Double Dip Drama

So far this month, politicians on Capitol Hill have been breathing sighs of relief as various manufactured fiscal crises have been averted at the last minute. And at first, it looked like the economy has been humming along just fine despite the DC drama. However, today it looks like earlier assumptions may have to be thrown out the window. Believe it or not, the early Commerce Department Fourth Quarter economic report actually showed the economy contracted by 0.1%

So what happened?

First, federal defense spending fell at an astounding 22.2 percent annual rate in the quarter, which subtracted 1.28 percentage points from GDP growth. That was in part a reversal from the unusual 12.9 percent gain in the third quarter. But when the two quarters are averaged together, the defense sector was a drag on the economy in the second half of 2012 —and that’s before a “sequester” of automatic defense cuts goes into effect this year if Congress doesn’t act to avert it. The volatility in defense spending —and consequences for economic growth- -are a reminder of the impact that may be seen in the future as federal spending cuts go into effect.

The second major drag on growth was from businesses inventories. Firms drew down their inventories by more than $40 billion, which subtracted 1.25 percentage points from GDP growth. In effect, by selling goods sitting on their store shelves and in their warehouses, production in the nation’s farms and factories was not as high as one might expect given consumer spending.

The good news, though, is that the effect from inventories should go away in future quarters; businesses can’t simply run down their inventories forever. final sales, which adds inventories back in, rose at a 1.15 percent rate. [...]

GDP is the broadest measure of economic output, aiming to capture the value of goods and services produced within U.S. borders during a given time. The data over the last three years paint a portrait of an economy stuck in a pattern of steady growth, neither break out into a sharp enough pattern of expansion to push down joblessness nor to fall into a new recession.

Still, there are some reasons for concern in 2013. While consumption spending held up in the final months of 2012, that was before an increase in the payroll tax took effect in January. And negotiations over the sequester could result in steep cuts in defense and other government spending in the months ahead, putting further downward pressure on GDP.

Now this is an early estimate, and the Commerce Department may revise this figure as more data comes in. And it looks like one-time events like inventory drawdowns and wild swings of military spending temporarily threw the GDP out of whack. Excluding inventory, real GDP sales actually rose by 1.1% last quarter.

However, we still can't feel too sanguine about this. The report also suggested that Washington's austerity fetish is harming economic recovery. While much of what happened last quarter may be temporary blips on the radar screen, we may also be seeing real warning signs going forward.

So why did we see slight contraction in the GDP? In large part because spending cuts -- federal, state, and local -- shaved more than a full percentage point off GDP growth.

I realize the right doesn't want to hear or believe this, but when Washington spends far less -- in this case, the cuts focused on defense -- it takes capital out of the economy and undermines growth. It is, as a practical matter, a form austerity, which helps hit the brakes on the economy. This is Economics 101 and yet Republicans continue to insist that it is the only policy they really care about.

It's something to keep in mind as the Beltway's preoccupation with debt reduction, not the recovery, continues unabated. It's also a reminder that the automatic sequestration cuts may very well push the nation closer to a recession this year.

For nearly four years, Europe has been ravaged by fiscal austerity. As European governments, especially in "The Eurozone" (where the Euro is used as currency), have been slashing their budgets, unemployment has skyrocketed as GDP plummeted. Many economists have been chiding "The Eurozone" for engaging in way too much austerity that's only exacerbated their "Great Recession"... And they've been warning us not to repeat this mistake.

Yet despite this, Republican Congresscritters like Nevada's own Mark Amodei keep calling for more "drama" in the form of government shutdowns and "Fiscal Cliff" budget slashing. Remember that this is essentially the American version of "Eurozone Austerity". And the more we engage in this activity, the more likely we are to actually fall into "double-dip recession".

Senate Majority Leader Harry Reid (D-Art of the Deal) seems confident that Republicans will cave (again) on "The Fiscal Cliff". Now, many economists are hoping his recent words will soon come to pass. Even when inventory is excluded, GDP still only grew by 1.1% last quarter. And if we fall "off the cliff" this year, we may see at least 0.7% worth of GDP growth shaved off this year. Can Nevada's & America's economy truly handle any more fiscal drama?

Recovery Is Here? The Strip Feels It, But What About the North?

Nevada’s Department of Employment, Training and Rehabilitation just gave us some (mostly) welcome news to start the week. Our state's unemployment rate fell from 13% in December to 12.7% this past January. Thanks to recent improvement in gaming and tourism on the Las Vegas Strip, those sectors are adding jobs again. However, not everyone is experiencing improvement.

Nevada’s jobless rate fell from a revised 13 percent in December to 12.7 percent in January, down
from 13.8 percent a year ago and a peak of 14 percent in October 2010. The number of
unemployed Nevadans remained relatively flat at 174,700, but is down 16,300 from the same
month last year.

“Employers added a seasonally adjusted 1,800 payroll jobs. It marks the 12th time in the past 13
months that employment has grown on a year-over-year basis,” said Bill Anderson, chief
economist for Nevada’s Department of Employment, Training and Rehabilitation
(DETR). “Nevada’s labor markets continued on a path of moderate improvement in January, but
Nevada’s unemployment rate is 4.4 percentage points higher than the nation’s 8.3 percent.”

Changes in the unemployment rates in the State’s urban areas were mixed in January. In Las
Vegas, the unemployment rate declined from 13.3 percent in December to 13.1. Over-the-year, the
rate is down by 1.3 percentage points. In the State’s northern metro areas, the unemployment rate
increased by six-tenths to 13.0 percent in the Reno-Sparks area and by seven-tenths to 13.5 percent in Carson City. Reno’s unemployment rate is down by 1.2 percentage points from the previous year and Carson City’s is down by one percentage point. The unemployment rate in the Elko area increased from 6.4 percent to 7.3 in January and is down three-tenths from the previous year.

