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Arctic Offshore Drilling

Arctic nations joust but North Pole payoff may be years away

WASHINGTON — Even as melting Arctic glaciers threaten to swamp shorelines, nations from Russia to the United States are betting that warming temperatures also will unlock trillions of dollars in new wealth. “It is potentially the biggest strategic opportunity in America since the Louisiana Purchase in 1803,” said Scott Borgerson, a former Coast Guard officer and now an adviser at Catalyst Maritime. President Barack Obama begins a three-day Alaska trip on Monday to underscore the urgency of combating climate change. His visit comes as the Arctic’s potential for oil and gas production and shorter trade routes when the ice melts puts it at the crossroads of economics and geopolitics. Already, the polar economic dawn includes server farms for companies such as Facebook and Google, which enjoy lower cooling costs in the north. Possible future rewards include an estimated 90 billion barrels of oil and 1.7 trillion cubic feet of natural gas that await discovery in the Arctic, with the vast majority located offshore, according to a 2008 U.S. Geological Survey report. Any big financial payoff, however, is probably decades away. Falling commodity prices are discouraging exploration for Arctic oil and gas, while new trade routes across the top of the world are falling short of expectations. “Arctic development is a lot slower than people thought,” says Malte Humpert, executive director of the Arctic Institute, a Washington-based policy group. “The hype is wearing off. It’ll be many, many years before we see the development people have been talking about.” That hasn’t deterred Russia, which has been the most assertive, and theatrical, in advancing its claims. In 2007, a pair of Russian mini-subs descended more than two miles below the polar icecap to plant a titanium flagpole on the North Pole’s seabed, a purely symbolic gesture. Russia, which boasts half the Arctic coastline and depends on the region for roughly a fifth of its national economic output, is expanding its Northern Fleet, upgrading regional facilities and staging unannounced military exercises. “The Arctic’s incredibly important to Russia,” says Heather Conley, a former State Department official now at the Center for Strategic and International Studies in Washington. “They’re basing their future economic development on it.” Russia’s not alone. Canada and Norway are preparing their militaries to defend territorial claims and forestall a 19th century-style resource grab. The cash-strapped U.S. Navy is concentrating for now on improving its ability to operate in the unforgiving north. Preoccupied by Islamic State and the rise of China, the United States has been an Arctic laggard. On April 24, however, the U.S. assumed the rotating two-year chairmanship of the Arctic Council, the eight-nation body responsible for environmental, maritime and emergency preparedness policies. The council, which operates by consensus, has agreed on procedures for dealing with oil spills and conducting maritime search and rescue despite rising tensions between Russia and other members over Ukraine. Obama will be the first sitting president to visit Alaska, and is set to address an international Arctic conference on Monday. The gathering, meant to draw attention to climate challenges facing the Arctic, will end with a joint statement that U.S. officials hope will add momentum to the United Nations Climate Change Conference set for December in Paris, said a U.S. official who briefed reporters Friday on the condition of anonymity. The climatic thaw that’s bringing the Arctic new prominence is unmistakable. Temperatures above the Arctic Circle are rising twice as fast as elsewhere, according to the Arctic Council. As a young Coast Guard officer in July, 1976, Robert Papp gazed from the town of Kotzebue and saw unbroken ice from the shore to the horizon. When he returned 34 years later as Coast Guard commandant, Admiral Papp scanned the sea again. “There was no ice to be seen whatsoever,” Papp, who’s retired and now the administration’s special representative for the Arctic, told a Washington audience this month. Nevertheless, the Arctic gold rush pales alongside the Klondike stampede that drew 