Veritas

The long awaited report on the viability of a sports and convention center for downtown Flint was finally released last week, and the findings were predictable: it could be viable, but!
The “but” really brings into question the the level of total community support there would be for the projects that would require a minimum of $68 million at a time when public financial resources are limited. And, by total community, it means the support from suburban Genesee County for a City of Flint development.
Now there’s little question that detractors of the project will bring up the “Auto World” fiasco of the early 1980s, which is a legitimate counter since there are claims that the three projects would create more than 1,100 new jobs, and revitalize the downtown area. However, unlike the auto theme park (plus Hotel and Pavilion), the success of the projects would not be totally dependant on tourism, but would theoretically draw local residents downtown on a continual basis.
So,the real question is, will the metro-Flint area support the activities, particularly in the arena and stadium, to make them financially successful?
However, before the question is reasonably answered, decisions are likely to be made on finances, and backers of the project will likely come to the business community for pledges of support. The danger here is that proponents of projects have the unique ability to skew the results of high pressure fund-raising to give a false appearance of community support.
Since business owners want to appear to be “good citizens,” they’re often susceptible to community oriented plans that don’t make realistic business sense. And, historically, their generosity covers the true weaknesses of the backers’ arguments.
The odds are pretty good that many of you will be contacted for support in the near future. Don’t be hesitant to question the feasibility....too many were in 1980.

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Briefs with local Housing Industry or Economic Impact

Isn’t it par for the course? Now that Buick says goodbye to Flint, it goes off to seek a “Hipper” image.
Last week the GM division that’s been targeting the social security set, unveiled its new Rendezvous, a combo SUV/Minivan, developed to attract those youngins in their 40s...... and, on top of all that, its marketing wing dumped Methuselah as its primary spokesman, and hired some 24 year old kid. Par for the course? No way! The new kid only shoots par on a very “bad day.” His name’s Eldrick Woods and he claims to drive Regal. He also goes by another name, and it isn’t Lion or Bear. And it looks like he’ll sell a lot of cars for Buick City II.

As we continue to here about the encroachment of subdivisions on farmland, we find it interesting to hear last Friday’s report out of Washington noting that Congressional Republicans are making an election year issue out of the current Clinton proposal to bail out farmers. Apparently, his $5.8 billion assistance package, as compensation for low crop prices is “woefully short,” which is probably correct, at least in comparison to the ‘98 and ‘99 bailouts that cost the taxpayers $15 billion. So, you can pretty much bet that the final package will be end up in the $7.5 billion range.
Of course, that will come on top of existing programs that will already give farmers $17 billion in assistance.
$25 billion? Wouldn’t it be wiser public policy to pay developers for taking farms out of the welfare system?

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The Dilemma that killed the Coronation

In all my years of political involvement, I’ve never observed anything that remotely resembles what’s going on in Republican Presidential politics today. What’s amazing about this election year is how the party’s elected leaders in the state and nation’s capitols, reached a consensus they were sure would guarantee a GOP victory in November. But a funny thing happened on the way to the coronation of their anointed candidate, George W. Bush.
First, the candidate began to crumble without any significant opposition in the first test of strength, the Iowa caucuses. Then, he was literally destroyed in the second test, as his only real challenger, Senator John McCain of Arizona, actively campaigned in New Hampshire.
Secondly, Bush’s failure would mean that party leaders would be stuck with their worst nightmare: a standard bearer who argues, not only for campaign finance reform, but for fiscal responsibility and against “pork barrel” spending.
The result? Bush backers (many of which despise McCain) began to panic. And the panic spread to the candidate who reneged on his pledge against negative campaigns and, in desperation, unleashed an onslaught of television and radio attack ads in South Carolina and Michigan; ads that viciously distort McCain’s tax plan, and blatantly attempt to create an illusion that his (McCain’s) recent fundraiser conflicts with his call for campaign finance reform.
But the attacks against McCain aren’t limited to Mr. Bush. Several of his best known backers have taken the lead in claiming McCain’s tax proposal is not a “Republican” plan, but is more like Clinton and Gore.
Now, here’s the problem with that theory. During the past four years, many of these same surrogates have claimed that Clinton’s success in balancing the budget came because he adopted Republican policies. Now, isn’t it fascinating that, if Clinton takes a position with positive results, it’s “Republican,” but when McCain speaks to fiscal responsibility, he talks like a Democrat?
Why is there so much disdain for McCain in his own party? Though much of it does stem from his reform posture, over the long term it’s been his anti “Pork Barrel” spending rhetoric that’s infuriated his colleagues. Because it’s McCain who consistently points to the hypocrisy of claiming fiscal conservatism while supporting “back home” projects that rape the federal treasury.
Back in 1996, the business and professional community deserted the GOP in shockingly large numbers, and supported the Clinton re-election due, primarily to economic issues. By showing its disdain for fiscal responsibility, GOP leaders are setting the party up for a repeat performance, if their candidate is nominated. Only this time, the beneficiary won’t be an economically moderate administration where Robert Rubin is calling the shots on economic policy. Instead, we’re looking at a Gore administration, which has already made a myriad of promises the treasury can’t afford.

