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Football + Television = Politics


Rarely do football and politics collide, but when it comes to the high-stakes world of the post-season College Bowl Games, politicians have been known to try to get their share of the limelight. With Democrats controlling Congress, and Fox owning the television rights to four of the five biggest bowl games after a year of surprise victories and ranking upsets, the urge to “get Rupert” by changing how Bowl Games do business with colleges may be irresistible.

And it may end up doing the sport some good.

Unlike every other collegiate sport, big-time college football is the only athletic endeavor sanctioned by the National Collegiate Athletic Association that does not have an official championship or series of sanctioned play-offs. Major college football instead has a system of bowl games, dating back to 1902 when the Pasadena Tournament of Roses decided to stage a football game to accompany their annual New Year’s Day parade.

Today, there are 27 Bowls hosted everywhere from San Diego to Toronto. Each has arranged an agreement to invite teams from various conferences and each has a pre-determined cash payout to the participating schools, ranging from the hundreds of thousands of dollars to over $15 million. And after all those games, the national champion is settled by a poll, a computer – or when the system works – a game between the two best teams, called the Bowl Championship Series (BCS) Title.

So where do the politics come in? Well, every pols a “homer” – rooting for, if not flat-out protecting the home team. It’s one of the duties of public office. That’s why, when Brigham Young University was denied a spot in one of the four high-paying BCS games five years ago, Utah Senator Orrin Hatch held hearings in the Judiciary Committee. Hatch complained that the system limited access to the big-money bowls and was discriminatory against schools, like his home-state Cougars or Utah Utes. Although Hatch was ridiculed, he affected change, and caused the BCS to add a title game and open up access to deserving teams from the smaller conferences.

The current system which rewards universities based on reputation and resumes can have a real impact on students. When Texas head coach Mack Brown successfully lobbied to get the human pollsters to move his Longhorns ahead of the California Golden Bears and into a high-priced BCS game in 2004, the Pac Ten lost $5 million. Since the conference distributes bowl revenues evenly, that means that the University of California system alone was out $1 million and that’s not accounting for all the Rose Bowl merchandise they would have sold. That’s real money the colleges don’t receive.

While it is doubtful that the Senate Judiciary Committee has any power – other than jawboning – over college football, Congress can control the purse strings of the organizations that help run the system. Bowl organizing committees, like the Pasadena Tournament of Roses, are not-for-profit groups and many have set up foundations to receive and distribute their bowl proceeds in their communities. Meanwhile the bowls milk every company from Citigroup to Chik-fil-A for sponsorship money. Take away the tax exemptions and suddenly, all those sponsorship dollars would probably dry up. Yes, if Congress wanted to force real change into College Football, they indeed have the power – the power of the purse-string.

Not surprising, bowl game organizers are some of the most vehement opponents of a playoff system because it would effective render them impotent. A football-oriented club for local elites – these committees are a cross between a Chamber of Commerce, Visitor’s Bureau and Rotary Club – touting the benefits of their existence to include, “rewarding experiences” for those unpaid student-athletes: ‘The gates of Alcatraz open once again as the Diamond Walnut San Francisco Bowl tours its teams through this historic monument of American justice. At the Hawaii Bowl, players get to … witness a true Hawaiian ritualistic luau at night.’”

And if you think that the Bowl games’ fiduciary responsibility lies in promoting the public good – a key component in determining whether their activities are indeed charitable – think again! The BCS selection procedures are quite clear. Invitations to the game may be modified to take into consideration, “whether alternative pairings may have greater or lesser appeal to college football fans as measured by expected ticket sales for the bowls and by expected television interest, and the consequent financial impact on Fox and the bowls.” Rupert Murdoch and News Corp. thank you!

Now, you’d think that Senators like Dianne Feinstein and Barbara Boxer might advocate change in how the bowl system works and its organized because it would result in a more equitable distribution of revenues for California schools that never make the BCS – Cal Berkeley and UCLA. But let me suggest another, more subversive reason, to prompt this Congress to act: Messing with the BCS means messing with Fox and its owner, Democrats’ arch-nemesis Rupert Murdoch! If ever figured that out, I am sure the liberal activist group would become a college football playoff’s number-one fan!