100,000 prospectors north between 1896 and 1899. Oil prices below $50 per barrel — less than half the price a year ago — discourage exploration efforts that incur high costs in the harsh Arctic climate. One exception is Royal Dutch Shell, which is spending more than $1 billion annually on Arctic exploration. On August 18, the company won U.S. approval to drill in Arctic waters for the first time since 2012 after its efforts were derailed by the grounding of a drilling rig. “Shell is a bit of an outlier,” James Henderson, senior research fellow at the Oxford Institute of Energy Studies, said in an email. “Other companies have taken a much more cautious approach, for environmental and cost reasons, and this caution will only be further underlined in a low oil-price environment.” The increasingly ice-free Arctic seas have opened a shortcut between Europe and Asia for ships bearing cargoes such as diesel fuel and iron ore. The sailing distance from Rotterdam to Yokohama via a northern route that hugs the Russian coastline is almost 40 percent shorter than the one through the Suez Canal, the Indian Ocean and the South China Sea. Yet only 31 vessels transited that route last year, down from 71 the year before, according to the Northern Sea Route Information Office in Murmansk, Russia. Those dozens are dwarfed by the more than 17,000 ships that passed through Egypt’s Suez Canal in 2014. “We cannot compare the volumes of cargo transported through the Suez Canal to the volumes transported through the NSR,” said Sergey Balmasov, head of the information office. A second polar route — the fabled Northwest Passage sought for centuries by mariners such as Henry Hudson — has seen only a handful of vessels. Submerged ice formations that rise from the seabed and complex channels discourage traffic. Despite the thaw, the northern route is still open only four-and-a-half months each year. Even then, the possibility of encountering ice makes it poorly suited for container cargo ships, which require precise scheduling. Shallow waters and a lack of navigational aids further complicate the journey. While the route makes sense for trade between ports such as Japan’s Yokohama and Rotterdam in the Netherlands, many major export hubs in Vietnam and Indonesia are too far south, says Sverre Bjorn Svenning, research director at ship brokers Fearnleys in Oslo. “If you go south of Hong Kong or south of Rotterdam, it’s cheaper on the traditional route,” he said. Much of the activity on the Northern Sea Route involves the export of natural resources or voyages between Russian ports such as Murmansk and Vladivostok, Balmasov said. In June, Russian Prime Minister Dmitri Medvedev conceded that the Arctic route’s traffic to date was “nothing to shout about.” Still, some analysts say the U.S. hasn’t done enough to position itself for the region’s emerging opportunities. Borgerson, the former Coast Guard officer, says the Obama administration is beginning to recognize the Arctic’s significance but needs to do much more. The nearest U.S. deepwater port to the Arctic is in Dutch Harbor in the Aleutian Islands, almost 1,000 miles from the Chukchi Sea that separates Alaska and Russia. Two of the Coast Guard’s three polar icebreakers already are beyond their 30-year operational lifespans, even as Russia plans a trio of new nuclear-powered vessels by 2020. New satellite communication networks, navigation aids, runways and modern maritime charts also are needed. Political infighting in Washington that’s prevented the U.S. from joining the United Nations Convention on the Law of the Sea means the U.S. — unlike every other Arctic nation — is unable to file territorial claims for the region’s contested resources. Russia submitted a revised claim to 1.2 million square kilometers (463 million square miles) of the Arctic continental shelf on Aug. 4, arguing that the territory is a natural continuation of the Russian continental shelf. The UN rejected a similar submission in 2002, though Russia says it has conducted extensive research since then to gather supporting data. Though not an Arctic nation, China also is hedging its bets by cozying up to Iceland. In 2013, the island nation became the first European country to recognize China as a market economy, and the two nations signed a free trade agreement.