Barry

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The Seinfeld Section (it’s still about Nothing ; in particular)

Good riddance to Steve Forbes! However, he will be missed as the “perfect” front man for the “Flat Tax.” After terribly flopping in New Hampshire and Delaware, the magazine publisher, who has spent more than $40 million of his personal fortune on a Quixotic quest for the presidency, withdrew from the race (under rumors that his daughters had filed papers for a competency hearing in a New Jersey court).
Americans can be thankful for Mr. Forbes five year effort, as he set the flat tax movement back, so far in fact, that House Majority leader Dick Armey has even refrained from babbling about the concept. Now, we can only hope that future proponents of such psychotic economic proposals possess all the charisma, charm and mental stability projected so proficiently by Mr. Forbes and his campaign brain?trust.

OH OH! It seemed like a good idea back then! But, this one’s from the “be careful what you wish for” category....
Democrats have their own dilemma with the emergence of John McCain’s popularity. For months now, Democrats have been speaking highly of Senator McCain, partially because they do like him, but more because they thought it would tarnish the seemingly invincible armor of the GOP leadership’s anointed candidate, George W. Bush. Well, it worked so effectively that that Bush’s popularity decline was so dramatic, that their (Dems) anointed candidate, Al Gore, caught him in the national polls. Success?
Hardly! Now, McCain’s destroying Gore by roughly 15% in those same polls. And, it’s even conceivable that he will win the nomination with independents, and even a number of Democrats, flocking to the polls in his support.
So, it was no surprise last Friday when Michigan Democrat chairman Mark Brewer issued a warning to his party members who are planning to vote in Tuesday’s primary....... “Don’t Do It!”
In fact, Mr. Brewer even suggested that Democrats voting Tuesday could be forbidden to participate in their own party’s March 11th caucuses (which comes four days after “Super Tuesday, the day the Democrat’s nominee will, in reality, be chosen)..obviously presenting a rough choice for Michigan Dems: Do I play a roll in picking one major candidate; or would I rather rubber stamp the other?

If you’re wondering how Gore can survive with Michael Jordan cutting commercials for Bill Bradley, remember, Sha-
quille O'Neal backs Gore, and California has more delegates.

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Association News and Events: Table Top was best ever; Parade Deadlines

Expectations for February’s Table Top exhibit night were met, and surpassed, as more than 200 members and exhibitors made it the best attended event in years. We ended up with 44 exhibitors, including a number of first time participants, and a large number of members we seldom see on normal Wednesday evenings.
Most gratifying were the continual compliments we received from exhibitors and attendees alike; particularly the one from the new member who had exhibited in several similar such events in other parts of the state and said, this one “blew them all away!”
If you weren’t involved, we suggest you plan to be next winter, as we’re confident the 4th annual will be bigger yet.

The first deadline is fast approaching for the spring Parade of Homes! After this Monday, February 21st, the cost for entry into the May event will rise by $200.
The Parade is, once again, shaping up as another tremendous kick-off for a banner year in the local home building industry...If you haven’t received participation materials and are thinking of putting a model in the event, please call the office immediately........The final deadline is March 10th!

Hopefully you receive this by 2-21-00, which not only is President’s Day, but also the meeting of the Home Builders Council, which has been reinstated in response to a number of new issues facing the home builder directly. As a reminder, it’s at the BAMF office, beginning at 3:00 p.m.

More good news from the association’s Workers Comp program. In its first “annual” meeting as a mutual insurance company, Michigan Construction Industry Mutual announced a policy holder dividend return of $2.8 million. However, checks won’t come until August....tbc.

It looks like Prosecutor Art Busch will be speaking on his check fraud enforcement program at the March meeting. However, we can probably get him to comment on a few additional items...see 2/29 Veritas.