Posted by Scott Olin Schmidt at 9:20 AM | Permalink

I’d Be There for Rudy


This past summer, Minneapolis grabbed national headlines for its crumbling infrastructure. Late next summer, the nation’s eyes will return to Minnesota again, for the Republican National Convention. Although I was there in 2000 and in 2004, it seems more likely that you’ll find me in Charlottesville, VA come next Labor Day than in Minneapolis, MN. I am a victim of political geography.

It’s not that I don’t want to attend the next GOP convention, nor that I don’t have a candidate yet, which will keep me from becoming a delegate in 2008. I support Rudy Giuliani and want to do everything I can to make sure he represents the party as its nominee next year. I was an alternate delegate for George W. Bush in 2000, where I was able to get the 15,000 assembled Republicans to start a “We Love Dick” chant to welcome our vice presidential nominee.

At the time, I lived in Congressman Brad Sherman’s San Fernando Valley district, and, as I later discovered, my selection as a delegate came on account of my age. I was 25 and the GOP had a quota for delegates under a certain age much like Democrats have quotas for Black, Latino, gays and lesbian delegates.

Nevertheless, I’m an experienced delegate! So, as the deadline to apply for the 2008 Convention approached, I asked my friend who is tied into the Giuliani campaign what I’d need to do to attend. “You can come as my guest,” he told me. When I told him I wanted to be a delegate, he laughed and asked me if I knew where I lived.

I may be represented in Congress by Rep. Henry Waxman, one the House’s most liberal Democrats. But for a district with a reputation for being one of the most safely Democratic in the country, California’s 30th sure has alot of high-powered Republicans.

Despite its reputation, the district, which covers West Hollywood, Beverly Hills, Santa Monica, Brentwood and Malibu, might be the most highly-contested seat for Republican delegate selection in the state – if not the country. And it’s nowhere near anything known as Reagan Country.

Actually, Nancy Reagan does live in the district. As does California Governor Arnold Schwarzenegger, former Los Angeles Mayor Richard Riordan, former gubernatorial nominee Bill Simon – Giuliani’s California Campaign Chairman. It’s not just celebs.

According to Fundrace, a number of people in the district have already maxed out their contributions to the Giuliani campaign. They include hotelier Barron Hilton (no word on his grand-daughter’s contribution history), real estate developers Rob Lowe and Fred Wehba, former Los Angeles mayoral candidate Steve Soboroff, California Redistricting Campaign chairman Bill Mundell, the former Mr. Arianna, Michael Huffington, Paramount Pictures CEO Brad Grey and Dole Foods mogul David Murdoch, to name a few. Add actor and humorist Ben Stein to the list of contributors and potential delegates, and well, maybe my friend has a point.

So I’m not even bothering to hedge my bets by submitting a futile application to be a Rudy Delegate which is too bad, because I hear even the airport can be interesting in Minneapolis – that’s a joke. But I have learned that your chances of attending a political convention don’t have as much to do with how many Democrats or how many Republicans live in your neighborhood. What matters most is how rich they are!

Posted by Scott Olin Schmidt at 9:00 AM | Permalink

Writers Versus Web 2.0


Here in Southern California, the effects of the Writers’ Guild strike were immediately palpable. The lines at Starbucks were longer Monday and tables filled with would-be writers staring into space, while the cardio equipment at the gym has been working double-time.

But the greatest effect of the WGA strike will be in how these negotiations lay a roadmap for the future of Web 2.0.

What’s at stake in the writer’s strike is much more than a pay dispute between Hollywood elites (although that’s part of it….). The winners and losers will extend far beyond the two parties negotiating in the hotel ballrooms of Los Angeles. The public’s access to content online is at stake in these negotiations and if an appropriate balance cannot be struck, the real losers may end up being the web-browsing public—that’s to say, you and me. Although I fear the prospect, ultimately, it may require action by Congress to sort these issues out.

Marc Andreessen, who has been around the internet a lot longer than I, thinks that this could be a turning point where amateurs take over the studios and leverage Web 2.0 to make the concept of “studios,” producers and writers all things of the past. It’s an interesting idea but I’m not so sure it’ll actually come to pass. To date YouTube’s stars have only monetized their online fame when they get picked up by those very studios Andreessen thinks are going away. Even internet diva Perez Hilton relies on the mainstream media to feed his publicity whoredom.