Again, this largely has to do with gaming and tourism. Las Vegas has been recovering there, but the gaming sector has been much shakier in the Reno-Tahoe market. We've been seeing those signs, but now that picture is looking clearer. And it's other reminder that gaming alone can't save us.

This comes back to what we discussed in January about our need to realize Nevada's economy can no longer afford to be a "one trick pony". During the worst of the recession, Clark County was taking the brunt of it because we were most susceptible to the real estate bubble bursting, along with global financial crises drying up tourists' disposable income. But even as economic recovery has brought many of these tourists (and some of their disposable income) back to Las Vegas, Reno continues to suffer as newer gaming destinations (like California's tribal casinos) are eating into a tourist market that used to be almost exclusively Northern Nevada's to tap.

If Governor Sandoval and state business leaders are serious about adding 50,000 jobs in this state in 2012, they have to realize that Nevada can't succeed in that by continuing to be a "one trick pony". Whether it's global turmoil affecting tourism to Las Vegas or new regional competition hurting tourism to Reno or online gaming posing a new threat to everyone, there will always be something that could harm our gaming industry. That's why it no longer makes sense to put all our proverbial eggs into that one basket.

Why "The J Word" Matters

Yesterday, US Labor Secretary Hilda Solis came here to Las Vegas to explain how the American Jobs Act will make an impact on Nevada's beleaguered economy once passed.

President Obama’s jobs plan would have a significant positive effect on Southern Nevada’s economy by putting construction laborers back to work, Labor Secretary Hilda Solis said today in Las Vegas.

Solis met with the Las Vegas Sun editorial board following an appearance before the Laborers’ International Union of North America at Paris Las Vegas.

Solis said she expects Obama’s $447 billion jobs plan, unveiled to a joint session of Congress on Thursday and detailed in a bill sent to legislators today, to garner bipartisan support because it uses ideas from both sides of the political aisle.

“Economists say anywhere from 1 million to 1.9 million workers in the construction industry (would be put to work),” Solis said. “That would have an immediate impact on places like Nevada, particularly here (in Las Vegas) where the housing boom was the hardest hit.”

Obama’s proposal includes tax breaks for small businesses, economic stimulus programs and a national infrastructure “bank” to fund roads, bridges, airports, seaports, railways, refineries and to upgrade schools. The president has proposed reducing tax deductions, modifying entitlement programs and increasing taxes on the most wealthy to pay for those programs.

It's a broad ranging piece of legislation that tackles job creation from multiple angles...



Yet House Republicans are already set to reject it and start another possible government shutdown melodrama, even as some progressive Democrats in the House are complaining that it isn't enough. However, one prominent voice in DC rose to say something that Congressional Republicans really did not want to hear.

"If policymakers want to achieve both a short-term economic boost and long-term fiscal sustainability the combination of policies that would be most effective according to our analysis would be changes in taxes and spending that would widen the deficit today, but narrow it in the coming decade," [Congressional Budget Office chief Doug] Elmendorf told the panel's 12 Democrats and Republicans. "The combination of fiscal policies that would be most effective would be policies that cut taxes or increase spending in the near-term, but over the medium and longer-term move in the opposite direction."

This is a generalized version of precisely what President Obama is proposing -- a $447 billion jobs bill that will increase spending on hiring programs, and reduce payroll taxes; accompanied by deficit reduction measures that take effect in 2013, to more than cover the cost of the jobs bill.

As we've talked about before, "austerity" does nothing but harm fragile economies in need of investment to recover and grow again. Yet even as top IMF economists point this out to the world, this is what we hear from the Republicans seeking to defeat President Obama next year.





Cheering on the deaths of the uninsured? Arguing over the value of Social Security? And while the Republicans keep playing in "Tea Party Fantasyland", a record 46.2 million Americans were hit by poverty last year. If there is ever a time to shift into overdrive to focus on job creation and put money in people's pockets again, it's now. But instead of offering any credible ideas on that, Rick Perry, Mitt Romney, and their enablers on Capitol Hill would rather obsess over "Tea Party" fantasies that would further destroy America's middle class, like ending Social Security and scrapping health care reform. (No wonder why Perry's and Romney's poll numbers are dropping like rocks!)

This is the great disconnect. For far too long, it seemed like far too many policy makers in The Beltway were obsessing over issues that "Middle America" couldn't care less about while they were out of work and asking where the jobs are. But while President Obama is reaching out to "Middle America" to explain what the American Jobs Act will do to help them get the work they need to rejoin the middle class, Republicans yet again seem to care more about pleasing teabaggers than actually doing their job.

10 of '10: Are We There Yet?

This week, I'm introducing 10 of '10, aka the ten most memorable Nevada stories covered here in 2010. Haven't we been through a lot this year?

And without a doubt, one of the biggest ongoing stories of 2010 was our brutal recession and whatever signs emerged of potential recovery. It seems the worst is finally over, but that's cold comfort to those here in Nevada who still can't find jobs.

Back in January, there was our first sign of hope when Goldman Sachs turned bullish on MGM Resorts as Vegas visitation numbers started rising again.

So is everything looking up from here? Apparently.

But is all the bad news over yet? Not so fast. Room rates are still hovering under $93 per night, and total spending is still down.

