May
15
Sensible investment, unforgiveable pork, and the farm bill
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H.L. Mencken, a genial man who got away with saying the darnedest things because of it, wrote an essay condeming the American farmer, chiefly, I suppose, because everyone else writes in praise of that particular fellow.
The prevailing view, in his day as in ours, was that the farmer was a hard-working sort, carrying on the American way against all odds, and we would do well to be more like him.
Mencken obstreperously argued that the American farmer was, in fact, un-American, because he voted to elect to Congress any lowdown unsavory scalliwag provided he pledged to raise crop subsidies and price supports.
I would suggest that today the difference between the farmer in our hearts, with his sleeves rolled up and his hands calloused, and reality is that he has been mostly replaced by Archer Daniel Midlands, which is company, not a person, calloused or otherwise. The crop subsidies and price supports finally got so lucrative that they attracted big business.
I have asserted previously, on other topics, that Hawaii is a time as well as a place, where things happen that used to happen on the mainland but don’t any more. Here is another example of that. We still have small farms. We have almost nothing but small farms. We have 600 farms growing coffee on the Big Island alone. Even our bigger farming operations, such as Kauai Coffee Co. or Maui Pineapple Co., would scarcely qualify for their own Interstate exits in South Dakota.
So when the annual farm bill comes out of Congress, after being fertilized and tilled and sprayed by Big Farm lobbyists, if Hawaii reaps anything it is largely an accident.
Such an accident has happened on Capitol Hill this week, where the House approved the farm bill Wednesday with more than enough votes to override a threatened presidential veto before sending it to the Senate for a likely similar outcome Thursday.
The nature of the accident is easy enough to describe: California farmers, who have loads of clout on the Hill wanted some things that will also benefit Hawaii, even if that was far from their minds when they demanded them.
When farm state lawmakers don’t control powerful committees or sit in the House or Senate leadership, they woo the powerful by throwing in a lot of projects for the home districts of the people who do hold power. That’s how the food stamp program, important to cities, came under the U.S. Department of Agriculture and the Congressional agriculture committees: coalition building. At the moment, however, farm state lawmakers sit in many powerful chairs. House Speaker Nancy Pelosi got more than 300 representatives to vote for the farm bill even though members knew President Bush had a valid point when he made his veto threat.
That point is that the bill contains $40 billion business-as-usual subsidy dollars for corn, wheat and other grain farmers who are currently reaping their highest commodities prices ever. Food stamp recipients can lose their qualification just by working part-time. A farm couple can earn $2.5 million and still qualify for checks from the government. H.L. Mencken would be rotating were he not already composting.
President Bush said he wasn’t going to sign a bill that gave billions to millionaire farmers. (I’m not sure if he also meant Kentucky breeders of thoroughbred racehorses, who won an amendment to allow three-year depreciation of their investments.) He won’t have to. Congress will override his veto in less time than it takes to weed a garden.
Yet the bill does some potentially good things. There are many reasons why Americans now get fat in elementary school instead of waiting until their thirties to do it, but one of them is that cash-strapped public school cafeteria programs switched to cheaper, more fattening foods at about the same time lava lamps went out (the first time). The bill contains a billion dollars for programs to put fruit and vegetable snacks back into schools.
Babyboomers like me tend to be skeptical of this sort of thing, but that’s because we grew up indoctrinated by the 1950s television commercials for such nutritional horsemen of the apocalype as TV dinners, Pop-Tarts, Instant Breakfast, and McDonald’s.
You don’t think we were indoctrinated? Then how come I remember this?
“Are you hungry for a treat/Want food that’s fun to eat/Then go to the golden arches in your neighborhood/McDonald’s golden arches, McDonald’s makes it so good.”
Today’s children, by contrast, have been indoctrinated by Sesame Street and might actually eat fruit and veggie snacks if they could get them.
Either way, the program should benefit Hawaii fruit and vegetable farmers.
The bill also contains grant money for research and development, and marketing, for nuts, flowers and nursery products. Hawaii is deep into these areas of agriculture. Maybe marketing will produce enough demand to deal with the current global macadamia nut glut.
May
14
The summer of our discontent
Filed Under Sunrise on KGMB9 | 1 Comment
Before 9/11, the airline industry was flying so full that its biggest problems stemmed from its own success. I remember covering Senate hearings in Washington, D.C., on the growing problem of overbookings and bumpings. Senators fly a lot, and they took the problem very seriously.
By 2001, things had changed. The airlines hadn’t fixed their problems; they hadn’t needed to. A business travel slump left plenty of empty seats, and then the World Trade towers fell and we were in a full-fledged tourism crash. It didn’t last long for Hawaii because Hawaii quickly became the safe alternative destination for people scared of flying abroad. But the industry stabilized with enough empty seats to cover most contingencies.