Meanwhile, the TV networks and the movie studios have figured out that if they put their content online on websites like YouTube or Hulu, people will do their marketing for them. If they put their content on iTunes, people will pay for it. And the writers, justifiably, want to be compensated when this happens with what are know – fondly in many cases – as residual payments.

Anyone unfamiliar with the concept of residuals need only dig up the old Seinfeld episode, where Jerry starts getting checks for pennies here and there when his work is aired in Japan. The writers want to start cashing such checks whenever their work is shown on the Internet. That’s what is at the core of their strike today.

The dispute between the Writers and the Producers reminds me of the war waged by the American Federation of Television and Radio Artists nearly a decade ago.

On the morning of September 11, 2001, I had to go into the office, and was the only one there. Our offices in Sherman Oaks had no working television or radio so the only way I knew of to get news of the terrorist attacks was to go online. To my chagrin, none of the local news stations had streaming radio. In fact, just about the only streaming radio I could find that day was a public radio station based in Atlanta, Georgia.

Puzzled as to why the radio stations were not putting their content online, I talked to some of my friends in the business. They told me that they had stopped streaming radio content because of a dispute with AFTRA. The radio “actors” were demanding to get paid for their commercial work, but if local radio streamed their content online, they said, the stations could not quantify the distribution online in order to pay for them. The bottom line was that because the actors wanted to be paid for works distributed online, none were, and no content was distributed over the Internet – setting back Internet radio for years.

Of course, that is the radio industry’s side of the story, so it should be taken with a grain of salt, yet the history here should serve as a cautionary lesson for the writers and producers as they bargain today. Today, the producers are claiming that there is no way to monetize content distributed online, and therefore no way to base a residual payment system. In the Wild West of Web 2.0, there is some truth to this, but the argument is in part a petard.

Studio-produced content can be and is monetized on the internet when I pay $1.99 to download an episode of Desperate Housewives from iTunes or when I have to sit through an ad to get free highlights of last night’s Colbert Report. The writers are correct to think that they deserve a share of these revenues. The question is how?

In the world of Web 2.0, things aren’t so clear cut. Let’s say that as a contributor to AOL’s FanHouse, I embed a YouTube video of the Simpson’s episode where Homer realizes that obesity is a disability to make a point about Notre Dame Football Coach Charlie Weis. Who owes the royalty to the writer—Fox Studios who produced the TV show, Google, which hosted it on YouTube, the 17-year old who uploaded it to YouTube or Time Warner who is selling ads on the page where I embedded it?

Before the lawyers get a chance to answer this question, you can bet that the crackdown on copyright enforcement for online video will be stepped up to the point where it will be as difficult to find TV or movie clips online as it was for me to find a radio station on September 11.

And that’s a shame. Because the freedom that we enjoy on the web today shouldn’t rip off those who come up with the good ideas – hey, even this column – but it should drive away an interested and growing audience either.

Resolving the residual mess caused by Web 2.0 may take more than negotiations between writers and producers. As any generator of online content knows, ideas flow freely, and usually without links back to the original source. While imitation is the sincerest form of flattery, the landlord doesn’t take flattery as a form of payment. Congress may have to step in and sort out the copyright standards for Web 2.0 before the residual debate can be truly resolved online–and when was the last time Congress was able to get anything right?

Posted by Scott Olin Schmidt at 9:41 AM | Permalink

The Disaster NIMBY’s Wrought


On my flight home Sunday night from visiting South Bend, Ind. the first officer contacted air traffic control asking about the fire was he could see blazing in the Temecula area, east of Los Angeles. It would be the first of many fires visible as flames made their way through Corona and the hills of Orange County, Lake Arrowhead, Santa Clarita and Malibu. It was pretty obvious: Southern California was burning.

Since Saturday night, more than a dozen wildfires have burned more than 1300 structures and tens of thousands of acres. Between Santa Barbara and San Diego, more than a half-million people have been evacuated from their homes.

A few decades ago, such wildfires would have been a major news event, but their impact on human lives would have been significantly lower. Because of the development and growth patterns of Southern California, residents are living on the edge and creating a built-up environment where a confluence of events can spark comparisons to the ultimate natural disaster in recent American history, Hurricane Katrina.