But at the very least, more signs are finally appearing and telling us that the worst is over and recovery is arriving. This is the third month in a row with year-over-year gains in tourist volume, and this is the first time since 2007 that Nevada casino winnings have actually seen year-over-year gains. Also remember that this is for November 2009... Before CityCenter opened!

And now with Wall Street giant Goldman Sachs betting on MGM Mirage's and Las Vegas' overall success, it's no longer looking so "crazy" to invest in Southern Nevada's future.

But still, we've had to deal with the changing dynamics of this town. In March, I wrote about the challenges posed by casinos investing more in emerging markets and less here in Nevada.

It's the law of diminishing marginal returns, plain and simple. As the 1990s Strip construction boom came to a close and the 2000s "luxury megaresort craze" began, Las Vegas began to reach the point of saturation with high-end megaresort casinos. The law of diminishing marginal returns began to take hold as the potential for profit decreased as the number of megaresorts vying for tourist dollars continued to increase.

This is why the Las Vegas of 2010 is a whole new ball game. We're no longer that tiny outlaw outpost in The High Mojave, but rather a maturing resort destination that already attracts over 37 million visitors annually. And while there are still some possibilities to expand that tourist pool, we don't have as much growth potential in gaming these days, like we did in 1950 or 1990. [...]

Now contrast this to newer markets, like Florida and Pennsylvania domestically and Macau globally. Pennsylvania and Macau are nowhere near full saturation yet, and Florida is a potential gold mine with already desirable tourist destinations that haven't yet been tapped by casinos. Now we can see why all the big casino companies are rushing to build abroad as they only agree to minor spruce-ups at their respective Las Vegas home bases.

So what does this mean? No, it's not the end of the world! Las Vegas will go on, albeit now as a more mature gaming destination rather than some place with unrealistic "limitless" growth potential.

And two days later, I wrote the rant I just can't stop using.

[... T]he casinos can no longer be counted upon as a "free ride". We can't just expect new casino construction to prop up demand for construction jobs, which props up demand for new housing, which props up demand for housing construction, which props up the rest of Southern Nevada's economy. We may have lucked out in seeing this model work from 1989 to 2007, but all it really did was hide the weaknesses in this shaky economic model that ended up being exposed when "The Great Recession" hit and all the artificial demand for new casinos, new homes, new whatever fell like a row of dominoes. [...]

Yes, there are signs of hope here. We're no longer seeing the mountain of foreclosures that seemed so mind-numbingly painful a year ago. We're no longer seeing the unemployment rate rocketing up to dangerous new highs, even though it's bad enough that it's still hovering around an already too high 13.8%. We are starting to see a return of economic growth, however so slight and lagging behind the rest of the country it is.

But again, I have to point out that we are lagging behind. We're especially lagging behind metro areas that have better PreK-16 education systems and more stable employment sources. Salt Lake City and Ogden, Utah, both have GMP (gross metro product) growth rates exceeding the national average and unemployment below the national average. Same goes for Denver, Boulder, and Colorado Springs, Colorado. So why is this? All of these areas boast a highly educated workforce employed in stable sectors like high-tech and biotech, and none were as dependent on the housing bubble and artificial "construction for the sake of construction" as Southwest areas, like Las Vegas and Phoenix (which is also lagging behind in economic growth).

So again and again, we come back to this dilemma. As long as our education system is broken and as long as we continue to make ourselves overdependent on the casinos and casino-fueled development, Las Vegas will continue to suffer under this radical boom and bust cycle that lives and dies on discretionary consumer spending. Sorry, but this is not how a major metropolitan area with 2 million residents and a state with over 2.7 million residents can survive!

So it all comes back to this. Will Nevada remember the lessons learned the hard way during The Great Recession? I have a feeling we have no other choice. Gaming revenue likely won't return to pre-recession levels until 2014. And moving forward, there's no more chance of "limitless" "growth for the sake of growth", as there just isn't much room left for The Strip to grow and competition can now be found almost everywhere.

Looking forward to 2011 and beyond, Nevada needs to look to more stable job sectors to find the stable economy we've always been looking for.

Las Vegas Recovery? Harrah's Is Hiring 500 Workers.

Well, here's a nice bit of news to make our Tuesday feel better. Apparently, Harrah's is hiring.

Harrah’s Entertainment is looking to hire 500 workers for positions at its Las Vegas casinos.

The casino operator announced today that it is looking to fill 125 full-time positions and 375 temporary, on-call or part-time positions.

Full-time positions include retail sales associates, guest room attendants, cooks, front desk agents, security officers, food servers, cashiers, assistant food and beverage managers, and line cooks. Seasonal positions include lifeguards, pool hosts and pool attendants.

Harrah’s is also looking to fill temporary positions for the World Series of Poker tournament, including sales associates, cashiers, valet and servers.

Harrah’s will host a job fair Wednesday from 9 a.m. to 3 p.m. at the Rio to begin its search.

So if you know any friends in need of work, let them know. Yeah, yeah, I know 375 of these 500 positions are part-time or on-call... But with Clark County unemployment still so high at 13.9%, every little bit helps.

And hopefully, this is just the start of more job openings coming on line as summer travel season quickly approaches.

Worst of Great Recession Is Over, But Challenges Ahead: See, I Told You So.

(Also at Progress Now Nevada)

Hey, it's not like I enjoy proclaiming it all the time over here. But every once in a while, I must admit it can be a little satisfying to see a Brookings Institution study and Sun story confirm what I've been saying for some time now.

