Economic Forum President Rebel Cook with Russell Greene, CEO of Grand Bank (left) and speaker Charles White of Stern, Agee

From the President:

If you missed the opening of 2011 Economic Forum meetings, you missed one of the best
programs presented by the Economic Forum – also one of the highest in attendees. Our
speaker, Charles White from Stern Agee, presented a concise and thoughtful analysis
to the current economic conditions and what to anticipate for the year – assuming no
dramatic events.

Special thanks to our longtime Corporate member, Russell Greene, CEO and President
of Grand Bank, who recommended and arranged for Mr. White to speak. Thanks also to
Russell who arranged for a repeat visit from the Leadership Class of the West Palm
Chamber.

Rebel Cook

Property appraiser: Market values hitting bottom

By Jeff Ostrowski

WEST PALM BEACH — The plunge in Palm Beach County real estate values has slowed from free-fall to gradual downturn, Property Appraiser Gary Nikolits said Wednesday. Next year’s rate of decline likely will be about half this year’s 12.5 percent drop, Nikolits said.

The market value of the county’s 628,000 properties fell from $179.9 billion in 2009 to $157.4 billion in 2010. Property values peaked at $233 billion in 2006.

“We have pretty much hit the bottom of the market in many areas of the county,” Nikolits said during a speech to members of the Economic Forum of Palm Beach County.

Read more (PDF)

Presentation slides: PDF

Attorney John L. Fiveash Jr. and Escambia County's Taylor “Chips” Kirschenfeld

By David F. Carr, webmaster

The worst environmental impact of the oil spill on Florida may be over, but the economic impact on the state will remain until perceptions of the problem change, emissaries from Northwest Florida told the Economic Forum of Palm Beach County at its July meeting.

John L. Fiveash Jr., an attorney Lewis Longman & Walker P.A. who represents the City of Pensacola and the Port of Pensacola, and Taylor “Chips” Kirschenfeld, Senior Environmental Programs Manager for Escambia County, were joined by phone by Edward Overton, professor emeritus at the Louisiana State University School of Environmental Sciences. The event came on the 100th day after the explosion at the Deepwater Horizon oil rig operated by British Petroleum.

Read on for the full story and photos from the event.

Although the program was advertised as “The Oil Spill and South Florida,” the speakers said the environmental impact on the East Coast of Florida is so far nil, and likely to remain so. Despite fears that the Loop Current could suck oil around the tip of Florida, it now seems that most of the oil has dissipated and is being broken down by natural biological processes.

But even if this optimistic assessment proves true, Florida has win back mindshare with the tourists who have been staying away this year – particularly on the Gulf Coast, but to some extent statewide. Fiveash said he was reminded of the challenge when he picked up the copy of USA Today left outside the door of his hotel room and found a story about tourists avoiding South Florida beaches on the front page. He turned on the TV and saw a segment where a reporter was combing a Florida beach at night, using an ultraviolet light to try to detect traces of oil on the beach.

“It’s a problem. It may not be an actual problem for you down here, but it is a perception problem,” Fiveash said.

For the most part, Kirschenfeld said the crisis has been over for weeks. “There was only about a 10-day period, in late June, early July, when there was a noticeable impact on the beach,” he said. It showed up as an “oily mousse” as well as in the form of tar balls and tar patties and oil-covered birds. But it was limited enough that the county has since restored the beaches to “pristine condition,” he said.

Even before the oil arrived, the county set up an ambitious environmental testing program to establish a baseline, taking samples of the water, sediment, and oysters at 34 locations to establish a baseline for comparison with future samples. Except for that 10-day period when oil was washing ashore, there has been no detectable trace of contamination in the water, he says.

To create this program, Escambia County actually bucked the direction it was getting from the Unified Command for the disaster response, which wanted all water samples sent to a small lab in Texas with “tight ties to the oil industry,” Kirshenfeld said. “We thought that was kind of a conflict.”

The county decided it needed to conduct its testing independently, even though it might not be reimbursed, in order to assure itself and the public that the results would be scientifically sound, he said.

The environmental impact seems to be tapering off, even though the release of oil into the environment is estimated at more than 10 times that of the Exxon Valdez disaster. But in contrast with the Valdez spill in Alaska, this one occurred in the warm waters of the Gulf, where naturally occurring microbes are starting to break down more of the oil.

Professor Overton has been all over TV news, and even on the David Letterman Show, explaining this process. Because these microbes evolved to consume small “natural seeps” of oil, they were at first overwhelmed by the scope of this spill. But now that the well has been capped, they are starting to catch up – rapidly reproducing to consume the oily feast.

“They’re degrading the residual oil that’s left floating around, particularly the sheen, which is what is easy to visualize from an overflight,” Overton said. There is probably still a significant amount of oil floating just below the surface, but it, too will start to biodegrade.

How long that will take for the oil plumes that have been detected deeper beneath the surface, in colder water, is debatable, Overton said. “But I don’t think we will see more gobs of oil washing ashore.”