GOP 2016 Trump-7

Trump wants to raise his own taxes, but would he kill the 1031 real estate break?

Billionaire Donald Trump, who built his fortune in real estate, told Bloomberg Politics this week that he wants to raise his own taxes. One way to do it is a bipartisan proposal that would blow up one of the real estate industry’s favorite tax breaks. The break, known as the like-kind exchange or “1031” for the tax code section it comes from, lets real estate owners sell one piece of property and buy a new one soon afterward without paying any capital gains taxes on the profits from the sale. The result is an ever-increasing pile of deferred capital gains, taxed only whenever there is a final sale or, better yet, never taxed as income at all upon death. “It was originally meant to really cover a narrow set of transactions,” said Lily Batchelder, a former aide to Senate Finance Committee Democrats and to President Barack Obama. “It’s grown into this huge loophole, especially for wealthy real estate investors.” Obama has proposed curbing the tax break, arguing that the justification for the 94-year-old provision is outdated because each piece of real estate can be easily valued and then taxed when sold. His plan would limit the benefit to $1 million per taxpayer per year, raising nearly $20 billion for the government over the next decade, according to the Treasury Department. (That’s more money, by the way, than the carried interest tax break that’s gotten much more public attention and criticism from Trump and leading Democrats.) Former top lawmakers in Congress-Republican Dave Camp and Democrat Max Baucus-went even further than Obama, proposing full repeal of like-kind exchanges for real estate as part of their broader plans to revamp the tax code. The break distorts economic decision-making by making real estate transactions different from others, but it’s been a central part of deals for so long that getting rid of it would be disruptive, both to real estate investors and the industry of intermediaries that exists to facilitate property exchanges. Unsurprisingly, the real-estate industry has spent the past two years building alobbying campaign to justify the break and warn of dire economic consequences if it vanishes. The hand-to-hand combat has occurred mostly behind the scenes in Washington, as lobbyists try to shape a mega-bill on taxes that’s going nowhere until 2017 at the earliest. Trump and his company aren’t part of the Real Estate Like-Kind Exchange Coalition, according to Jeffrey DeBoer, president and chief executive officer of the Real Estate Roundtable. “Our tax code is clearly in need of an overhaul, but it should not come at the expense of provisions that fuel economic growth on Main Street,” Daniel Goodwin, chief executive officer of Inland Real Estate Group of Companies Inc., said in a statement that called the provision a “core catalyst” for domestic real estate. “A 1031 exchange, for example, enables a business or investor to defer-not dodge-the capital gains tax on an asset sale.” In 2011, U.S. taxpayers deferred more than $33 billionin capital gains through exchanges, according to Internal Revenue Service data. Without the break, they would be more likely to hold onto property, locking themselves into investments for more time to avoid paying the capital gains tax, said Brad Borden, an expert on real estate and taxes at Brooklyn Law School. Property owners would also be more willing to move their investments outside of real estate, because the tax costs of selling for cash and swapping buildings would become equal. As for Trump, who is leading in polls for the Republican presidential nomination, it’s not at all clear what he pays in taxes or how much he benefits from section 1031, because he hasn’t released his tax returns. He tends to make long-term real-estate investments, and a good chunk of his income comes from licensing deals that pay him for the use of his name, not necessarily ownership stakes where like-kind exchanges would be an effective strategy. Borden said he’d be “shocked” if some of Trump’s entities hadn’t used the break. Still, section 1031 supports the entire real-estate industry, encouraging frequent transactions and creating the environment where Trump thrives. In some cases, it may keep prices lower, because it makes property owners more willing to put their buildings on the market. An industry-backed study released earlier this year said exchanges under section 1031 lead to less debt and that 88 percent of the properties that are exchanged are later sold in taxable transactions. An earlier industry-backed studysaid repeal would lead to more borrowing and reduce gross domestic product by 0.04 percent. DeBoer said in an emailed response to questions that repealing like-kind exchanges would lower real estate values by reducing liquidity and increasing friction in real estate transactions. “Rather than distorting economic decisions, like- kind exchanges remove artificial tax considerations from real estate investments,” he said. “Section 1031 prevents the taxation of phantom income. Any taxable gain must be used to acquire the replacement property, otherwise it is taxed immediately.” The real estate industry’s power in Washington-just think of how well the mortgage interest deduction has survived-will make the tax break tough to dislodge. “It would take some gumption, but it’s the right policy call and it’s a way to treat different investments fairly and in the same manner,” said Batchelder, who now teaches at New York University’s law school. Trump will release more details on his tax plan over the next few weeks, Hope Hicks, a campaign spokeswoman, said in an email. She didn’t say whether Trump has used like-kind exchanges. Of course, there are other, more straightforward ways that Trump can raise his own taxes. He can increase marginal tax rates. He can adopt a favorite Republican proposal and end the tax deduction for state and local income and property taxes, which disproportionately benefits residents of high-tax states such as New York. He could also raise estate taxes or limit the maneuvers the wealthiest few can use to minimize that tax. But Trump thrives on drama, and none of those options would be nearly as dramatic as attacking his own industry.