Local economic consultant Jeremy Aguero said the region must work to continue to provide adequate infrastructure, including water. He also made a subtle point about the relationship between the region’s strengths and weaknesses: “Right now, our biggest strength (low cost) is also our biggest weakness (because we underfund education).”

Las Vegas, relative to other cities, has low taxes and is filled with cheap buildings and cheap labor. The problem is that cheap, uneducated labor does not appear to be very useful at the moment or in the near future.

“The main policy implication is the human capital issue,” Parker said. “The extent to which Intermountain West cities are in recovery is highly correlated with education and skills. And we’re an outlier: We’re heavily dependent on industries that don’t require education.”

Indeed, the unemployment rate for those with a college degree is roughly 10 percentage points lower nationwide than those without a high school diploma, which probably understates the true picture because the undereducated are also more likely to be underemployed — they’ve dropped out of the labor force and thus aren’t counted in the official statistics.

Muro said this gap between those with college educations and those without simply confirms what’s been known for some time: “Education is a mainstay of success at the family, company, community and national level. There are few insights better documented than the benefits of education.” [Emphasis mine.]

As I said on Monday, the casinos can no longer be counted upon as a "free ride". We can't just expect new casino construction to prop up demand for construction jobs, which props up demand for new housing, which props up demand for housing construction, which props up the rest of Southern Nevada's economy. We may have lucked out in seeing this model work from 1989 to 2007, but all it really did was hide the weaknesses in this shaky economic model that ended up being exposed when "The Great Recession" hit and all the artificial demand for new casinos, new homes, new whatever fell like a row of dominoes.

However, it's not all bad news. Believe it or not, our long downward spiral finally looks to be over.

The worst of it finally appears to have passed.

After two years of economic decline, the gross metropolitan product of Las Vegas, which measures Southern Nevada’s total output of goods and services, grew slightly in the fourth quarter of 2009 [by 0.5% over Q3], according to a new report from the Brookings Institution.

The quarter also brought a substantial reduction in the foreclosure rate, although Nevada still leads the nation.

“When news has been bad for so long, things not getting worse is good news,” said Elliott Parker, a UNR economist.

Yes, there are signs of hope here. We're no longer seeing the mountain of foreclosures that seemed so mind-numbingly painful a year ago. We're no longer seeing the unemployment rate rocketing up to dangerous new highs, even though it's bad enough that it's still hovering around an already too high 13.8%. We are starting to see a return of economic growth, however so slight and lagging behind the rest of the country it is.

But again, I have to point out that we are lagging behind. We're especially lagging behind metro areas that have better PreK-16 education systems and more stable employment sources. Salt Lake City and Ogden, Utah, both have GMP (gross metro product) growth rates exceeding the national average and unemployment below the national average. Same goes for Denver, Boulder, and Colorado Springs, Colorado. So why is this? All of these areas boast a highly educated workforce employed in stable sectors like high-tech and biotech, and none were as dependent on the housing bubble and artificial "construction for the sake of construction" as Southwest areas, like Las Vegas and Phoenix (which is also lagging behind in economic growth).

So again and again, we come back to this dilemma. As long as our education system is broken and as long as we continue to make ourselves overdependent on the casinos and casino-fueled development, Las Vegas will continue to suffer under this radical boom and bust cycle that lives and dies on discretionary consumer spending. Sorry, but this is not how a major metropolitan area with 2 million residents and a state with over 2.7 million residents can survive!

We already know what's wrong with Nevada. We already know what's causing the prolonged suffering here in Las Vegas. When will we do something about it and start building the infrastructure for a better and more stable future?

Economic Recovery: How Washington Sees It vs. How Nevada Sees It

The difference couldn't be any more stark. In Washington, Senators are bickering over "partisanship"... No, scratch that. They're really just in another power struggle!

U.S. Senate Majority Leader Harry Reid is likely to face increasing mutiny from fellow Democrats in the wake of Indiana U.S. Sen. Evan Bayh’s surprising decision to retire, political analysts say.

The announcement last week by Bayh, D-Ind., once widely favored to win re-election, has shaken the 59 members of the Democratic Caucus and threatens to create an “every senator for him- or herself” mentality that could weaken Reid’s ability to lead, political scientists predict. [...]

“I think the problem Harry Reid has now is holding his caucus together,” said Eric Herzik, chairman of the political science department at the University of Nevada, Reno and a registered Republican. “The irony is that both wings of his caucus could become more strident, with liberals demanding that he move to the left, and more moderate senators saying: ’You’re killing me in my home state. I can’t go with you on this one, Harry.’ Reid is caught in the middle.”

Now obviously, there's some hyperbole with this RGJ piece. After all, the headline warns of "rebellion!" and the story speaks of "mutiny!" OK... So we'll soon be hearing of gun fights and outbreak of (another) civil war?

Still, there has been real rancor in DC lately. And as always, it seems like a number of the folks on Capitol Hill are more concerned about their own egos than delivering any real accomplishments.

Already, Harry Reid is having to deal with this as he tries to win over whatever GOP votes are available for the jobs bill. Yes, the Republicans may even try to filibuster away job help!

Senator Harry Reid of Nevada, the majority leader, has been trying to round up a few Republican votes for his version of a jobs bill,after he surprised the Senate and the White House by jettisoning many elements of a bipartisan proposal that had some momentum.

Mr. Reid’s $15 billion plan includes four central elements of that proposal, including a payroll tax exemption for companies that hire unemployed workers, but he dropped billions of dollars in business tax breaks and other extraneous initiatives.