There is a potential downside to this natural environmental reaction, which is that rapidly reproducing bacteria could cause “dead zones” of depleted oxygen, killing all the fish in the area. But so far that effect has not been detected. The effect has been more severe on dolphins and sea turtles who died after surfacing to breath in a patch of oil, as well as on sea birds, Overton said. And although oysters will tend to accumulate toxins from oil in the water that will render them inedible, fish generally will not, he said.

While many of the latest developments are positive, Florida communities need to work harder to get the news out, Fiveash said. If communities on the East Coast of Florida are finding that tourists are staying away based on false impressions of the extent of the spill, they may even want to pay for their own water testing and publicize the results, he said.

Meanwhile, he worries about the “Economic Topkill” of the burden the spill is placing on top of local communities like his, coming on top of a mortgage crisis and falling tax revenues and state funding. As the state pursues its claims against BP, “one thing that concerns me is that if the state does make a large recovery, that money should not be consumed by the state for general purposes,” he said. “That recovery may not come for 2 years, 5 years, 10 years, 15 years – but it could be very large, and we need to track those funds.”

David F. Carr is a writer, editor, web consultant, and columnist on technology for small to midsize businesses on Forbes.com. See www.carrcommunications.com and www.facebook.com/carrcomm

Keri-Ann Baker and Economic Forum President Rebel Cook with John L. Fiveash Jr. and Taylor “Chips” Kirschenfeld

Listening to the presentation by attorney John L. Fiveash Jr.

Q&A with Attorney John L. Fiveash Jr. and Escambia County's Taylor “Chips” Kirschenfeld

The speakers field questions after the meeting

Channel 12 News interviews John L. Fiveash Jr.

“It was based on a concept that if you put all the shopping in the middle of a residential community, everybody would walk to the town center,” said Rebel Cook, of Rebel Cook Real Estate of Jupiter. …  “That concept looked great on paper,” Cook said, “but in reality it doesn’t work, particularly in South Florida. It’s too hot (for people to walk).” Cook says Abacoa Town Center also suffers from the lack of an anchor store, such as a grocery store.

Read More: Bank Sues Abacoa (pdf)

Phil Smith, National Political Director of the Concord Coalition, answers questions following his talk

For years, deficit hawks have complained that the federal government was papering over the difference between revenues and spending by dipping into the Social Security “trust fund” – the difference between retirement taxes collected and money paid out.

According to Phil Smith, National Political Director of the Concord Coalition, that cash cushion is in any case going away. “We’re entering cash deficit territory for Social Security,” Smith said, speaking at the April 20 meeting of the Economic Forum of Palm Beach County.

Although this day has been predicted for years, the previous official projection was that Social Security spending would exceed revenues for the first time in 2016. But when updated figures are published by the Social Security trustees, probably in June, Smith expects them to show that milestone has already been reached.

That’s both a factor of a weak economy and diminished revenues and of long term demographic trends – an aging population, coupled with a lower birthrate and fewer workers supporting more retirees.

The Concord Coalition’s mission is to promote fiscal responsibility on a nonpartisan basis, and the Social Security deficit is one of many reasons Smith gave why the nation needs to get serious about controlling its annual deficits and rising national debt.

The federal government now pays more than $200 billion in interest on the debt alone, “and whatever it is you want from your federal government, that is $200 billion that is not available,” Smith said.

Serious solutions to the federal government’s fiscal policies have get little attention when our leaders spend their time on grandstanding and partisan sniping. Probably the best chance of serious reform in entitlement programs came in the late 1990s, when President Clinton agreed to a series of presidential Town Hall meetings on the issue, Smith said. In one press conference, he said he would not rule out the idea of replacing the current system with private retirement accounts (a conservative proposal later championed by President George W. Bush). But Clinton’s openness to new ideas evaporated soon after.

“That happened to be the same day Monica Lewinski was given immunity,” Smith said, and in the sex scandal that followed the White House went into defensive mode, Republicans went on the attack, and discussion of serious issues evaporated.

The federal government did achieve a couple of years of surplus in the 1990s, partly because of a roaring economy combined with the “peace dividend” from the end of the Cold War. Now, our economy is suffering and defense spending has risen for a nation at war. The nature of our cumulative debt has also changed, compared with historical debts such as the one run up during World War II. Then, the debt was largely held by Americans who bought war bonds, and it was paid off fairly quickly after the end of the war. Now, our debt is held largely by foreigners and seems unlikely to be paid off any time soon.

The recent health care reform legislation does have some potential to trim the deficit, Smith said. The nonpartisan Congressional Budget Office projected about $100 billion in savings from parts of the legislation aimed at controlling the rise of health care costs. Smith said he considered this “a tentative beginning, at best” at balancing health care costs and revenues. The projected savings also depend on consistent implementation of the reform policies, which is by no means assured. For example, the implementation of a tax on generous “Cadillac” health care plans has already been postponed.

The nation’s fiscal problems are deep enough that they cannot be solved by trimming foreign aid, or cutting the space program, or rooting out waste. “I really wish there was a line item in the budget for waste fraud and abuse, so we could just cut it out of there,” Smith quipped.

Instead, what is really going to be required is to curtail popular programs no politician wants to touch or take other unpopular steps, like raising the minimum retirement age for Social Security. Spending controls will also have to be accompanied by tax increases.