Economic Update: No end in sight for the economic boom

During the past two weeks we learned that the economy remains even stronger that the rate of economic growth suggests. As the current expansion reached the point where it became the longest in history, we found the rate of job creation in January was the highest in two years, the rate of unemployment is at its lowest level in 30 years, and fourth quarter productivity was so strong that labor costs actually fell a full percent from October through December.
Then, last week, the Clinton administration said, in the release of its annual economic report, that fundamentals continue to look very good and, “as long as we (the government) stick to sound policy, there’s no reason it cannot continue indefinitely.”
In a statement accompanying the report, the President credited “fiscal discipline to help reduce interest rates and spur business investment,” and the opening of foreign markets as reasons for the continuing economic boom. And he also included government “investment” in education, health care, science and technology as additional reasons to credit administration policy.
The report expects growth to slow to a 2.9% rate this year, and continue in the 2.5 to 3% range through the end of the decade.

Employment
Back in the 1960s and early 1970s, economics students were told that 4% unemployment was “full employment,” since there would always be a certain percentage of workers “in between” jobs. And, in January 1970, the U.S. hit its “full employment” target.
Subsequently, as dramatic changes engulfed the economy, consensus economic opinion suggested that there would be danger of it overheating if the unemployment rate fell below 6%.
Well, last month American firms generated new jobs at so strong a pace, the jobless rate actually fell to the old full employment level, the lowest in 30 years.
There were 387,000 new jobs created last month, the highest number in more than two years and approximately 43% higher than expected. Also, the average wage, a closely watched indicator of inflation, was up 6 cents per hour—to $13.50—also larger than forecasted.
However, as you can see in the next section, danger from these employment conditions are offset, to a great extent, from productivity data.

Productivity Surges
A few days after the release of the employment report, the Labor Department announced that worker productivity rose at a 5% rate during the fourth quarter ‘99 while wage costs actually contracted, at their largest rate in nearly 4 years. The news confirmed the belief that rising technology in the workplace is continuing to improve efficiency, thereby allowing firms to streamline operations and reduce costs.
For all of 1999, productivity was up 2.9%, slightly above the 2.8% the previous year, as labor costs rose 1.8%, well below 1998’s 2.4%. But the big news had to be the fourth quarter’s labor costs performance. The measure of the actual expenditures by companies on worker output falling 1%, was significantly better than expected, and came on top of a 0.3% contraction in the third quarter. So, has been the case for the past three years, productivity continues to suppress inflationary pressures.

Other Notes: Manufacturing showed some strong signs in the past couple of weeks as orders at U.S. factories jumped 3.3% (fastest pace in 7 years) in December, while industrial output climbed 1% in January (the fastest pace since August ‘98, when GM settled the strike)....as Automakers boosted production to a 13.3 million vehicle rate.

Housing Industry News Update

Sales of new, single family, homes reached an historic high of 904,000 units last year, as “good weather” conditions contributed to a year-end boost in December. The Commerce Dept. figures, released two weeks ago, show that sales were up 2% over 1998, and rose in every region except for the Northeast.
The Midwest experienced the biggest rise, up 4.9% to 172,000 units.
Sales for December were up 1.3 percent from November. However, in comparison to a year earlier, inventories were higher as a 4.4 months’ supply of homes was on the market. A 3.8 months’ supply was available in 1998.
Regarding 2000, NAHB is forecasting a 7.3 percent sales decline for the year. Still, the projected sales of 838,000 units remains an historically strong number.

Although their figures for 1999 appear distorted in comparison with the private and public data we’ve seen throughout the year, the Detroit Branch of the Federal Reserve recently reported that recent figures suggest the state’s “hot housing market may be starting to cool.” In its “FedPoints” issue for the first two months of 2000, the fed looks at the declining “year-over-year growth rate of employment,” and notes that the slower rise has had an effect on the housing market.
Their data also says that housing activity in the Detroit area was on the rise, at a 10% pace in the middle of the year, but slacked off in the fourth quarter.
Although the 10% figure for mid-year was probably high, every county in the region experienced a fall off by the year’s end, except Genesee, and total activity was down for Southeast Michigan, as a region.
The interesting point the Fed raises is the declining growth in employment, from 1.4% in 1998 to 0.7% last year. As was noted last spring at the annual Oakland County economic report, growth in economic activity was being inhibited by the limited availability of potential workers in an extremely tight labor market.
This is a severe problem which could well have long term repercussions on the future of home building in all counties in the region.

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