Whether Mr. Reid can prevail remains uncertain and he now needs at least two Republicans to join Democrats to overcome any Republican opposition since Senator Frank Lautenberg, the New Jersey Democrat who was taken ill last week, is not expected to be present and voting.

In a warning to those intending to block the bill, Mr. Reid’s aides have let it be known that a Republican filibuster of his jobs plan does not mean that he will then turn around and offer the earlier bipartisan version. But just exactly what he will do is not clear. [...]

With Democrats intensifying their criticism of Republicans for opposing almost all legislation and erecting procedural hurdles even to measures and nominees they ultimately support, [Senate Minority Leader] McConnell [R-Kentucky] was also a bit defensive over suggestions that Republicans are simply tying up Washington.

Even when it comes to important work on bringing about economic recovery, it's all about political gamesmanship for some in Washington.

And apparently, all the political games getting all the media attention hasn't helped in getting Nevadans to understand what last year's stimulus package has been doing to bring on economic recovery.

The stimulus gave a significant tax cut to most people; it stabilized state budgets, including Nevada’s to the tune of a $1 billion, which prevented layoffs of thousands of teachers and saved hospitals that would have cratered in the face of a steep cut in Medicaid reimbursements; it provided money for extended unemployment benefits; and, it set in motion infrastructure projects, including a recently announced $34 million for a bus rapid transit line on Sahara Avenue.

Although the job losses have largely stopped, companies haven’t begun hiring again, so most Americans aren’t feeling very good about their economic prospects. [...]

So, not surprisingly, the stimulus doesn’t poll well. A CNN poll showed 56 percent disapprove.

But here’s the paradox: By wide margins, as high as 80 percent, Americans favor the provisions of the bill, including money for the unemployed, infrastructure spending and tax cuts.

As [Rep. Dina] Titus [D-Henderson] noted, however, the marketing of the bill has been less than stellar.

“No, we did not do a good job,” she said.

“People have forgotten it included the big tax break, they have forgotten the $250 check if you’re on Social Security or a veteran. Those aspects were not played up enough. And then money for the state — look where the state would be without it. Then there’s the continuation of unemployment benefits at a time when Nevada is second to Michigan” in unemployment.

Then Titus reiterated her point: “No, we didn’t do a good job selling it.”

And I'd add that it's become difficult to even "sell it" when talk of the stimulus often deteriorates to complete lies and distortions.

She noted many Americans mistakenly think the stimulus package and the $700 billion Troubled Asset Relief Program (TARP) — the bank bailout — are the same thing.

Titus is right. More than half of Americans think stimulus money went to help “bankers and investors,” according to the CNN poll. Which, aside from tax cuts that nearly all Americans received, is untrue.

For Titus, that’s doubly cruel: She wasn’t even in Congress when the first round of TARP money was approved, and then she voted against the second round.

For the Republicans, it makes perfect sense to "pass the buck" on TARP (which remember, was proposed by George Bush before he left office in 2008) onto President Obama and confuse the stimulus with TARP so that it's easier to just rail against "bailouts" and enrage the teabagger "masses" (more like a few small conspiracy kook crowds, but the media prefer big stories of "controversy" and "epic conflict" to real facts).

One of my all-time favorite bloggers, Desert Beacon, tackled the whole "stimulus issue" on Friday and looked through the spin to discover the facts.

The Republicans are certainly trying to drum in the message: "The Stimulus Bill hasn't created a single job." [TP] As has been that Party's practice, the message is phrased in highly generalized terms, as a blanket indictment of federal spending, without noting the specifics. One small specific from the Nevada State Health Division is instructive.

The American Reinvestment and Recovery Act (Stimulus Bill) paid for a $46, 232 supplement to the " Centers for Medicare and Medicaid Services (CMS) original $76,743 allotted in the FFY10 budget for ambulatory center surgery inspections bringing the total to $ 109,991. The additional ARRA funding will support the inspection of 13 ambulatory surgical centers, with a new CMS survey process that uses an infection control tool developed in conjunction with the Centers for Disease Control and Prevention (CDC)." [NSHD pdf]

If memory serves Nevada experienced a Hepatitis C outbreak in 2008 related to inspection issues? In May 2008, the Sparks Tribune reported: "Of the 50 ambulatory surgery centers now being inspected for unsafe practices by the state Bureau of Licensure and Certification, 22 haven’t had recertification surveys within a six-year time frame. In one case, the gap was 15 years. Twenty-one others haven’t been open long enough to have had a six-year inspection." With the cut backs in agency budgets currently under consideration, is it really rational to lash out at funding that supported someone inspecting another 13 ambulatory surgical centers?

There are larger pieces that receive wider public support, like spending on infrastructure. The American Reinvestment and Recovery Act included $144 billion for public infrastructure projects, and the level of public support was significant. USNWR reported: "A national poll released today (Jan. '09) shows that 94 percent of Americans support a national effort to build up the country's infrastructure. Meanwhile, 81 percent of Americans say they are prepared to pay 1 percent more in federal taxes to support infrastructure projects." There was another important item in the polling just cited.

"One caveat in the support for infrastructure spending, however, is how the projects are developed. More than half of Americans in the poll say that either the accountability or the transparency of the projects is their most important consideration in public works spending. That's three times more than those who say that achieving "measurable results" is their top priority." So, people placed "accountability and transparency" at a much level of concern than "measurable results," and they got it. However, one can't have it both ways; either the money gets spent quickly with less accounting or the money gets spent more slowly with more accounting. Fast or slowly, Nevada is getting $ 270,010,945 for infrastructure and public transit funding under the Stimulus Bill. [CBS] Are the Republicans really opposed to cash-strapped Nevada getting $270 million in public transportation and infrastructure funding? There are construction jobs to be paid for and the state budget isn't where those are going to be found.