Now we may be seeing a return to the conditions of 1999 and 2000, not because the airlines are getting a lot more passengers but because they’re parking jets and squeezing passengers onto a smaller nunber of flights to try to control their amazing jet fuel bills.
It’s understandable. Jet fuel prices have risen four fifths in the past year and are still ascending. You’d park jets, too.
But you’re not running an airline; you’re the customer. And you’re going to suffer this summer. If an electrical storm causes enough lightning on the runway to delay or cancel flights, there may be no seats available on later flights that day; you might spend the night at the gate.
I shudder to think what this could do to Hawaii tourism, both immediately and down the road — because anyone who has a terrible trip that ends in a wonderful Hawaii vacation is likely to remember the terrible trip in a future year when a return visit is considered.
May
11
According the infamous emailed game plan by the chief financial officer of Mesa Air Group, the plan was to drive Aloha Airlines out of business by waging a fare war, selling tickets below cost, until Aloha ran out of cash.
Mission accomplished. Now what?
Now the surviving airlines are charging more, but not enough more to cover costs. They’re still losing money. Why? Apparently because Mesa’s go! did such a good job of convincing people that $49 a ticket was a rational fare that it is now a victim of its own campaign.
Customers who forsook Aloha for go! will — due to gullibility and/or poor math skills — feel they are gouged if prices go too high too fast. Hawaiian, too, can’t raise prices too much, or everyone will get an altogether unjustified feeling of being crispy gougee.
Hawaiian and Aloha tried telling us for nearly two years that they and go! all needed $60 or $70 a ticket to make a profit. Aloha hired an analyst to estimate the costs of all three, and discovered that it actually had the lowest cost structure despite flying aging gas guzzlers. Hawaiian had higher labor costs and go! had far fewer tickets it could sell due to its smaller planes — flying a van instead of a bus, in the inspired metaphor of Hawaiian CEO Mark Dunkerley.
Analysts don’t think Mesa cared particularly whether it muscled Hawaiian or Aloha to the sidelines as long as the result was a two-carrier market. But, having seen the books as a prospective buyer of both legacy carriers during their respective bankruptcies, it knew how much cash it had, and it knew that in a protected fare war Aloha would run out of money first. CEO Jon Ornstein said Mesa then decided there was room for three carriers after all. Analysts said only irrational numbers could produce such a belief after years of interisland transfer traffic shifting to direct neighbor island flights from LAX.
For more than a year Mesa acted like its low fares were perfectly normal and ads for “Hawaii’s low cost airline” resonated with people who thought Hawaiian and Aloha had gouged them for years. I personally spoke with people who firmly believed that since go! was sometimes charging $19 a ticket there must be a way to make money like that. This sounds distressingly familiar to the local credit counselor who told me that she spoke to someone whose subprime mortgage payment reset to a greater amount than the entire household income, who said, “Well, I thought it I couldn’t afford it, they wouldn’t have given me the loan.”
These are the same folks who think the ladies walking Kuhio Ave. late at night are just tacky dressers.
Meanwhile, jet fuel prices have more than doubled since go! launched — and fuel is a bigger cost for airlines than payroll — so the true breakeven point for interisland flights at normal load factors might be approaching $110 now. (Planes use many times more fuel taking off than they do cruising, so interisland flights use a greater percentage than you might think of the fuel that a trans-Pacific flight does.)
In other arenas of life, $110 today is the same as $40 in the 1970s, so why does this surprise you? How many years did it take for home prices to double? For the price of a car? A movie ticket? A Big Mac?
Yet go! and Hawaiian clearly feel they can only raise ticket prices so much at the moment without triggering the inaccurate belief of the baboozery that gouging is occurring. For Mesa, it may be a case of its own strategic plan coming back to kick it in the okole. For Hawaiian, it is arguably an example of how it, too, has been hurt by what put Aloha out of business.
And what about the other players?
Island Air mostly flies routes not served by Hawaiian and go! but it can only raise prices so much if its larger brethren are still flying at a loss. Similar factors may be in play for Pacific Wings and Mokulele (aka go!Express). Let’s not forget that the fare war didn’t just put thousands of Aloha Airlines employees out of work, it also drove Island Air to furlough half its work force, cutting a few hundred other jobs out of the local economy. So far as I know, nobody is deliberately trying to put Island Air out of business, but the vagaries of our weird marketplace are still hurting that carrier.
Now then. What about you? Did it sting when I said “baboozerie” because you made a gouging crack once? I forgive you. The thousands of families of Aloha Airlines employees thrown out of work may not forgive you but I do. We all make mistakes. But it would be a mistake to continue to forsake local businesses every time a deep-pocket mainland company comes in with loss-leader offers and a pretense that your local vendors were somehow ripping you off. You need to be a smarter shopper than that.
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