GOP 2016 Rubio-2

Big sugar fighting to protect a sweet deal with lawmakers

WASHINGTON — A sweet deal for American sugar farmers is compounding delays in a proposed trade agreement affecting 40 percent of the world’s economy. The commodity has become a sticky subject in talks over the Trans-Pacific Partnership, potentially the biggest trade deal in history and a key goal of the Obama administration. TPP, as it’s known, would link a dozen countries and, its proponents say, make it easier for U.S. companies to sell goods around the world. But the trade deal may also weaken protections for the sugar industry dating back to the Great Depression should negotiators heed the calls of Australia and other nations for the U.S. to loosen a quota system that protects domestic suppliers while making the product more expensive for consumers. As they have for decades, sugar lobbyists are fighting to keep it that way by using their clout with lawmakers. In Washington, that means one thing: money. Sugar accounts for a small fraction of U.S. farm output, but the industry contributes more to congressional campaign coffers than any other commodity producer. Between 2007 and 2014, growers donated $18.5 million, according to the Center for Responsive Politics. “The sugar lobby is one of the strongest in the country,” said James Cassidy, global head of sugar derivatives at Societe Generale in New York. Sugar isn’t the only thing snarling the trade talks, which broke off in July and are expected to resume as early as September. Other issues include dairy products, cars and intellectual property rights. But sugar occupies a special place in U.S. politics. The commodity has been a source of controversy since before the American Revolution. Import protections have artificially inflated domestic costs for decades. Nowhere is the industry’s clout felt more than in Florida, base of the nation’s most powerful sugar barons, the Fanjul brothers. Between them, the Fanjuls — Alfonso, Jose, Alexander and Andres — have long-standing ties to at least three U.S. presidential candidates: Sen. Marco Rubio, Republican of Florida; former Florida Gov. Jeb Bush, another Republican; and Hillary Rodham Clinton, the Democratic frontrunner. Rubio recently defended the U.S. sugar program at an event organized by major Republican donors Charles and David Koch. Bush wants to phase it out, according to a spokesman. The Clinton campaign didn’t respond to requests for comment. Major sugar-users like PepsiCo and Hershey have complained about the sugar program for years, saying it needlessly raises costs, both for them and for consumers. While a global production surplus has driven world sugar prices to their lowest levels since 2008, U.S. prices are much higher than elsewhere. A pound of domestic sugar fetched 24.45 cents yesterday on ICE Futures U.S., compared with 10.94 cents for a global counterpart. This week, the gap between the two was the widest since November 2011. “The issue of sugar is one that is sensitive,” U.S. Trade Representative Michael Froman told Bloomberg this week. “We made clear that we won’t do anything that undermines our sugar program, but just as we are asking every other country to put everything on the table, we are also talking about what other steps we can take on the sugar area as well.” Other sugar producers, led by Australia, say the U.S. must roll back support for its sugar industry for a TPP deal to get done. Other countries, notably Indonesia and Japan, also regulate the sugar trade. The National Foreign Trade Council, a pro-trade group that includes Coca-Cola Co. and Wal-Mart Stores, and the Sweetener Users Association, a collection of sugar-buyers, is holding a conference call with Australian sugar producers Monday to promote expanded U.S. access for foreign suppliers. The American Sugar Alliance, the industry’s lobbying group, says other countries are making unreasonable demands, particularly given that the U.S. has already made some concessions. The TPP talks haven’t been held up by sugar, according to the group, which spent almost $2.2 million lobbying last year. “Sugar clearly was not a sticking point,” the group said in a statement. The Fanjul’s Florida Crystals didn’t return phone calls or an e-mail seeking comment. American Crystal, a Minnesota-based cooperative, and other sugar groups and growers referred inquiries to the American Sugar Alliance. Rep. Collin Peterson of Minnesota, the top Democratic lawmaker on the House Agriculture Committee and the leading recipient of sugar donations in his party, said international complaints about U.S. sugar are nothing new. “Australia has wanted the U.S. to open up its market forever,” Peterson said. “I don’t think anything will make them happy.” Perez reported from New York. Contributors: Jennifer Epstein in New York and Michael C. Bender in Washington.