So we are getting money. Just remember that it took so damned long because "Luv-Guv Gibbons" wanted to start a fight over who would have ultimate control over the stimulus funds. And obviously, that was much more important to him than actually setting up the needed tracking tools (to meet the transparency and accountability requirements) to receive those stimulus funds.

But hey, at least we're getting the money now. And we're seeing results. It's just that the Republicans don't want us to know that it's stimulus funds at work while the Democrats are busy trying to push the jobs bill in DC to bring back some more needed help and apply it directly to the unemployment crisis we're still facing.

So I can understand why a number of our neighbors are confused over what was done last year to promote economic recovery and what's being done this year to create more jobs. When all the media attention is on partisan and inter-party flame wars and ego stroking, it's hard to see how our government is doing us any good. But when we look beyond the petty politics and look at how the policy is being put to use here in Nevada and elsewhere throughout the country, we can start to get a better picture of how it's really working.

Recovery: Are We There Yet?

I know, I know. Tonight may be a little scary. After all, the "State of the State Address" will be on and we have to hear from "Luv-Guv Gibbons" one more time advancing stupid excuses for "policy" to fill the latest record busting budget deficit. I'm sure real, sensible ideas like making the mining industry pay its fair share won't be on his agenda.

Sigh...

Well, at least there seems to be some good news down here. Early indicators are pointing to a good February (and perhaps good rest of 2010?) for Las Vegas.

Gamblers are in town for the Super Bowl; over the Presidents Day three-day weekend, lovebirds will flock in for Valentine’s Day weddings on the same day that revelers will celebrate the Chinese New Year; wholesale clothing buyers will pack up for the mammoth MAGIC apparel trade show Feb. 16 to 19; and racing enthusiasts will drive in for NASCAR Weekend Feb. 27-28.

And let’s not forget the USA Sevens International Rugby Tournament and Fan Festival on Feb. 13 to 14, an event previously held in San Diego but now finding a home at Sam Boyd Stadium, with fans flying in from New Zealand, Australia and Kenya.

The convergence of these events, and more, is expected to draw more than 350,000 tourists to town — just a fraction compared with the Februarys of healthier years but still a heartening number after 15 consecutive months of year-over-year percentage declines that finally ended in September.

According to Las Vegas Convention and Visitors Authority data, September, October and November showed slight percentage increases in visitors. Anecdotally, December and January, which haven’t been totaled, were strong. That means February could be the month that analysts can affirm that a trend is under way. [...]

“If you get a good start with the Super Bowl, you can keep the momentum,” [Las Vegas Adviser's Anthony] Curtis said. “Often when things are good, they snowball. But if they’re bad, they’ll snowball as well. I think the last good Super Bowl weekend we had was in 2006. It went down in 2007 and it foreshadowed everything that happened. It was a great leading indicator.”

So perhaps folks like Steve Wynn can stop saying stupid things about President Obama and get back to business? It seems there are signs of recovery out here.

Again, I know we've talked about this before. Unemployment is still too high. We've yet to see a trend of positive GDP growth. And as I hinted at above, the state has yet to see the additional tax revenue we badly need.

But if the numbers aren't lying and visitors really are trickling back to Vegas to spend some cash and have a good time with us, then perhaps the worst is finally over.

Betting on MGM Mirage's (& Las Vegas')... SUCCESS? T. Rowe Price Is. For $277 MILLION!

Oh yes, you heard me right. The Baltimore investment firm is now investing a grand total of $277 million in MGM Mirage. But why, especially when so many are still expecting MGM Mirage to fail?

Apparently, we Americans love spending money so much that T. Rowe Price is expecting us to stop being tightwads and have more fun once it becomes clearer the economy is recovering.

[T. Rowe Price portfolio manager Joseph] Fath’s optimism for MGM Mirage is mainly based on macroeconomic trends, such as recent growth in the gross domestic product, rather than any grand company strategy. Lately, he has been poring over such mind-numbing statistics as retail inventories and manufacturing shipments — data that seem far removed from the glitz and salesmanship of the Strip.

In a phone interview, Fath said he thinks the figures serve as signals of business demand and an eventual indicator of whether Joe and Jane Pittsburgh — or their counterparts in, say, China — will splurge in Las Vegas.

“I feel better than I ever have this year,” Fath said with an audible sigh of relief that sounded out of place on the other end of the phone line, in the nation’s foreclosure capital.

“Things are absolutely better than they were six months ago. Job losses are slowing and home foreclosures are starting to clear. This will be a delayed recovery. But it’s a question of how fast things pick up and what that looks like.”

Some have made similar comments. But what sets Fath apart from the many skeptics who fear for MGM Mirage and Las Vegas tourism in general is his continued belief in a tenet of American culture: “This is a consumption nation. As people’s balance sheets get better, they will spend more.”

Even though Fath admitted later in The Sun's story that he thinks MGM Mirage went in too deep with CityCenter, he now also thinks expectations have been set so low that a modest profit for their new project will be enough to restore confidence in the company, and in Las Vegas... Despite still feeling bearish on other gaming companies with debt problems, like Harrah's Entertainment, Las Vegas Sands, and Station Casinos.

Given lowered financial expectations for CityCenter, the property, he said, only has to generate a modest profit for MGM Mirage stock to benefit. CityCenter will hurt the lowest-performing and least competitive properties, which isn’t necessarily a bad thing for the Strip or MGM Mirage, which owns several of the Strip’s more profitable resorts, he added. [...]