On the religious right, they would have you believe that exurban Southern California is burning because the City of San Diego filed an amicus court brief in support of marriage equality in California. Others are wondering whether the coincidence of so many fires could be tied to terrorism. But regardless of how the fires started, their devastation can be blamed on one group of people – NIMBY’s.

If you don’t have them in your town yet, let me tell you about our version of the NIMBY. Many Southern Californians believe that there should be no development any where near anyone. Once settled in a new community, they will say, “Not in my backyard!” to any building proposal that comes along. Like the Malibu environmentalist, they believe that the last house that should be built is the one they live in.

Unfortunately for us, politicians only respond to voters who live in their districts, not those who might move in, so NIMBY’s can be very powerful. When they say that there should be no new apartment buildings or condos, local elected officials listen. They’ll block projects, propose that density be capped and work the corridors of City Hall to make sure that nothing new gets built.

But the fact there is little to no density-increasing urban construction here in L.A., where it would make sense has not kept folks from moving to Southern California. To accommodate this influx, we first built up the San Fernando Valley, immediately North of L.A., in the 1950′s. The Valley then spilled over the hills into the San Gabriel Valley. When that filled up, we started building in Ventura County and Santa Clarita, a community founded way back in 1984. The last decade has seen an explosion of growth in Orange County and now the Inland Empire, once nothing more than farms.

The fires raging in Southern California today are being compared to those of 1993, when a similar number of structures were burned. But if the fires of 2007 had happened in 1993, fewer homes would have been lost because, well, there were fewer homes in these outlying areas. The communities that were the suburban hinterlands back then – Altadena, Laguna Beach and Sierra Madre – are now considered close-in L.A. suburbs when compared to the far-flung subdivisions and towns which are burning today. In 1993, Rancho Bernando and Poway were considered the boondocks, whereas today, these communities are considered to be practically part of the city of San Diego.

Despite our wildfires, earthquakes and the occasional riot, people still seem to want to come to Southern California.I hate to admit it but I kind of agree with Al Gore about the need for smart growth here–and you know how I feel about the former Veep. If we continue to build out – not up – the wildfires one or two decades from now will be even more devastating as people live closer to the wilderness’ edge.
To accommodate growth, Southern California’s elected leaders will need to develop a scarce political resource – a backbone – and say no to the NIMBY’s and to ask Washington for help to build the public transit necessary to make communities both more livable and more dense.

Sometimes, it takes a crisis to force our leaders into action. Just ask George Bush and Michael Chertoff as they visit Southern California this week. Maybe this will be the moment that prompts our leaders into action to develop a more sustainable pattern of development.

Posted by Scott Olin Schmidt at 3:03 PM | Permalink

Fly Without Fear


After September 11th, Americans faced a new reality of airline travel: stepped up security searches, carry-on baggage limits and silly regulations became the norm. Over time, we adapted to the “new normal” of flying and are back in the air again in record numbers which is creating a whole new set of problems.

When passenger levels were waning, local airport authorities like those in Los Angeles and San Francisco put off plans to expand capacity and build new gates. Facing bankruptcy or near-bankruptcy, U.S. airlines put off investments in new aircraft and sought to maximize revenue with the planes they already had, not counting on travelers wanting back in the air so quickly.

In the airline business, it seems, the rules of supply and demand have been shattered apart by these two externalities – no one flying to everyone on board – to the point where the system is near a breaking point. These days, too many people are trying to get on too few planes, and it’s not pretty.

While activists were lobbying Congress for a Passenger’s Bill of Rights, the nation learned of the most tragic victim of the airways woes: Carol Gotbaum. On her way to Tucson, Arizona to check into a treatment clinic, Gotbaum was denied boarding onto her connecting flight, got irate and was taken into custody by airport police, where she died of asphyxiation apparently trying to get out of her handcuffs.

Gotbaum’s case, while extreme, was not the result of anything out-of-the-ordinary for flyers. Every day across the country, Americans are subject to cancellations, overbookings and denied boardings leading to a sense that flying can kill, even when the plane takes off and lands safely.