Fed Rates

Fischer praises economy, straddles FOMC liftoff date camps

Federal Reserve Vice Chairman Stanley Fischer left open the option of an interest-rate increase next month, walking a line between officials who want to delay due to market turmoil and those who say the economy is strong enough to handle a move. Fischer said reports on the U.S. economy’s tempo have “been impressive, and the economy is returning to normal,” in an interview with CNBC from the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming. “I think it’s early to tell, the change in the circumstances which began with the Chinese devaluation is relatively new and we’re still watching how it unfolds,” he said. “I wouldn’t want to go ahead and decide right now what the case is, more compelling, less compelling,” for a September liftoff. On Wednesday, New York Fed President William C. Dudley said market turbulence made the case for a September move “less compelling to me than it was a few weeks ago.” Fischer’s remarks place himself between two camps on the Federal Open Market Committee. Officials such as Fed presidents James Bullard of St. Louis and Loretta Mester of Cleveland say the economy’s cumulative gains have been strong and they expect them to continue, and put varying weight on recent market movements. “My view so far in looking at all of the factors is that the economy can sustain an increase in interest rates,” Mester said in an interview Friday with Bloomberg Television at Jackson Hole. Another camp is signaling there is little reason to rush and appears to prefer to hold off and determine if there is fallout from market volatility, a slowing Chinese economy and the devaluation of the yuan on Aug. 11. Fed officials next meet Sept. 16-17. “We’ve got a little over two weeks before we have to make a decision, and we’ve got time to wait and see the incoming data,” Fischer said. “We haven’t made a decision yet and I don’t think that we should make a decision,” he said. “We’re dealing with something which happened about 10 days ago, particularly the change in the circumstances.” Officials had been “anxious to get going” with getting rates off zero but now need to figure out if market events have blown them off course, said Atlanta Fed President Dennis Lockhart, who is a voting FOMC member this year. The Fed has held rates near zero since 2008. “The fundamentals of the economy are really solid,” he told Bloomberg Television Friday at Jackson Hole. “I weigh both the distance that we have traveled as well as the current outlook for the economy. Both of those to me I think would suggest that we’re close. The timing is close.” Equities around the world have been whipsawed this week, indicating markets remain subject to sudden shifts in investor sentiment. The Standard & Poor’s 500 Index fell 0.2 percent as of 2:53 p.m. in New York Friday after the U.S. stock benchmark’s biggest two-day gain since the beginning of the bull market in 2009. The yield on 10-year Treasuries was 2.18 percent, little changed from Thursday. “If you don’t understand the market volatility,” Fischer said, “yes, it does effect the timing of a decision you might want to make. But I think they could settle fairly quickly, there is that possibility.” Investors have increased the probability of a move at the FOMC meeting on Oct. 27-28 to 49 percent from 40 percent on Thursday. They see a 38 percent chance the Fed will move next month. The Fed last raised rates in 2006. “If markets behave themselves and we get a decent jobs number on Friday we are back to a very close call” on a September interest rate increase, said Michael Feroli, chief U.S. economist at JPMorgan Securities in New York. Monthly job gains have averaged 211,000 so far this year, and economists expect a 220,000 gain when August data is reported on Sept. 4. Bullard raised the possibility of delaying a move until October if market turmoil persists. “The committee does not like to move when there’s volatility,” he said in remarks to reporters Friday after an interview with Bloomberg Television in Jackson Hole. “If we had the meeting this week, people would probably say let’s wait.” He added, “but the meeting is not this week, it’s Sept. 16 and 17.” Bullard said he would support scheduling a press conference following the Oct. 27-28 FOMC meeting if the committee doesn’t raise rates next month. That would make it easier for the Fed to explain a liftoff in October. Bullard and Mester next year will move into two of four rotating voting seats on the FOMC reserved for regional Fed presidents. “The big takeaway is that Fed officials sound pretty uncertain, amidst a pretty uncertain environment,” said Omair Sharif, a rates sales strategist at Societe Generale in New York. “With this much uncertainty, and the cautious tone that they’ve all adopted, at this point I have to think that odds of September are lower — that they’ll probably skip September.”

