Pro Sports Stadiums

http://www.latimes.com/sports/la-sp-nfl-farmer23-2009oct23,0,2970914.column

Gov. Arnold Schwarzenegger signed legislation that will make it easier to build a 75,000-seat football stadium in the city of Industry, by exempting the venue from state environmental laws.

While that doesn't guarantee that the stadium will actually be built -- it's up to an NFL owner to pony up the cash for that -- it does remove the biggest hurdle by far in the entitlement process. The governor's rationale for doing something so dramatic -- in one of the most environmentally sensitive states, no less -- is he's been promised the project will create more than 18,000 jobs. That would be a huge boost to the local economy.

Now, if the Industry stadium creates 18,000 jobs -- a number many experts think is inflated -- and stadium deals in San Diego and the Bay Area create 36,000 more, maybe it's the NFL that winds up solving California's fiscal crisis.

Who wouldn't cheer that?

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Interesting article in the LA Times that confirms the point on what industries the government has selected for success. A few points:

*Cal environmental laws often do not protect the environment but allow labor unions to protest projects prior to the developers meeting their salary demands.

*Job growth now comes from temporary construction projects that have limited employment benefits when completed (no national long term employment benefit if a team relocates)

*Interesting that the governor exempts a pro sports stadium but not other projects that could create long term employment benefits, this should clarify why I said the government favors pro sports and not manufacturing.

No Not Auto

I have heard a few people tell me in response to the industries I selected as government choice I forgot auto. Auto was a recipient of, "Cash for Clunkers" and well as the GM and Chrysler bailout.

A closer inspection shows those actions are not the same as choosing those industries for success and growth. Hyundai who produces most of their cars offshore was one of the biggest beneficiaries of "Cash for Clunkers". The GM bailout allowed GM to close the only manufacturing plant in the most populous state in the country. The Chrysler bailout handed ownership to the UAW and management to Fiat. Fiat now wants to imports cars that get sold in Dodge dealerships.

Lastly, except for some Southeastern states, most states have decided an auto plant is too dangerous for the environment.

In conclusion, The auto industry has not been selected by the government for success.

Employment and Oversupply

Economists are puzzled as to why job growth has slowed, citing everything from higher health care costs, to higher productivity, to Chinese currency manipulation.

"The answer is, we don't know," said Tim Bartik, a liberal economist with the Upjohn Institute for Employment Research in Michigan who is proposing a tax credit for employers who hire new workers

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/25/MNMR1A9PMQ.DTL&tsp=1#ixzz0Uxw9xPV8

Is negative job creation really that puzzling? If stimulus is targeted at oversupplied industries, the best case scenario is jobs do not fall in those industries. The best example is all the "Stimulus" focused on housing. Housing employment has remained flat, overall jobs are down, and housing vacancy rates continue to grow.

Other examples including providing more, "Stimulus" to state and local government. In NJ, the state population has been flat this decade but state government employment has grown. What are all those additional state employees producing?

So in the end if the government spends a few trillion more you can get positive GDP, but please do not be surprised by lower employment.

CIT versus Goldman Sachs

During the 2008 "Financial Crisis" the media reported the banking system needed to be saved because it was the cardiovascular system of the economy. I think it is interesting to see what is happening to two different banks:

CIT, makes loans to small businesses and many franchisees. They did receive TARP but is not really making loans anymore and is likely headed for bankruptcy. This is the cardiovascular system to small businesses. (BTW I think the country has enough Subway Sub shops, but these loans directly create jobs)

GS, trades stocks, promotes IPOs, and helps fund private equity companies. For example, a private equity company will buy an established company like Outback Steakhouse then try and sell it to another PE company or plan an IPO for a profit. These PE actions create a lot of profit for the banking class but do not create incremental jobs throughout the country (Outback already existed).

CIT got some funding but GS received over $20B directly and indirectly from the government.

If you are a realtor in the Hamptons GS certainly is the cardiovascular system, but if you own a strip mall in Missouri you need CIT. Based on this it is interesting to see which "necessity" received the most government support. Is it a surprise to see unemployment increasing when you review government actions?

Government Desires

Thinking about what we produce in America, made me realize the nation produces what the government wants the nation to produce. The five industries that receive huge subsidies and are (were) the nation's growing industries are:

-Investment banking

-Professional Sports (Division 1-A college is professional in my book)

-Agriculture

-Housing

-Health Care

Just to list some of the subsidies these industries receive:

-Guaranteed loans from the Federal Reserve

-Professional Sports (When is the last time you heard of an unsubsidized stadium)

-Agriculture (Bob Dole said a farmer can double their income by installing a second mailbox)

-Housing, probably not enough room to list them all, but here are a few: deductions, FNM, FRE, FHA, Federal Reserve Purchases, Tax credits, etc

-Health Care, I read between Medicare, Medicaid, VA, and government employees it is over 50% of all health care spending in the country

The problem is now that all of those industries are oversupplied the government is trying to create demand for their products.

How long can the government choose what the nation creates and create the demand for those products?