MGM Mirage will seek to refinance its heavy debt load, while likely taking cash out of CityCenter in exchange for debt on the mostly equity-financed project, Fath said. “There’s still heavy lifting to do, but the nasty stuff is done.”

This year will be bumpy, he warns, with business likely to grow in the second half of the year and into next year. “The average Joe needs to feel better about things and for that to happen, things like employment and housing prices need to pick up.”

And yet, many Strip resorts, especially those owned by MGM Mirage, have been able to maintain high occupancy rates by offering unprecedented deals. Thirty-five million visitors flocked to Las Vegas this year in a crummy economy.

“The demand is there. They need to book business at higher rates. But a lot of operators are scared to raise rates,” Fath said.

Well, casino operators have had good reason to be afraid of raising rates. In the dark, hard times of 2009, they had to lower rates just to fill the rooms and cut their losses. If even Steve Wynn agreed to do it, then what else could they have done?

However, things may be changing. Vegas room rates for New Year's Eve 2009/10 were up 4% over NYE 2008/09, and a number of hotels, from Aria to Paris to Sam's Town to The M, were all sold out by December 30. Now we're still nowhere near 2007 room rate highs, but occupancy looks to be flat... Which is a minor miracle of its own, considering all the new hotel rooms added last year on The Strip (CityCenter, PHo Westgate), on Paradise (Hard Rock's new towers), and in Henderson (The M Resort).

So perhaps we finally hit rock bottom at some point in 2009 and are poised for some kind of comeback in 2010? I hope so, and it looks like T. Rowe Price is betting so with its bet on MGM Mirage. And looking at the first tea leaves for 2010, perhaps better days lie ahead in the new year.

Hard Times Still Abound, Even As City Center Opens

Here are some rude reminders of our still brutal economic reality in Las Vegas, even while we witness the opening of what we hope will be "economic salvation":

- Greenspun Media (The Sun's owner) just laid off as many as 25 workers in a "consolidation effort".

- Binion's closed its hotel tower, which a long time ago was the famous Mint in its previous life.

- Clark County sales fell 16.5% in September.

- More distressed homeowners are turning to mediation to save their homes from foreclosure.

It's still tough out there, even with City Center just starting to open. Let's hope City Center's opening is a sign of better times coming.

Nevada Still #1 in Bankruptcies, But Credit Card Delinquency Down

Uh oh, more bad news...

The Administrative Office of the U.S. Courts reported that nationwide, bankruptcies for the fiscal year ended Sept. 30 surged 34.5 percent to 1.4 million -- with Nevada posting the highest rate in the nation.

Nevada led the nation in filings for the year with a rate of 10.49 per 1,000 people, well above the national rate of 4.52 filings per 1,000 people.

In 2008, Nevada was No. 2 in the nation with a filing rate of 6.39 per 1,000 people and the national rate was 3.38 filings per 1,000 population.

In Nevada in the 2009 fiscal year, bankruptcy filings totaled 27,560 -- up 64.5 percent from 2008.

It's obviously still hard times in Nevada this holiday season with so many people at risk to lose it all... But at least more people are taking extra precautions to avoid this financial disaster.

Also, credit report company TransUnion.com issued third-quarter credit card delinquency statistics, with Nevada again leading the nation with a rate of 1.98 percent.

That's the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards and compares to the national rate of 1.1 percent.

The national rate was down from 1.17 percent in the second quarter.

Despite leading the nation in this category, Nevada's numbers improved from the second quarter (2.19 percent) and the first quarter (2.44) percent.

In terms of dollars, the average credit card balance in Nevada was down 3.16 percent from $6,517 in the second quarter as Nevadans reduced spending and banks limited lending.

TransUnion.com projected that by the end of the year, the rate in Nevada is expected to drop again -- yet still lead the nation at 1.9 percent. Nationwide, the rate is expected to remain steady through the fourth quarter at 1.1 percent.

The new forecast reflects slightly more optimism about credit card performance in Nevada and around the country. Just three months ago, the national rate was expected to hit 1.2 percent and Nevada's rate was expected to grow to 2.25 percent by the end of the year.

Ain't it funny how it takes an economic meltdown like this to get people to become more financially savvy and prudent? It's too bad the federal government didn't require the big banks to be more prudent last year. But then again, it's always we the consumers who are required to be "fiscally responsible" while Wall Street gets more bailouts.

Well, at least people are being more responsible and credit card debt isn't as bad it used to be not too long ago. I guess we have at least some somewhat cheerful news today. Now excuse me while I check my bank account balance and prepare my December budget...

Monday Open Forum: Are the Luxury Strip Properties Self-Defeating?

(This is the first in what I hope can be a weekly gathering where we can talk business, pleasure, the arts, food, or whatever else we want to talk about here.)

Today's Sun piece on the four and five-star Strip casinos reducing their room rates really got me thinking. Is it all just too good to be true? Or just bad business?

I first remembered my trip here in March:

When I was still in the process of buying my condo in March, I needed a hotel to stay. I was first thinking of getting something closer to Henderson, but I couldn't help myself when I found a suite at Encore going for $120 per night via Expedia.com. This was my dream come true, and I FINALLY had the power to fulfill it!

