s, that separated investment and commercial banking and prevented banks from becoming “too big to fail.”

The Obama administration has balked at Volcker’s suggestions amid industry opposition. But Volcker warned that without such reforms the nation could face a repeat of its current crisis in a few years.

After Volcker’s remarks, the 11 other panelists gave their views on the economy and the proper relationship between business and government. They included Gov. Steve Beshear, Louisville Mayor Jerry Abramson, the presidents of the universities of Kentucky and Louisville and several business leaders.

David Grissom, president of Mayfair Capital in Louisville, said he was depressed at the quality of national leadership. He complained about the huge amounts of money government is using to try to rescue the economy.

Julie Janson, president of Duke Energy in Kentucky and Ohio, lamented new government regulations on energy and utilities.

Churchill Downs Chief Executive Robert Evans warned this was a bad time to raise taxes and increase government regulation of business.

U of L President Jim Ramsey cited sobering statistics about Kentucky’s economic “blood bath,” such as the decline in manufacturing jobs in the past decade from 310,000 to 200,000 and the fact that Kentucky spends $9,000 a year on each public school student, $6,000 on each college student — and $19,000 on each prison inmate.

As each panelist took his or her turn, things turned gloomier. Then the last panelist, the governor, spoke.

Beshear said he thinks Kentucky is in better shape economically than many states and, with smart strategy and investment, the state could position itself to take advantage of future economic opportunities, such as advanced manufacturing.

“Until I heard from the governor, I was in a state of desperation,” Volcker deadpanned, adding that he agrees with Beshear’s optimism.

But, Volcker said, Kentucky and the nation must see the economic crisis as a “wake-up call” and make some fundamental changes.

Volcker also agreed with comments by UK President Lee Todd, who emphasized the need for more rigorous math and science education and more technology research that can be commercialized to create jobs.

Todd criticized the recent emphasis on the service economy: “We can’t create wealth by serving hamburgers to each other.”

In the best line of the day, Volcker said Americans need to shift away from “financial engineering” and focus once again on civil, mechanical and electrical engineering.

We need to regain our leadership in technology development and manufacturing, he said, rather than churning out so many business school graduates who are focused on making big, quick and easy profits by manipulating money.

If there’s one thing this year’s Shakertown Roundtable made clear, it is this: Economic recovery will require us to figure out how to prosper in a new and different global economy, rather than simply trying to get back what we have lost.

Centre College President John Roush, commenting from the audience, perhaps said it best: “I think we are going back to a place of well-being. But it’s a different place.”


As needs grow, charities worry about funds

December 12, 2008

The United Way pledge card showed up in my office mailbox this week.

I’m a big fan of United Way of the Bluegrass, the organization where some of Central Kentucky’s best people come together to help others. United Way supports 95 non-profit groups and 251 programs that make this a better place to live.

Like a lot of people, I don’t expect to get a raise next year. I might not be able to give more to United Way, but I also know I can’t afford to give less.

Charities dread hard economic times such as these; needs rise and contributions often fall. Kathy Plomin, the United Way of the Bluegrass’ president, is keeping her fingers crossed.

One of United Way’s big efforts is the 2-1-1 telephone hotline, where people in the region call operators around the clock to be referred to an organization that can help them with specific needs. Call volume has tripled this past year, with most people needing help with things such as housing, utility bills and food.

“What we’re finding is that people who never needed services before are calling for them,” Plomin said.

So far, United Way contributions are holding up. The organization has received pledges of $5 million toward its $8 million goal for the year. The big problem will be “pledge loss,” she said.

Employees at 1,800 companies in the region contribute to United Way through payroll deduction. But as employees are laid off, or leave work and are not replaced, pledges go unmet.

Normally, United Way budgets pledge loss at 7 percent. “This year, I think we’re going to have to budget in double-digits for pledge loss,” she said. “And there are some companies we’re not even going to because they’re having such a hard time.”

United Way hopes to offset pledge loss by recruiting more companies. More than 40 have been added to the system this year. The organization also has conducted several phone-athons among lapsed donors, raising tens of thousands of dollars.

“You have two schools of thought: Some people are afraid, because of the economy, to put themselves out there with donations,” Plomin said. “But some others are just caring more, and giving more, than they normally do.”

Other non-profits also are cautiously optimistic about contributions amid rising demand for their services.

“People are still generous,” said Kim Livesay, community relations director at the Hope Center shelter. “It looks like we’re going to make it through the holidays, but who knows about January.”

The Hope Center is coming off its biggest year ever for private donations, which account for more than 25 percent of funding. Its shelter and recovery programs get an additional 6.6 percent of funding from the United Way, with most of the rest coming from federal, state and local governments.

