Category Archives: Economics

Trump budget to signal huge retreat from world affairs

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Foreign Policy magazine is reporting that the Trump administration is going to propose slashing more than half of what the U.S. spends annually for United Nations’ programs (“White House Seeks to Cut Billions in Funding for United Nations“).

And it’s not just the U.N. facing big cuts, but funding for other types of foreign assistance and even the State Department itself.

FP says the moves signal “an unprecedented retreat by President Donald Trump’s administration from international operations that keep the peace, provide vaccines for children, monitor rogue nuclear weapons programs, and promote peace talks from Syria to Yemen, according to three sources.”

And what will this mean?

Richard Gowan, a U.N. expert at the European Council on Foreign Relations, said cuts of this magnitude would create “chaos.”

This is a single-minded selfishness of a sick billionaire’s view of the world that, if actuallly pursued, is going to come back to bite us right you-know-where.

Even without dealing with what this says about the lack of simple human empathy or caring about others, the president’s people seem blissfully unaware that the U.S. is less than 5% of the world’s population, and chaos elsewhere in the world can’t be contained or made to work in our favor.

FP cites observers who predict that Congress will not agree to cuts of this magnitude and that this part of the president’s budget, at least, is unlikely to pass.

I’m not sure that’s really comforting…

Trump’s travel ban could trip up the state

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A marked decrease in international travelers to the U.S. following Trump’s initial ban on travel from seven countries, already seen in data from different parts of the travel industry, could end up taking a bite out of Hawaii’s visitor industry.

The problem seems to be that the U.S. is suddenly perceived as an unstable and unwelcoming place for international visitors as a result of the ban and the resulting global publicity.

The New York Times reported last week that travel bookings to U.S. destinations dropped after Trump’s ban was announced. Online searches indicating potential interest in future travel dropped as much as 47%, according to the Time’s review of data from a number of travel sites. See NY Times, “After Travel Ban, Interest in Trips to U.S. Declines,” February 20, 2017.

The short-term weaker demand for travel to the United States aside, the bigger concern for travel analysts is the ban’s potential to damage the country’s lucrative tourism industry in the coming years. Statistics from the Bureau of Economic Analysis, part of the United States Department of Commerce, show that tourism-related spending in the United States was $1.56 trillion in 2015; tourism created 7.6 million jobs in the United States that same year.

According to Adam Sacks, the president of Tourism Economics, part of the economic research firm Oxford Economics, President Trump’s executive order is part of a broader policy platform and “America first” rhetoric that is creating international antipathy toward the United States and already affecting traveler behavior.

Earlier this month, his group conducted a study of travel to Los Angeles County and found that the county could suffer a potential three-year loss of 800,000 international visitors as a direct result of the ban, the equivalent of $736 million in tourism spending.

“It doesn’t take a lot of uncertainty or adverse sentiment to affect travel decisions,” Mr. Sacks said.

In a tweet on Sunday, economist and columnist Paul Krugman observed: “Tourism and education are surprisingly big U.S. exports, almost surely creating more jobs than, say, coal.” His tweet included a chart showing income from travel.

A friend emailed me wondering what the situation is at Honolulu International Airport? Is the “welcome” less welcoming than it used to be?

These are important issues for Hawaii’s overall economy, and any negative results are going to quickly trickle down to the rest of us.

Hints about the future of rural America?

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I thought these observations gleaned from recent news stories, were worth sharing. They arrived in emails from someone who comments as “Compare Decide”.

The good news is that JC Penney has made its first profit since 2010.

The bad news is that they have decided to close up to 140 stores.

The worse news is that this will probably trigger the closing of many struggling shopping malls.

http://www.marketwatch.com/story/jc-penney-to-close-130-to-140-stores-sales-dip-2017-02-24-12485289

Most of these articles on this subject frame it in terms of the rise of online shopping, or the executive mistakes of the past.

But it has been little noted that these store closings are in rural areas.

The story of the century is the decline, obsolescence and doom of small towns and outside suburbs, and so few seem to see this pattern.
….

But back in September of 2016, an optimistic JC Penney was planning on replacing Sears and Macy’s.

http://www.chicagotribune.com/business/ct-rise-of-jc-penney-20160826-story.html

Some of J.C. Penney’s most profitable locations turned out to be small stores in rural areas where the retailer pays almost no rent; two California stores opening this year will be completely funded by the landlord.

A less happy story from yesterday.

http://news.morningstar.com/all/dow-jones/us-markets/201702248502/jc-penney-to-close-more-than-100-stores-3rd-update.aspx

Penney on Friday eked out its first annual profit since 2010, but executives said they were closing weaker stores so they could focus their investments on revamping those in stronger markets. Penney said it would identify the locations that are set to close next month, though executives said many were smaller stores in rural locations.

Geography is critical.

Optimism is still evident in some parts of the retail industry.

But another mall giant, Gap Inc., posted higher comparable quarterly sales for the first time in two years. “If you read the headlines today, you’ll see the words dead, dying, sick. We are none of those,” CEO Art Peck told investors late Thursday. “We are healthy and strong and have a plan and clear direction.”

Um, that’s what JC Penney was saying last year….

Watching the rising waters

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A New York Times story published this week reports that the economic impact of climate change and rising sea levels on coastal real estate “could surpass that of the bursting dot-com and real estate bubbles of 2000 and 2008.”

It’s an important story with plenty of implications for Hawaii, but likely got lost in the Thanksgiving and Black Friday news and advertising.

See: Ian Urbina, “Perils of Climate Change Could Swamp Coastal Real Estate.”

“The fallout would be felt by property owners, developers, real estate lenders and the financial institutions that bundle and resell mortgages,” according to the story.

The article cites “nuisance flooding,” or flooding caused by tides rather than by weather, as sort of a leading indicator. Honolulu already has its share. The high tide floods in the Mapunapuna industrial area is just the most recognized. But some older high rise buildings in low lying areas of Honolulu, including in and around Waikiki, are already facing problems created by a rising water table. I know of several condominiums on the edge of Waikiki where water is entering elevator shafts, requiring expensive efforts to seal or block the waters. Given the number of older buildings, I would be surprised if this isn’t a major issue that just hasn’t grabbed the public’s attention yet.

There are many unknowns, including the pace of sea level rise over coming decades and the reaction of real estate markets.

The NYT story cites a recent post by Freddie Mac, the mortgage giant, concerning the impact on the mortgage market.

One challenge for housing economists is predicting the time path of house prices in areas likely to be impacted by climate change. Consider an expensive beachfront house that is highly likely to be submerged eventually, although “eventually” is difficult to pin down and may be a long way off. Will the value of the house decline gradually as the expected life of the house becomes shorter? Or, alternatively, will the value of the house—and all the houses around it—plunge the first time a lender refuses to make a mortgage on a nearby house or an insurer refuses to issue a homeowner’s policy? Or will the trigger be one or two homeowners who decide to sell defensively?

I’m now living a quarter-mile from the beach, and I’m old enough that the long view isn’t as much of a personal concern. But for younger folks, this all deserves to be a much higher priority.