National News

IMF offers mixed economic picture, all eyes on Europe

Marketplace - American Public Media - Wed, 2014-10-08 11:52

The IMF has revised its view of global economic growth prospects: It’s a mixed picture, leaning towards poor.

The U.S. will have grown 2.2 percent by the end of this year, the IMF says. That's not stunning, but still 0.5 percent higher than the fund’s previous prediction.  The U.S. is expected to grow 3.1 percent in 2015.

The IMF reduced its prediction for growth in Europe from 1.1 percent to a mere 0.8 percent.  Europe is still struggling with an 11.5 percent unemployment rate (the U.S. rate is 5.9 percent).  The continent is precariously close to deflation - a form of economic stagnation that can last decades, as it did in Japan.

China’s growth is slowing and will continue to slow, says the IMF.  It will decelerate from 7.7 percent growth in 2013 to 7.4 percent in 2014 and 7.1 percent in 2015. 

“The U.S. is the one eyed man in the country of the blind,” says Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.  “The U.S. is the only one that seems to be turning in the other direction.”

Kirkegaard credits both the aggressive response of the U.S. Federal Reserve and the underlying “flexibility and dynamism” of the U.S. economy: “The U.S. is an economy that is able to absorb shocks far more rapidly than certainly the European countries but also Japan and it is an economy where simple entrepreneurship plays a much bigger role.”

“The U.S. is once again the rudder that’s going to keep the world steered in the right direction I hope,” says Ross DeVol, Chief Research Officer at the Milken Institute. The rising dollar and increasing consumer appetite in the U.S. will spur the export sectors of other economies around the world.

The modest success of the U.S. may also pose a challenge to the rest of the world. When the U.S. was in crisis, investors shifted money to developing and emerging economies. Now that the U.S. is getting back on its feet and interest rates may rise in 2015, the reverse is happening, says Stephen Kaplan, assistant professor of international affairs at George Washington University.

“It might be more difficult for governments and firms abroad to borrow in an environment where more capital is going to be dedicated to the United States,” he says.

The larger source of concern for many economists however is the situation in Europe.

“Europe is avoiding a technical recession but will get so close to one that you won’t know the difference,” says DeVol. “The global cycle is out of balance.” 

Europe not growing at all, or very slowly, is not good for anyone in the world, says Matthew Slaughter, professor at the Tuck School of Business at Dartmouth.

Europe all together has the largest economy in the world. A weak Europe is less likely to import from the U.S. or China which is also slowing down. Slaughter says its problems – like an 11.5 percent unemployment rate and a not fully resolved sovereign debt problem – run deep.

“Those problems have been layered on top of what for many countries, even before the crisis, was this no growth in population, slow productivity growth environment they were already in,” Slaughter says.

Demographically, Europe is aging, Slaughter continued: “In many countries the labor force growth will be zero and there’s not much inflow of immigration so that dynamism from a young and growing population is not there.”

The European policy response to the recession has not been as aggressive or effective as responses elsewhere in the world. 

“The combination of fiscal and monetary policy has just been too firm,” says Peter Fisher, senior fellow at the Center for Global Business and Government at Dartmouth.  “It’s partly because they’ve been fighting a multiple front war – they’ve had to hold the euro together in addition to stimulating economy and that’s both a political challenge and an economic one.”

The IMF says Europe has a 38 percent chance of slipping into a recession again, double the odds in April.

CDC's Ebola workers find funding is strapped

Marketplace - American Public Media - Wed, 2014-10-08 10:41

The death Wednesday of the Dallas Ebola patient Thomas Eric Duncan underscores the high stakes around controlling the spread of the disease. To that point, the federal government has announced it would soon screen air travelers coming from West Africa to see if they have temperatures.

Separately, the Centers for Disease Control and Prevention has more than 1,000 people working around the world to contain Ebola. On-the-ground work involves risk and problem solving, where staff must do everything from collecting blood samples, to tracking the sick, to hiring workers to pick up the dead. 

It’s a difficult job, says Dr. Bridgette Gleason, who turned 30 this week. Gleason says she’s seen tragedy every day since Sept. 13, the day she arrived in Sierra Leone.

“Being surrounded by death, it’s obviously overwhelming if you really focus on that,” she says. “To really make a difference you have to focus on what you can do.”

That attitude gives a sense of the men and women who parachute into these communicable disease hot spots. Staffers are expert trouble-shooters. But with the Ebola spreading in West Africa, CDC folks like Peter Kilmarx – who is leading the operation in Sierra Leone — must do something outside the norm: think about budgets.

“We are not fully meeting the demand and it’s stressful. It’s a very challenging situation,” he says.

For the past 20 years, CDC field staff has depended on the non-profit CDC Foundation for money when it would otherwise take too long going through bureaucratic channels at the agency.

The outbreak has gotten so big so fast, so that’s changed.

“There is simply not enough money at this time to meet the needs that CDC is sending our way,” says the Foundation's executive director, Charlie Stokes.

Stokes understands putting a crimp in this financial lifeline is actually a matter of life and death. That’s why the foundation launched an emergency fund back in August to address Ebola.