National Business

leslie meredith tech matters web sig.jpg

Little tips for big security gains

A week doesn't go by without news of a security breach on some big name website. Add to that the constant stream of phishing scams, ransomware attacks and other new malware varieties and it's clear no computer user is beyond risk. But there are simple things you can do to help make sure you are not among the next batch of victims. Let's call it our best practices for safer computing. Turn the following tips into daily habits and you shouldn't have to worry quite so much about online security. Delete online accounts you no longer use. Maybe you like trying new services like a photo editing site or a new online store. Most websites ask you to set up an account before you can use their services and that means you could have a lot of passwords floating around out there. When you decide you don't want to use a service anymore, remember to delete your account. Then if the service is hacked, your credentials won't be part of the stolen data. If you have a number of online accounts, you'll want to keep tabs on any security breaches that are made public. Rather than browse news sites or set up a lengthy list of Google alerts, you can do a quick check on https://breachalarm.com. Type in your email and the site will tell you if the address is associated with a security breach. (Tip: Don't allow your browser to automatically fill in your email address — Breach Alarm reads this as mechanical input and won't run your result.) If your account has been compromised, you'll see that immediately. Change your passwords. Breach Alarm also offers a free alert service for one email; to monitor multiple emails, packages start at $10 per year. For safe password use, the most important thing you can do is use a different password for each account, the longer and more nonsensical the better. By using unique passwords, you'll avoid one hacked password opening the door to multiple accounts. Consider using a password manager to streamline the process, but understand it won't work on all websites. For instance, Equifax will not let you paste in a password — it must be typed. If available, always opt for two-factor authentication, which means a service will ask for a second piece of "identification" such as texting a temporary code to your phone that you'll use to login. Biometrics, such as Apple's Touch ID that became available with the iPhone 5S, is another form of two-factor authentication. Outlook, Gmail, Dropbox, Chase and Facebook offer it, usually as a text. You can see a full list of companies that use two-factor authentication at https://twofactorauth.org, as well as many who do not. Before you input personal information, including a credit card, make sure the website is secure. Look for https at the beginning of the URL in your address bar. When you are finished with any website, log out. Working in a public place brings a new set of risks. It is possible for someone to access your computer and its data whenever you're sharing a network. Because it's so risky, minimize logging into a public WiFi network. And, if you don't need the an Internet connection, turn your WiFi off. Otherwise, your computer may establish the connection on its own. Windows users should right-click on the wireless icon in the taskbar to turn it off. Similarly, Mac users will click the WiFi icon in the menu bar and select "Turn Wi-Fi off." If you use your computer's file sharing feature at home, turn it off when you are in a public place. In Windows, open the Control Panel, select Network and Internet and then Network and Sharing Center. Choose Homegroup and Sharing Options and choose Change Advanced Settings. Turn off file sharing, print sharing, network discovery, and the public folder. For Mac users, open System Preferences from the Apple menu and click on the sharing folder. Uncheck all boxes. One last thing. Regularly back up your computer. And then go a step further by copying your important documents and photos onto a flash drive or uploading them to a cloud storage service such as Dropbox or Google Drive. If your computer is stolen or breaks, you'll still have the data that could be really tough to replace. Leslie Meredith has been writing about and reviewing personal technology for the past six years. She has designed and manages several international websites. As a mom of four, value, usefulness and online safety take priority. Have a question? Email Leslie at asklesliemeredith@gmail.com.