One organization already seeing a drop in contributions is The Salvation Army. The annual Angel Tree campaign is trying to provide gifts for 5,000 children — 1,000 more than last Christmas. But it is still seeking sponsors for more than 500 of those children before the campaign ends Sunday.

More severe is the “kettle campaign” — those bundled-up bell-ringers you see outside of stores with red kettles on tripods. With a dozen days to go, the Salvation Army is $157,000 short of its $350,000 goal, Major Debra Ashcraft said.

The Salvation Army’s William Booth Society, its annual major donor campaign, is coming up soon. “We’ve heard back from a couple of those folks who’ve said they just really can’t give at the level they’ve given before as a result of the economy,” she said.

“We’re in a very generous community,” Ashcraft said. “But the need has never been greater. We don’t think that the giving is keeping up with the extra demand.”

It’s something worth thinking about as you pass those bell-ringers, look at your own United Way pledge card or see people in need on the streets.

“In my lifetime, I don’t think we’ve seen anything like this,” Plomin said of the economic downturn. “Everybody’s kind of wondering what’s going to happen.”


How to balance business and government?

December 9, 2008

It looks as if Detroit may get its bailout after all.

If a reluctant Congress approves, the Big Three automakers could get $15 billion in short-term loans, following in the footsteps of banks and brokerages that are receiving $700 billion in public assistance.

Like many taxpayers, I’m angry at having to come to the rescue of greedy and incompetent corporate executives, but they seem to have us over a barrel.

Without the Wall Street bailout, the credit squeeze might have cost even more Kentuckians their jobs and savings and left the state with an even bigger budget deficit. A Detroit meltdown could wash away thousands more Kentucky jobs, from the Corvette plant in Bowling Green to the Ford plants in Louisville and dozens of parts suppliers across the state.

How did we get into this mess? Corporate greed and incompetence, for sure, as well as some irresponsible consumers. But I keep thinking that we could have avoided this crisis if government had been doing its job for the past eight years — if not the past quarter-century.

While we’re fixing the economy, it would be useful to have some sober discussions about the proper relationship between business and government. For decades, some politicians and big-money special interests have reduced that discussion to simplistic sound-bites: Business good. Big business better. Government bad. Government regulation very bad.

Government doesn’t create wealth, business does. Capitalism is the world’s best economic system because of human creativity, entrepreneurial spirit, enlightened self-interest and the nimbleness of business people to respond to the market’s needs.

But for capitalism to succeed over the long haul, it needs a fair and healthy marketplace where government sets some boundaries and enforces rules. Business people are the first to say that their job is to make a profit for their owners, not watch out for society’s best interests. That’s government’s job.

The Wall Street meltdown can be traced to greed and abuse made possible by deregulation and lack of government oversight. And if government had pushed harder for tough fuel economy standards — or helped fund innovation the way Japan has done with its automakers — the Big Three and the rest of us would be in a lot better shape now.

Honestly, I’m almost as concerned about government “oversight” of the auto industry as I am about government’s apparent lack of oversight of the financial services industry, which is getting nearly 50 times more money with few strings attached.

Government isn’t suited to running a business; it’s too bureaucratic and political. Of course, some would say the same about big corporations, especially public corporations more focused on short-term gain than long-term sustainability. Anyone who has ever worked for a big corporation knows why the comic strip Dilbert is so popular.

Some government regulation is essential; otherwise, our air and water would look like China’s and investors would have even less confidence in the safety of our financial system than they do now. But examples of overregulation are easy to find. Just ask any health care professional who deals with the well-meaning but nightmarish federal privacy law known as HIPAA.

As the nation feels its way toward a new relationship between government and business, a good subject to consider is health care.

Unlike in most industrialized nations, our health care system is left largely in private hands. Health care costs have traditionally been borne by business, although, as those costs have risen dramatically, companies have shifted more of them to workers.

The United States spends 16.5 percent of gross domestic product on health care — much more than any other nation — and that figure rises every year. Yet we have an inefficient system where an estimated 47 million people are uninsured and many families are just one serious illness away from financial ruin.

Why should businesses bear that burden? If government took more responsibility for managing health care with private providers, many people think both quality and coverage could be improved. Freed from those benefits burdens, companies could be more competitive globally. Plus, think of the entrepreneurial potential that could be unleashed if so many workers weren’t tied to jobs they hate by fear of losing health care benefits.

Of course, any attempt at change will be vigorously opposed by the health care industrial complex, which profits from the current system’s inefficiency. It will raise fears about “socialized medicine,” even though public-private systems such as Medicare, while hardly perfect, have worked well for decades.

Like many Americans, I’m uncomfortable with government trying to manage big business. But if government would use this opportunity to learn how to do a better job of governing, we might be spared more corporate bailouts in the future.