Wednesday, January 27, 2010

What Does This Tell You?

From Harper's Magazine, February 2010, excerpt from Harper's Index:


Number of architects nominated to design the 2010 "New American Home" for an annual home-builder's convention: 3

Portion of the home completed by November, when the builder ran out of money: ¾




This speaks volumes about where we are right now.

First, we have grandiose ideas about how to "celebrate" everything. This is a result of the marketing culture that we have become accustomed to which is ingrained in the promotion of everything from Cheetos to choosing not to have an abortion and producing a Heisman trophy winner instead. Anything marketed properly can sound great. But is it real? And does it matter? Because once the marketing has done its job we are already on to the next thing.

But what happens is that the bigger picture is completely overlooked. Without context we aimlessly move from marketing scheme to marketing scheme. The only satisfaction comes in finding something to move along to. No engagement for any length of time.

Just ask a politician what should be done to solve any of the multitudes of problems we are currently facing. You get marketing platitudes and the sense that he has some numbers cruncher stashed in the basement doing the real work of finding the answer while the politician is out delivering the message, but somehow they never let that basement dweller out. And nothing actually gets done. But that's OK because we just move on to the next thing, there are so many. Sure, we will circle back around to that topic eventually but the same thing happens again. At some point time will run out. What is amazing is how long it is taking.

Back to the Index data: It is 2010 and we have been in a residential real estate meltdown for almost two years now. So let's have a home-builder's convention!


Yeah, why not. But true to form for our current economy, the money is gone before the job is done. No surprise there, except perhaps that financing was found for even ¾ of it. But why would you start building if you did not have it all lined up before hand? Perhaps they counted on getting a bailout. Or maybe they were betting costs would fall to make up the difference. But who is going to reduce their price when the risk of the job failing before completion because it is underfunded from the outset is so obvious?

Who is responsible for this? I doubt we will ever know. Chances are the guy in charge is long gone; off the hook by his very absence or his bankruptcy or his incarceration. When you are using other people's money, there is little reason to exercise any personal responsibility. For every Bernie Madoff there are thousands of small time crooks who never get caught. And even when they do so what, the money is gone. No resources left to even tear it down. That is the case just down the street from my house where a three story shell of an oddly designed "luxury condo" complex sits rotting upon land that once held some modest but pleasant low slung red brick apartment complexes surrounded by beautiful green lawns.

As a final observation maybe this is the true representation of the New American Home: incomplete and unfunded. Three quarters of a house is really about all we have built ourselves over the last quarter century. I guess when the rain starts coming through the open quarter of the house and hits us in the face we might actually wake up and take matters into our own hands and seal it up. In the meanwhile, we all seem to be waiting for a guy with a big hammer to show up and lead the way. Is that person you?

Thanks to the Flicker photo, identity unknown.

Thursday, January 21, 2010

Friday, January 15, 2010


Another legislative session is underway in Arizona for whatever that is worth. Judging from last year expectations should be low-the problem they started off with then has grown by half again as much. Being that this is an election year expectations should be even lower.

Arizona is bankrupt; plain and simple. To make that point even more poignant, we just sold off our state buildings. Oddly, government is underwater but in just a couple of days the private sector had no trouble coming up with $750 million to buy its hardware. What that says is that there is money out there, but it only gets spent where there is an opportunity to get something in return.

I submit that people like Carl Hayden, Barry Goldwater, John Franks, Justice Rehnquist, Burton Barr, Bob Stump and John Rhodes are spinning in their graves. Although a young and sparsely populated state, way out here in the neighborhood of Mexico, our juxtaposition on the frontier of the American experiment bred independence and led to some of the great thinkers of the mid 20th century. Their ideas and hard work had a major influence on the development of the entire country, paving the way for democracy to reach its most highly performing period. Locally, practical solutions to problems were brokered while the core values which celebrated Arizona’s unique environment and wide open approach to living in it made their way into the fabric of the limited government that the people needed.

Suddenly we find ourselves on the wrong end of the worst fear that was harbored by the native Arizonan of the 1970’s – we have become East L.A. No, actually, we are even worse, for it is true that even with as bad off as the California financial situation, Arizona’s on percentages far eclipses it. How did we get in this mess? Growth. The addicting elixir of uncontrolled growth that finally self destructs much like apoptosis, the “programmed cell death” brought on by a parasite that has loved that cell to death, after sustaining it as long as possible. Up until now we welcomed new residents with open arms. But business has never followed. We have loved our state to death after sustaining it on the act of growing as long as possible.

A couple of particularly brave politicians are just starting to spout about how we need to do something to attract businesses from out of state in order to improve our economy. The Governor railed about this in her State of the State speech on January 11, 2010. Some have finally dared to suggest that the financial disaster and existing regulatory structure in this state are actually deterrents to bringing in new interests. They cite as an example the dozens of solar projects that are prepped and ready save one key component-financing. Unlike state buildings that are already built and fully occupied and not going anywhere anytime soon, people with money see too much risk associated with the regulatory uncertainty that is endemic in this State to invest in anything new. That is part of the equation.

The other important part of the problem is that the same handful of people and business interests that have been running this state with near monopolistic fervor for the last 30 years are desperately clinging to their power bases and in doing so are leaving a horrific mess in their wake. Our problems have a local genesis; they cannot be blamed on the global recession; we have had no earthquake or hurricane. This is entirely the making of those who, as part of the big residential land rush that has fueled our growth, brought with them the formerly foreign concept of government dependence to what was once a state of rough riding cowboys who happily relied upon their own chutzpah to make their way. And the power brokers were OK with that as long as it did not impact their domain.