For five days and four nights, I had one of the best weeks of my life. I ate at places like Sinatra and Daniel Boulud. I saw Le Reve. I partied at Blush. And of course, I FINALLY had a chance to laugh at the folks paying the same or more for inferior rooms on The Strip. ;-)

The article is quite correct about those of us who shop around for low rates at high-end properties. But contrary to what some the commenters are saying here, most of us online bargain-hunters aren't the typical "discount travelers". I actually put much of my hotel savings back into the local economy as I was able to afford luxuries like 5-star restaurant meals, more souvenir gifts for the family in California, and more gambling money. IMHO these Vegas hotels are now offering rooms at something closer to fair market value than ever before.

I know that the hotels will eventually raise rates again as the economy recovers and the desire to expand profit margins returns, but now really is the best time to see the best of Vegas at shockingly good prices. If I weren't already a Henderson homeowner, I'd probably be grabbing one of those $109 per night suites at Mandalay Bay's THE Hotel!

I know not all travelers, especially people who travel here, do as I do. I'm one of those odd ducklings that prefer to spend my hard-earned money on real meals and shows than on a "one-armed bandit". Maybe I am part of the problem. But then again, I at least spend some cash on food and entertainment. What about those travelers that don't do the restaurants and shows that have truly made this town great?

But ultimately, we the consumers can only be blamed so much for this problem. Ultimately, the casinos need to accept some responsibility for getting us into the dilemma. We can argue over whether or not Vegas has gone "too high-end" (for the record, I don't think so), but we can at least all agree that we should at least be getting our money's worth.

Here's another of my comments:

The megaconglomerates [Harrah's and MGM Mirage] have taken The Strip and turned most of it into a somewhat generic experience. So many of the casinos don't seem to have any character these days. While I'm certainly not one of those folks who wish for the "Old Vegas" days of mafia rule, cheap & crappy food, and rigid racial segregation, I can see how "New Vegas" hasn't always lived up to its promise with lame players' club benefits, low payout table games, "skin tight" slots, "celebrity chef" restaurants that are all celebrity and no chef, and once-overpriced rooms at the mid-range places that even Motel 6 would be embarrassed to call its own. (Hint: Don't ever stay at Harrah's or Imperial Palace! At least save up a few extra bucks to go to The Rio.)

The key here is value. I can't speak for all of you here, but I can say for myself that I don't mind paying for something good so long as I know it's truly good quality. Don't make me fork $100+ for a dinner for that I could have had at the neighborhood diner for 1/3 of the price. Don't expect me to spend more than $20 at the slots if I know all of that will just be flushing it down the drain. And for goodness sake, don't expect me to pay $10+ for a cocktail with cheap liquor!

I hope the "independent" casino bosses like Steve Wynn and Phil Ruffin still have enough sense in them to rethink "New Vegas" in a way that will really bring the consumers back and get them spending again. People want value. If we're paying a premium for "five star cuisine", that meal should knock my socks off. If we're paying for a luxury hotel, I want room to roam, a comfortable bed, and a big enough tub for me to enjoy a nice bubble bath. If I'm paying, I want real bang for my buck!

Yes, I know Steve Wynn isn't really the great political mind he thinks he is. But hey, we must admit that he knows how to run casinos well. Wynn and Encore are the crown jewels of The North Strip. And hopefully with the new promos he's trying at his properties, such as "Taste of Wynn" prix fixe menus at the restaurants and reduced room rates, along with amenities we expect from a good hotel/casino, like comfortable rooms, quality dining, and great entertainment, he can help in rethinking The Strip.

So can Phil Ruffin. He just took over TI from MGM Mirage, and so far things are going well. Perhaps if MGM Mirage and Harrah's had avoided taking on too much debt as he did, they wouldn't be in such dire straits.

So maybe with better corporate governance and more value being provided to consumers, The Strip will still be able to revel in all its luxury. Or maybe not? Got any ideas on what to be done to make those luxury Strip casinos make money again?

I Told You So.

See why huge cuts to the social safety net aren't the best way for a state to balance its budget? Just take a peek at what's happening next door.

On one hand, we learned that the Los Angeles Economic Development Corp. expects per capita personal income in Orange County to drop for a second consecutive year as unemployment continues to rise and retail sales continue to fall. And on the other hand, OC home foreclosures are expected to continue rising. Basically, Orange County doesn't look to be exiting this recession quite yet.

It's just too bad that we can't expect more stimulus to help us soften the blow. Thanks to Arnold's "stimulus killer" budget, most of the economic benefits from the federal stimulus that are helping the rest of the country bottom out and turn around will be offset by the draconian state budget cuts. So once again, California will be losing out at the very least... Or may even hurt recovery efforts for the rest of the nation.

And unfortunately, the "bidness lobby" here in Nevada still doesn't get it. No matter how much they try to steal business from California by telling them how "high" taxes are, those of us who've seen the budget crisis there firsthand know what the problems really are. And honestly, same goes for Nevada.

So will we have enough legislators (and hopefully a sane Governor, too!) in office in 2011 to realize all this?

New Home Sales Show Sign of Recovery?

Maybe... But not so fast. Remember that this is being fueled by "bargain hunters" looking for deeply discounted foreclosure and short sale homes. Hopefully the buying spree will continue, but I don't know how it can if unemployment goes higher and wages fall lower.

The Commerce Department reported that sales of new single-family homes rose 11 percent in June, an increase that dwarfed economists’ expectations of a 3 percent increase. The pace of home sales rose to a seasonally adjusted rate of 384,000 a year, the highest level since November.

But the figures offered no sign that the housing market had returned to health.

Despite the monthly increase, sales of new homes were still down 21 percent from June 2008. The market is still swamped by a glut of for-sale houses. And new homes, facing competition from cheap foreclosures, are sitting on the market for close to a year before they sell, compared with a median time of six months on the market in 2007.