Flying doesn’t have to be a dreadful experience, but it takes two to tango in today’s airline roulette – passengers as well as the airlines themselves. And if you follow a few simple rules, your experience will be much better. So here’s my guide, culled from years of travel and a few friends in the business:

1) Know your rights. When an airline cancels a flight or changes a schedule, you as a passenger have certain rights. Know about “Rule 240” and use it liberally. When an airline changes or cancels a flight due to something within their own control – operations, mechanical problems or labor strife – they’re obligated to take care of their passengers with everything from meal vouchers to hotel accommodation to monetary compensation or ground transportation. If a schedule change occurs before you take off, you can usually use Rule 240 to choose the flights of your choice or to get a refund from the airline entirely – even on a non-refundable ticket. If you are denied compensation, ask, ask again until it is given.

Your rights, however, are limited to a degree. Officially, most airline contracts of carriage state that their only obligation is to get you from Point A to Point B – so accept this limitation before losing your cool as you fly through Charlotte on your way from L.A. to Newark.

2) Know your responsibilities. If the airline tells you to show up early for a flight, do so. If they tell you that you cannot check luggage after 45 minutes before flight, don’t push your luck.

If you want to be guaranteed a seat on a plane, better to get a seat assignment before check-in, because those without a seat assignment will be the most likely to be denied boarding in the case of an overbooked flight.

3) Be flexible. Sometimes the easiest way to get from Point A to Point B on a plane is not a direct line. If a connecting flight through Chicago is cancelled, check to see if Denver, San Francisco or Washington are viable alternatives. Last year, returning from holiday with my family in Southern Virginia, my travel plans got messed up when Denver International Airport shut down entirely. I was supposed to connect from Norfolk to Washington Dulles to Denver to Burbank. Knowing there was weather in Denver, I went to the airport early and asked to stand by on an earlier flight to Dulles. Because of weather in Denver, Dulles was a mad-house, but I convinced the airline to let me try to stand by on any flight to Los Angeles or San Francisco that was available. Once I arrived in San Francisco, I found someone to take care of getting me a boarding pass to Burbank.

During irregular operations, airlines are usually taking care of more than just one person and your trip is not the most important thing in the world to the agent you’re speaking to. Be creative and proactive in offering alternatives and you will be more likely to get what you desire: To your destination quickly.

4) Remember the Golden Rule. As children we are taught to treat others as we would like to be treated ourselves, and guess what? It applies to us even as adults especially when flying. When a flight is overbooked or worse yet cancelled, the airlines’ customer service representative is faced with handling dozens if not hundreds of passengers whose plans have gone awry. Human nature leads most passengers to get mad and try to get even, but surly passengers lead to surly gate agents and sometimes worse. Try killing them with kindness and see how kind the agent can be in response. Trust me, this works!

While the nation’s airports and airlines have a long way to go to create capacity to meet demand, we should not be more afraid of airport gate agents than we are of Islamo-fascists. Most airline nightmares can be avoided if you learn to play the airline game: Know your rights, know your responsibilities, be flexible and follow the Golden Rule.

Posted by Scott Olin Schmidt at 5:25 AM | Permalink

USC and HRC: Invincible!


The impossible happened this weekend in college football when a hapless Stanford University led by a first-year coach and a backup quarterback, seized Troy and brought down the number one team in the country, the invincible University of Southern California.

To Vegas, a Trojan win was more inevitable than the presidency of Sen. Hillary Rodham Clinton. USC was a 41-point favorite over the Cardinal. But, alas for us USC fans, the impossible happened and we lost 24-23. Yes, only by one point but in football, as politics, one point matters.

With each national poll that is released, Clinton’s nomination and election to become president of the United States appears inevitable. With all apologies to Fidel Castro, she is looking invincible with or without Barack Obama by her side if you listen to the political pundits. And that’s why Clinton risks the same tragedy as my USC Trojans.

USC never thought they could lose to Stanford. In the week before the game, the coaches went home early. In their pre-game walk to the Stadium, players and coaches looked more focused on having fun than on playing football. And when it came time to put the pads on, the coaches now admit that they never considered that Stanford might win when choosing which plays to call.

In a word, my friends, that’s hubris. And hubris, as my Spot-on colleague Mike Spinney pointed out yesterday, is the Democratic Party’s greatest enemy right now.