Examples of the kind of nonsense that goes on to inhibit the economic drivers that will pull us out of it abound. Unless something is done to make some fundamental changes in the way we interact with business, all of the cuts will further paralyze and suppress the economy, driving closer and closer to resembling our impoverished sister nation to our south.

Regulation is a necessary tool to ensure that bad actors don’t spoil the things we love and need about our surroundings. But implementation of those regulations is the key to making them work. We have a command and control approach in Arizona. Big brother is tasked with watching every step along the way. Permits are need for everything imaginable-private property owners are subject to zoning codes, building codes, licensing and taxation at every level: school district, city, county, state and federal. Micromanagement is the mode of operation. Everything must be planned and proposed through the use of licensed professionals. But although those professionals are often required to seal/stamp their work evidencing that they are licensed and trained to perform that task, we don’t trust them. Instead they are subject to review by government monkeys who are most often college graduates working their first jobs or folks who disliked the competitive pressure that comes with the profit making private sector. This silly review process adds huge amounts of time and money to projects despite producing absolutely nothing in terms of value. And it oddly focuses a great deal of discretion in the hands of those who are often ill equipped to exercise it. Whether frozen by the fear that any decision will be a wrong one or energized by the fact that the natural lack of specificity makes creating requirements very easy, the typical bureaucrat wields inordinate power over the citizenry.

Just in the last two days, even in this economy, I have been witness to insane stories of progress stymied by misdirected regulators. Building permits are stalled while federal, state and county personnel gnash teeth over the conflicting roof load calculations that have arisen with the HUD adoption of new standards for manufactured homes. Another building permit is stalled over 8 weeks in Northern Arizona after the homeowner spends $26,000 designing a special foundation to fit the soil conditions, the likes of which the permit issuer had never seen before and had no clue how to review. A permitted activity in an agricultural setting was halted for 6 months while the regulatory authorities sort out who is really in charge, all the while the farmer is complying with the program specifically created to avoid this situation. While an appeal is pending the window of opportunity to finish the job while the complaining neighbors were away is hindered by continued territorial argument. A major investment to create a natural gas storage facility, which has been publically called for over nearly a ten year period, is turned away when the regulators unilaterally decide it cannot be permitted but once that regulator is dethroned the standards that will be used remain vague and subject to government discretion. These lists can go on and on.

What can be done? There are calls for reform but fundamental changes are needed. First, cost/benefit analysis should be a part of any legislation that is proposed. A bill has been introduced to inject greater cost/benefit scrutiny, but only after the legislation has been passed and the statute is being implemented through the rule making process. By then it is too late.

Fees for actual services must be determined with an allowance for overhead. Currently there are numerous programs that purport to charge fees but the money in turn is not used to fund the program. Buying a permit should be no different than buying a sausage, the cost of the sausage of bringing that sausage to market is included in the price and the shopper makes the decision according to value. Businesses should be able to make the same judgments when they are forced to have their work reviewed from the public perspective.

We need to take a real look at why we have permits for the things we do. Why do we need a government official to “sign-off” on a foundation design? If they establish the standards that should be enough. Any professional hired to design that foundation would have insurance and a license. If he stamps that plan as being in accordance with the standards and it turns out that it isn’t his insurance should pay to fix it and his license should be on the line. No different than when you hire a lawyer. No one looks over that lawyer’s pleadings or briefs before they are filed with the court to second guess that lawyer’s legal reasoning. Why engineers put up with this insult in the first place is beyond me.

I remember a time when a city inspector came by to review my residential remodel. It was me and him. He stood looking at the ceiling joists for a good long time scratching his chin and muttering to himself. I finally asked what was the trouble? He was trying to figure out if the joist was crooked or if it was simply an optical illusion. Together we determined the latter and I got my green tag. I will forever remember the futility of that exercise, the fact that the job had to stop for it to happen, that my money had to pay for it and that this guy clearly was looking for some way to justify his job but was having trouble finding anything. Amazing waste of resources (and in fact counterproductive because it actually allows for mistakes to be made by shifting the responsibility from the guy doing the work to someone else, another case of transferring personal responsibility the is endemic in this crumbling system, but I digress).

But even if we can’t feature giving up this aspect of command and control, why not conscript the engineering community to watch itself. For example, a lawsuit filed valued at less than $75,000 is automatically assigned to the next attorney on the state bar list who must act as an arbitrator. With the filing of a permit request, why not conscript the next engineer on the list to do the review? The lawyer does not get paid for this activity in the name of community service. Should the engineer? Should it not be the private sector that bears this risk? That way they can properly manage it. It would not be long before the market would sort out the competent from the incompetent, unlike the way we do it now which props up the incompetent at taxpayer expense.

This pattern repeats in every aspect of government: OSHA, unemployment appeals, groundwater management, cosmetology, zoning, and on and on. Just a few fundamental changes to transfer the power back to the marketplace where it belongs will reset the government priorities, decrease costs, eliminate risk and jump start the economy.

There is no time to wait. We need to live up to the expectations of our ancestors and inject some common sense back into our institutions. Political will is never easy to overcome but these times certainly present unprecedented opportunity to do just that.

Special thanks to Jake Adams for the black and white saguaro/barbed wire photos.