“The official position of the Concord Coalition is that everything should be on the table. You cannot look solely at benefits reduction because the cuts would have to be so draconian,” he said. Yes, lawmakers will have to be careful not to raise taxes in a way that chokes off growth. But what won’t work is to go on “taxing as if we’re a small government and spending as if we’re a big government.”

One way we as voters can help make positive outcomes more likely is to make sure we show support for politicians who exhibit courage when it comes to making the difficult but necessary decisions, Smith said.

While many experts predict a pending commercial real estate crash that could devastate the tax base and further threaten bank stability, economist Hugh Kelly said reports of an apocalypse are overrated.

Kelly, a New York University real estate professor who spoke to members of the Economic Forum of Palm Beach County today, said he knows he’s bucking conventional beliefs when he dismisses the most dire predictions.

But, he said, a growing GDP and new jobs he believes are coming this year could soften a crash.

“I think forecasts of a crash are navigating out of a rear-view mirror of a recession that is over,” Kelly said inside the Kravis Center. “Demand for use of commercial space remains weak and absorption is negative, but we’re growing in terms of consumption.”

Read More

John Gillies, the head of the FBI office in Miami, retells one particular tale of public corruption repeatedly these days. He said it shows how public corruption is often right out in the open for everyone to see.

Speaking to the Economic Forum of Palm Beach County on Wednesday, Gillies said he worked a case in California in which an attorney openly bribed judges and juries. The lawyer even took a jury out to lunch. Gillies later asked the opposing attorney in the case why he didn’t go to law enforcement. The chagrined lawyer said, “I didn’t want to look cheap in front of the jurors.”

Read More

John Browne, former member of Parliament

Politicians and the media tell us our economy has tiptoed back from the brink of catastrophe and that a recovery is under way. They haven’t convinced John Browne, a former Conservative Member of Parliament under Prime Minister Margaret Thatcher who now writes and lectures on political, economic, financial and defense issues. A Palm Beach County resident and investment advisor, Browne was our November speaker.

“Things were really desperate, and now, suddenly, as if by magic, it seems that everything is all right,” Browne said. But this return to normal is an illusion, he said. “The same behemoth banks are still there, only now they’re larger. The same toxic assets are there, only now they’re hidden.” Meanwhile, consumer confidence has dropped to levels not seen since the 1930s. So to those paying attention, the facts don’t fit the rhetoric.

“In the 1960s, people took acid to make things look weird. Now, we take Prozac to make them look normal,” Browne observed. “So you have to ask yourself, are we being fed political and economic Prozac?”

We are told unemployment is over 10%, which is a cause for concern, but the real figure is more like 18% when you include those who have stopped looking for work or have been downgraded into part-time employment. Statistics like unemployment and inflation rates are being manipulated by the government to make the economy look healthier than it really is, while our political leaders are acting as cheerleaders for renewed investment in the stock market, he argued.

Browne believes the root problems go back to President Johnson’s introduction of entitlement programs, which have grown to the point where we have a consumer-driven economy, consuming three times what we produce and financing the difference with debt. This trend is almost impossible to reverse in the face of popular politics, Browne said, because “if you’re a voter, and you can get free money, I’d always vote for free money.”

Yet this “$125 trillion Ponzi scheme” will soon come crashing down, Browne believes. “The whole world is wondering if it’s ever going to be paid back,” he said, and the national banks of other countries such as China and India are starting to edge away from reliance on the dollar. If the U.S. dollar should ever lose its status as the world’s standard reserve currency, it’s value will plummet, he said.

Meanwhile, the inflation that would normally be expected to result from pumping more money into the economy is being suppressed by some slight of hand by the Federal Reserve, which is loaning money to banks at zero interest and allowing them to loan it back at 3% interest. This is keeping money bottled up in the system, rather than lent out to companies or individuals, thus the lack of inflation. But at some point, it’s likely that the government will take the brakes off in an attempt to stimulate the economy. The result could easily be stagflation (inflation unaccompanied by economic growth) even worse than the U.S. saw in the 1980s.

That economic crisis was ended due to the courage of Fed Chairman Volcker. Volcker couldn’t have pulled it off without “the backing of a great man, President Reagan,” he said, “but I ask you, what sort of backing would a Fed Chairman get today?” He argued the right way to have addressed the economic crisis would have been with something like a two-year tax holiday to put money in people’s pockets and spur consumer spending. He also believes that, despite its rhetoric on investing in infrastructure, the Obama administration has allowed too much infrastructure spending to be siphoned off to fund entitlements.

Ultimately, the political consequence of cowardly economic policy may be revolution – something this summer’s Tea Party rallies only hint at. But although Browne showed some sympathy with the need for the “grassroots revulsion … against the total immorality and corruption of government,” he also said it worries him that revolution without wise leadership can present an opportunity for someone like Lenin or Hitler. “It’s dangerous because of who might seize control,” he said.

The only good news Browne is that there is always opportunity amidst catastrophe “for the people who see this coming and take action to counter it,” Browne said. “The people who are really wise may actually increase their wealth, at least in relative terms but maybe in excellent terms.”

See also: event photos by Lee Hershfield