“We initially thought $30 million would be enough," he says. "What we are seeing in terms of needs in the field tells me it’s going to be considerably more than that.”

To put that figure in perspective, that’s what the foundation spends on all of its programs in a year. Stokes estimates Ebola needs $50 million alone.

If the foundation falls short, Stokes knows he’ll have to level with the CDC docs.

“We are either going to have the money and send it, or we are going to have to say, 'you are going to have to prioritize,'” he says.

Stokes admits it’s easy to feel overmatched by this epidemic, but – much like Gleason in Sierra Leone –he says he’s going to focus on what he can do. 

World Bank Says Ebola Could Inflict Enormous Economic Losses

NPR News - Wed, 2014-10-08 10:36

In 2013, Sierra Leone and Liberia ranked second and sixth among countries with the highest GDP growth in the world. But that growth has stopped because of the deadly Ebola virus.

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Texas Officials Say They Will Cremate Ebola Patient's Remains

NPR News - Wed, 2014-10-08 10:20

As relatives grieve, public health officials are setting in place a plan to safely care for the remains of Ebola patient Thomas Eric Duncan. Cremation or burial are both acceptable, the CDC says.

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Steel's slow, grinding growth

Marketplace - American Public Media - Wed, 2014-10-08 10:08

The economy is growing at 4 percent per year. Unemployment is down. But that's not always how the economy feels, day to day.

Lisa Goldenberg is the president of Delaware Steel Company of Pennsylvania, where she has a front-row seat to how the economic outlook is making life easier — or harder — for businesses. In a July interview, Goldenberg lamented that things weren't going as well as she had hoped. She has that same grinding sense of progress today.

"We should have had a stronger September. We're doing okay, but okay isn't good enough. It's a struggle," Goldenberg says.

The bright spots: construction, energy and cars.

"For the steel business, construction is a good thing," Goldenberg says. "People go out, they need washers and dryers made out of steel."

But are things better than July? No, she says. People have a little more money to spend, but not enough to pay off debts from the past few years. And definitely not enough savings to buy a house.

"It's painful to live through slow, even, deliberate growth," Goldenberg says. But even so, "it's the best way, in my opinion, to build a solid economy."

We Don't Know A Lot About Dogs And Ebola — But We Should

NPR News - Wed, 2014-10-08 09:55

The story of Excalibur, whose Spanish owner has Ebola, raises many questions. Can dogs catch the virus? How would we know if they did? Could they infect humans? We asked a specialist for answers.

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Five U.S. Airports Will Institute New Ebola Screening Procedures

NPR News - Wed, 2014-10-08 09:47

Passengers arriving from some countries in West Africa will have their temperatures taken upon arrival. They will also be asked to keep

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Why we tip more than we used to

Marketplace - American Public Media - Wed, 2014-10-08 09:00

Tipping can be a contentious issue in the U.S., especially in light of the debate over raising the minimum wage. Whether tipped employees should even be paid minimum wage is still a question up for debate in most states.

With the hardships of low-wage workers on their mind, consumers might be compelled to increase the percentage of their gratuity in instances like dining in a restaurant. Concerns over low wages might be the reason why, percentage-wise, we tip more compared to past decades.

Or is it some other economic reason tied to the rise or fall of food prices? Does the average diner even pay attention to those factors?

Looking at historical data on the U.S., there does seem to be a general rise in how big of a percentage people tip, says Mike Lynn, a marketing professor and expert in tipping behavior at Cornell University School of Hotel Administration.

“If you look at etiquette books, going back pretty far, etiquette books were recommending 15 percent tips,” Lynn says, “But there was a survey by Leo Crespi in Public Opinion Quarterly in 1947, and what was clear was that people were tipping 10 percent on average in restaurants.”

Other etiquette books reinforced the 10 percent norm for tipping as well.

An excerpt from \"The itching palm; a study of the habit of tipping in America,\" an anti-tipping etiquette book published in 1916.

William R. Scott/The Penn publishing company of Philadelphia via California Digital Library

The rise of tipping to a more 15 percent standard may have more to do with how the tipper wants to be perceived, Lynn says.

“My theory is that some people tip as a positional good. To get ahead of others,” Lynn says, “They want better service than other people get. They want the server to look up to them and respect them more. They tip to get out ahead of others, and once some people do that, it puts pressure on everybody else.”

Lynn cautions that his theory is based more on his own observations rather than hard evidence on tipping, which is difficult to come by, but he does say there is evidence that tipping is more common in countries that are more status-oriented.

Lynn also says we shouldn’t totally discount people who say they do tip to rectify what they see as unfair wage practices for servers, in which they are paid below the state minimum wage. He also points out that in states like California, where tipped employees do make at least the state minimum wage, tipping rates aren’t significantly lower than in states with different policies.

The numbers for October 8, 2014

Marketplace - American Public Media - Wed, 2014-10-08 08:14

Five U.S. airports will begin screening passengers arriving from West Africa for Ebola starting this weekend. Kennedy International will be the first, the New York Times reported, followed by O'Hare, Washington Dulles, Hartsfield-Jackson and Newark Liberty international airports.