With the war in Iraq being unpopular and Congressional Republicans seeking to offend just about anyone from Latinos to sick children, Democrats must think that both ends of Pennsylvania Avenue will be handed to them on a silver platter right now. For Clinton and for the party as a whole such a cocksure mentality can only spell trouble. They’d do well to take a look at their party’s recent history here in California. After sweeping Statewide elections in 2002, the Democrats governed from the far left and their actions – and arrogance – led to the recall of Governor Gray Davis.

When Governor Arnold Schwarzenegger limped out of the 2005 Special Election like a wounded puppy, Democrats turned far left again, nominating ultra-liberal tax-and-spender Phil Angelides over the more moderate Steve Westly. If you’re taking notes, Schwarzenegger’s still with us. Angelides couldn’t get arrested.

On Saturday night against Stanford, USC played like they had a big lead even when they didn’t because the coaches were so sure that if they played their game instead of playing to the circumstances of the game they were in they would have the lead. And playing with the lead is exactly what the Clinton for President campaign is doing today.

In national polling, Hillary Clinton leads her rivals for the democratic nomination by twofold. It’s not unlike the 41-point Vegas spread for USC over Stanford. So, if presidential politics were a football game, she would have two choices: Run up the score or sit on the lead. The risk of trying to run up the score is that you might make mistakes and give your opponents hope. The risk of sitting on a lead too early is that it may get chipped away until it is too close and when you need it you no longer are running at full speed.

Metaphorically, it seems that Clinton has chosen to sit on her lead. She is running as the frontrunner, eschewing town hall meetings, Q&A’s and is moving towards more scripted events. That kind of remoteness indicates a big of arrogance, doesn’t it? And that’s dangerous. If it doesn’t hurt Hillary in the primaries, it could trip her up in a general election where she suddenly has to campaign again as if it mattered.

They said that a Stanford loss to USC was inevitable just as some are predicting a second Clinton Presidency will be. But if Hillary runs her campaign with the same hubris as Pete Carroll coached the Trojans last week, she may not have an opportunity to redeem herself in the last seven games of the season.

Posted by Scott Olin Schmidt at 8:13 AM | Permalink

Fool Me Once…Not Twice


As the housing boom expanded into a bubble, I sat on the sidelines here in my rent-controlled West Hollywood apartment. My brother and his family were chased by rising housing prices from Los Angeles to Portland to San Antonio. Now, if proposals to bail out bubbled borrowers are approved, we may be forced – because of our rational decision-making – to subsidize everyone who made bad choices and bought a home before the bubble burst.

The National Association of Realtors went to President Bush and urged him to propose a mortgage bailout. So, naturally, Democratic presidential candidates must be even more generous in their proposed handouts. Heck, even local officials in Los Angeles have talked about using money from the Affordable Housing Trust Fund to assist homeowners facing foreclosures. This is bad policy and even worse economics. As long as such bailouts are considered possible, they will only create market conditions that bend reality and artificially prop up housing prices, keeping market forces from returning home purchase prices to more rational levels.

In seven semesters of economics at Georgetown and the University of Southern California, I learned one basic truth: markets seek the equilibrium value. Want to know what that is? Well, draw a supply line and a demand line. Where they cross is the equilibrium value whether we’re talking about housing markets or widgets. Where buyers find sellers and exchange money, that’s the equilibrium value.

In a rational housing market, the median home will be affordable to the median homebuyer. That is to say, if you remove the people who are living in apartments and those who already own their homes, then the average home should be affordable to the average person. But that’s not what’s happened. In California, the housing affordability index has fallen from 24% in 2004 to 11% in 2007. In Los Angeles County, it is even lower. Only 3% of homes sold in early 2007 were affordable to the median household!

The economics of a market where only 3% of the people can buy in become unsustainable – as we are now finding out. The market has been inflated by buyers who couldn’t afford their purchased – helped along by loose credit and well, some unsavory mortgage-lending practices. During the irrational exuberance of the housing market, buyers were told that prices were only going up because everyone needs a place to live and the population is only growing! But that’s exactly why housing is a bad investment. You cannot profit from your gains unless you substitute the product you’re selling for something less than what you had before. And if housing prices are only going up, you’ll sell and buy something much less expensive. Unless, of course, you’re willing to play Bubble Roulette.