The announcement comes right after the death of Thomas Eric Duncan, the first person to be diagnosed with Ebola in the U.S. since the outbreak began, on Wednesday morning.

In other news, the Fed minutes are expected later today, along with the usual combing for clues about interest rate hikes. In the meantime, here are the other numbers we're watching Wednesday:

25 minutes

That's how long one employee says he waited, unpaid, to be screened for stolen merchandise following a 12-hour shift at an Amazon fulfillment center. Jesse Busk sued the staffing agency that placed him in the job, Bloomberg reported, and several other suits against Amazon followed. The allegations will be heard by the Supreme Court Wednesday.

5

Google, Yahoo, Microsoft, LinkedIn and Facebook all compromised with the Justice Department in January over disclosing details of government requests to the public. Those firms are now able to give some more general information about data requests that were previously confidential. Twitter argues the remaining restrictions infringe on its First Amendment rights, the Washington Post reported, and the tech company is suing the government.

$27 billion

Netflix's estimated market cap, making its recent deals for a "Crouching Tiger, Hidden Dragon" sequel and four Adam Sandler movies seem downright affordable to a streaming service that already spends $3 billion on content annually. Those numbers come from a Variety analysis of Netflix's recent push to the big screen, which posits big theater chains might be forced to get on board with the streaming model... or go the way of Blockbuster.

Why water conservation doesn't mean lower water rates

Marketplace - American Public Media - Wed, 2014-10-08 05:27

Tap water is still one of the cheapest things you can buy these days.

Of course, out West many households have to conserve water because of a drought. In other parts of the country, folks are using less water not only because they want to conserve, but also because appliances are way more efficient than they used to be. Still, many of those folks are finding that no matter how much water they save, their water rates still go up. They’re using less water, but paying more per gallon.

Why? Put simply, when water consumption drops, so do the main revenue streams for water and sewer agencies. But whether you use one drop of water or a thousand gallons, utilities still bear the cost of cleaning it and sending it to you. Those costs are mounting.

To get a quick sense of the success of passive household conservation, just walk into a store that sells toilets.

“We’re looking at a couple of models here,” says Sean Jones as we walk down through the Home Depot in Gaithersburg, Maryland. “American Standard, Glacier and we have Kohler.”

Twenty toilets in a gleaming row, and when all of them flush, they flush low-flow. Decades ago, toilets used five to seven gallons of water per flush. Now, every toilet here uses far less, to meet EPA criteria.

Jones says now it's “1.28 gallons of water flushes per flush."

It’s not just toilets, though the EPA says toilets are the main source of residential water use. Decades of federal standards have created a new normal: water efficient dishwashers, shower heads and washing machines that save thousands of gallons a year.

Water and wastewater utilities also urged conservation, including the Washington Suburban Sanitary Commission, or WSSC, in Maryland.

“We’ve had a 30-plus year message of conserve, conserve, conserve,” says West Laurel resident and WSSC customer Melissa Daston.

So, that’s just what she did.

“I’ve replaced all of my toilets to low-flow toilets,” says Daston, the past-president of her local civic assocation. “I save up all my dishes until I have a full load. I have stopped watering my lawn years years and years ago.”

The list goes on. If Daston’s water use has fallen, however, her water rates have not. She doesn’t find her bill unreasonable – and she’s not complaining – but, she’s noticed.

“They’ve gone up,” she says. “Point blank, they’ve gone up year, after year, after year, after year.”

In fact, WSSC’s acting CFO Chris Cullinan says rates have gone up about 95 percent (on a compounded basis) over the last ten years. That’s far higher than the rate of inflation.

The reason? WSSC is producing less water than it did twenty years ago, even though it’s added more than 70,000 customer accounts. Again, because of fixed costs, the less water people use, the more these public utilities have to charge for it.

“We make money when we sell water,” Cullinan says. “That’s our primary revenue source. And so while from an environmental standpoint conservation is certainly one of our objectives, from a business standpoint it certainly presents some challenges.”

The biggest challenge is aging infrastructure. WSSC has about 5,600 miles of water pipes and almost as many sewer pipes. 

“It’s from New York to LA and back, within a service area encompassing two counties,” Cullinan says.

He says decades of improper infrastructure investment mean it’s now time to catch up and do reactive maintenance. The utility is under court order to fix sewer overflows, which Cullinan says will cost about $1.4 billion.

The head of the American Water Works Association says rate increases like the ones in Maryland are happening across the nation, as decreased water use collides with the financial burden posed by buried infrastructure.

“Those pipes were put into ground anywhere from 70 to 100 years ago,” says AWWA’s CEO David LaFrance. “There’s massive needs for replacements. We estimate that over the next 25 years it’s a trillion dollar problem.”

The solution won’t all come in the form of rate hikes.

Like other utilities, WSSC wants to stabilize rate increases by charging higher fees. It has proposed a revamped account maintenance fee, which would include an infrastructure investment charge. It’s also proposed a changed customer affordability program, which requires state approval.

The utility sees recalibrated fees as a more stable, equitable way for all users to fund the infrastructure that brings them water and takes away waste.

Small users like Melissa Daston worry increased fees hurt the biggest conservers the most.

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