Say you paid $250,000 for a charming West Hollywood bungalow in 1996 and you sell it today for over a million. Sounds great. But you aren’t going to be able to afford another West Hollywood bungalow with your $1 million. You might be able to take some profits and get into a $900,000 condo or worse yet, move to Texas and pocket the difference but in the end, you are ending up with something less in part because you’ll have a bigger loan to pay off the house that’s replaced the bungalow. And everyone needs housing, so pocketing everything really isn’t an option – unless you’re willing to rent until the market returns to its equilibrium value.

Not everyone had the pleasure of taking seven semesters of economics, of course. But sometimes common sense can substitute. If a bank is going to lend you six figures you should be able to figure out this basic equation: How much money am I making and how much can I afford to spend? It seems many people didn’t even do this math. Now they and the lenders who sought to profit off of their ignorance – some of whom suggested to their clients that the rules of mathematics didn’t apply to home loans – are now paying the piper.

Now, I have a great deal of sympathy for anyone who is losing their house. Not all of those being put out on the street or who are working through the frustration of having to deal with far-away banks and unscrupulous lenders were buying and selling million-dollar property. But I have no sympathy for the lenders and real estate agents who profited from putting them in such a predicament.

The real estate agents have already made their profits when they pocketed their 6 percent commission. But lenders need the borrowers to be solvent in order to cover their bottom line – to keep money flowing through the system. Bailing out the borrower, therefore, will only help the lender while it hurts the rest of us who are stuck to foot the bill–in the form of tighter credit, stock market volatility, a falling dollar and higher taxes to pay for a government bailout. And that’s not fair to anyone.

Posted by Scott Olin Schmidt at 6:08 AM | Permalink

It’s Still the Economy, Stupid


If it feels like the 1990’s are back, you are not alone. After O.J. Simpson’s return to the headlines – and cable TV – and the resurrection of Hillarycare, I wouldn’t be surprised to see a sudden dirty plaid flannel shirts as Grunge makes a comeback.

And when it comes to politics, there’s a 1990’s catch phrase that may once again define the 2008 Presidential contest: “It’s the economy, stupid!”

Conventional wisdom says that the 2008 election will be determined by one issue: the war in Iraq. Will Americans withdraw into a protectionist cocoon or will we choose to stick things out and clean up the mess that was made? But conventional wisdom this far out from an actual election can often be wrong.

More often than not Americans vote on what they perceive to be their best interest. As the 21st Century opened, housing prices soared, liquidity sloshed through the economy and incomes rose with relatively no inflation and we could care about things like Iraq and what our troops were doing over there.

By and large, the war in Iraq has little effect on the day to day lives of most Americans. If you are not in the military or do you have a family member serving, the Iraq is little more than a philosophical or partisan discussion to be had mostly among people you know agree with you. If you are serving or know someone who has, your view is not filtered by the media and you likely know why we’re there, what we’re doing and the costs of failure.

But what will matter to most Americans when they go to the ballot box in 400 days is what affects their day-to-day lives. All signs are indicating that we’ll be feeling an economic pinch by then.

In Stockton, California, home foreclosures have increased ten-fold in the last year as rising interest rates sting homeowners tricked to believe that the housing bubble would not burst.

Consumers are staying away from retail stores in droves leading to lowered expectations from Lowe’s, Target and other retailers, many of them catering to the middle class.

The trucking industry is seeing declining tonnage month-to-month, signaling a decline in economic activity across the nation.

Perhaps all of these signals were telling the Federal Reserve that the U.S. risked slipping into a recession if they did not act before cutting interest rates by a surprise half-a-point. Wall Street liked the Fed’s move at first, but investors have since wondered if they were being proactive in addressing an economic slowdown that the markets were not seeing or rather, choosing not to see.

If the economy is in recession, or heading there, Americans will be faced with two clear choices in Decision 2008: cut taxes or raise them. All of the major Democratic Candidates have promised to repeal the Bush tax cuts and will require even more revenue to pay for the programs they’re proposing. Meanwhile, likely Republican nominee Rudy Giuliani can run on a record of cutting taxes 22 times while Mayor of liberal New York City.

Most Americans I know seem smart enough to know that if you want to inject liquidity into the markets, you do not take money away from investors and if you want to increase consumer confidence, you do not do so by taking money away from the working class. Americans understand, instinctively, that the money they earn is theirs–not the Government–and are loathe to hand it over to Washington in tight economic conditions.

If Americans are feeling an economic pinch in their pocketbook, raising taxes will be as popular as invading Iran, leaving Americans with a choice between voting on a war halfway around the world or voting with their pocketbooks. This is why, or rather how, contrary to today’s Conventional Wisdom, the GOP has a shot at keeping the White House in 2008. After all, it’s the economy, stupid!

Posted by Scott Olin Schmidt at 8:30 AM | Permalink

Time to Kick The Juice


The University of Southern California has a proud tradition of excellence on the football field and this year has returned to its glory days under six years of the tutelage of Head Coach Pete Carroll. But not all trophies in the Athletic Department’s Heritage Hall are without tarnish.

Six Heisman Trophies – awarded to the best player each year in college football – are on display in the USC Trojan trophy cases. I assume USC Athletic Director Mike Garrett’s trophy (which would be the seventh statue) is in his office but the one trophy you’d think would be missing is, in fact, front and center in the display case. Yes, USC still celebrates the football career of O.J. Simpson – he who has been accused of double-murderer, found liable for the death of his ex-wife and her boyfriend, accused of stealing Direct TV and now facing eight felony counts in Las Vegas, Nevada.

USC gives all of its Heisman Trophy winners the same treatment. Their number is retired, their trophy and jersey are displayed in the trophy case at Heritage Hall, the university’s sprawling athletic center. Trophy winners’ numbers are also on large display in the peristyle end of the Los Angeles Memorial Coliseum.

I have to wonder how football coach Carroll – who had nothing to do with USC’s Student Body Right heyday of the 1960’s and 70’s – feels when he walks by O.J.’s jersey on the way into the office each day past Simpson’s #32 jersey and Heisman Trophy. USC has taken a very diplomatic approach to handling Simpson. The school recognizes that Orenthal James Simpson attended USC and played football – quite well – before going off, like most Heisman winners, to a career in the National Football League. But Simpson is not invited to any official university events. The school embraces his accomplishments on the field while separating themselves from his actions off of the field.

But is that a lesson Carroll truly wants to send to his players? Play good football and you’ll be heralded no matter what happens off the field? Because it seems that is the message being sent to USC players by the coaches and administration. Or, perhaps more accurately, that’s the message the players receive.

In recent years, Trojan football players have been arrested for or accused of soliciting a prostitute, spousal battery, sexual assault, plain old assault, gun possession, drug possession, steroid use and more. The list goes on and on and, of course, includes O.J.’s acquittal for for murdering his wife, Nicole Brown Simpson and her friend Ron Goldman.

Some of my fellow USC boosters say Simpson is being recognized for accomplishments that are thirty, nigh, forty years in the past and that it’s possible to separated by decades from his triumph on the field from his horrible behavior off the field. But being a football player at USC is a little bit like being a cardinal in the Vatican. USC has long tradition for winning football games; playing there as a college student is an accomplishment, a ticket for many to the NFL. The untalented, the modest, don’t make it. But no one should be so arrogant as to think that because of their talent on the field, society will excuse anything they do off of it. But if Heritage Hall celebrates O.J. Simpson the football player while looking away from O.J. Simpson the man, that is where we – unfortunately – end up.

Now, I can understand the argument that the man’s troubles today have nothing to do with his on-the-field performance during the Johnson Administration. I can understand why, during the racially charged early 1990s in Los Angeles, USC decided to postpone making a decision about how to handle Simpson’s legacy until after his trail.

But, as a supporter and alumnus of the University of Southern California, I have to say that Simpson’s antics are getting embarrassing. Having listened to the tape from the Las Vegas hotel room robbery where Simpson allegedly tried to steal his own memorabilia, I will likely blush in embarrassment as I walk into the Coliseum on Saturday.

Hopefully, if the charges against Simpson stick, he’ll be convicted this time and USC will be able to replace his jersey with a newly retired number in the off season. I’m thinking it’ll be the number 10 jersey that belongs to this year’s Heisman Trophy candidate – and likely winner – Trojan quarterback John David Booty.

Posted by Scott Olin Schmidt at 5:19 AM | Permalink

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