Economy Manufacturing

Texas is booming and investors are yawning

For all its success as the fastest-growing big state, luring the most business with a paucity of taxes and regulation, Texas is an inferior investment. Even before the 14-month collapse that cut the price of oil by 63 percent, the publicly traded shares of Texas companies (64 percent are energy-related) underperformed the Russell 3000 Index. Since 2010, they’ve also trailed companies domiciled in California and New York, states known for high taxes and enthusiasm for regulation, according to data compiled by Bloomberg.Stock Markets Rate Texas Companies ‘Meh‘ The Lone Star State’s AAA-rated debt also gets modest respect in the bond market. Its return is third from the bottom among the nine states sharing the best credit rating during the past five years, Bloomberg data show. What makes the Texas economy so impressive also limits its appeal in financial markets. Investors aren’t looking at the past and present. They’re looking for exciting things in the future. That can confer an advantage on states that are willing to actively shape their destiny and to invest in things like education and infrastructure. Low costs are fine, but high value is better. Texas extols its low-cost, nonintrusive government approach as “wide open for business,‘‘ and it continues to lure companies seeking cheaper labor and capital. Toyota, the world’s No. 1 maker of vehicles, last year moved its North American headquarters and 2,000 jobs to Plano from Torrance, California. Being the cheapest big state for business has benefits. Texas’ gross domestic product increased more than the GDP of at least the 10 largest states in the U.S. during the past five years. Since 2010, the workforce in Texas expanded 15.9 percent, the most after North Dakota and Utah. Texas personal income increased 37.2 percent during the same period, bettered only by North Dakota and Wyoming. Tax revenue increased 62.3 percent, trailing only the District of Columbia, New Hampshire, North Dakota, New York and Pennsylvania. Texas home prices rose 17.3 percent, lagging the gains only in North Dakota, D.C., California, Hawaii and Colorado. Yet none of these achievements make Texas bonds a winner in the market for comparable state and local government debt. So far this year, the total return, or income and price appreciation, of Texas has amounted to 1.55 percent, better than only two other states with AAA-rated debt. The other six AAA states are enjoying superior returns: Virginia at 2.05 percent, North Carolina at 1.81 percent, Georgia at 1.84 percent, Utah at 1.79 percent, Missouri at 1.65 percent and Maryland at 1.57 percent, according to data compiled by Bloomberg. Like bondholders, stock investors also perceive being cheapest for business as a strategy that favors the present over the future. While companies domiciled in Texas produced a total return of 52 percent in the three years leading up to June 2014, when oil prices started to fall, the benchmark Russell 3000 Index returned 58 percent during the same period. Companies based in California and New York, two states Texas governors deride as bad for business, returned 75 percent and 52 percent during those three years. So far this year, the August market crash pushed down stocks nearly everywhere. Texas shows a total loss of 16 percent, worse than California’s 2 percent loss, New York’s 5 percent loss and the Russell’s 5 percent retreat, according to data compiled by Bloomberg. It’s true that the oil-price collapse hit Texas companies hard. But it can’t account for inferior investment performance in other industries. Shares of Texas health-care companies returned 104 percent during the past five years, compared with the 163 percent average for the industry. Texas information technology companies returned 98 percent, compared with 100 percent for the U.S. industry. Texas consumer discretionary companies, which include J.C. Penney, returned 110 percent compared with 152 percent across the United States. Texas industrial companies, which include KBR, returned 84 percent compared with 96 percent for U.S. industrial companies since 2010. Trailing market performance hasn’t prevented Texas companies from getting bigger. They spent $220 billion acquiring other companies in 2014 -- the most since 2004 -- and $146 billion this year. Foreign companies also have been busy in Texas, seeking the same low costs as their U.S. counterparts, paying lower premiums for the Texas-based firms they acquire and proving above all else that Texas remains cheap, according to Bloomberg data. The quality of jobs remains a weakness in Texas. Growth in per capita income in California and New York is superior to Texas. Even Rhode Island, the smallest state, does better than Texas, with higher per capita income growth. All of which suggests that being cheapest for business isn’t necessarily best for investors. Matthew Winkler, editor-in-chief emeritus of Bloomberg News, writes about markets.

AP Poll Millennials Online

When it is and isn't OK to be on your smartphone: the conclusive guide

Etiquette, by definition, is a form of consensus: not a static code of conduct, necessarily, but a set of norms we all agree on at a given moment. We change, the moment changes — the agreement evolves, too. And it’s evolving really dramatically right now, according to new findings from Pew. The paper, which surveyed more than 3,200 American adults, found that the vast majority of us own cellphones and are rarely parted from them. (That’s not exactly news.) But it also documented striking new patterns in how and where we use our phones, particularly in places where, even two or three years ago, whipping out a cellphone would be considered rude. Nearly 80 percent of all Americans, for instance, think it’s OK to blunder down the sidewalk with your eyes trained on your phone. And a majority of young people say they post pictures, send tweets and surf the Web in front of other people. If etiquette’s a majority consensus on acceptable behavior, and this is what the majority thinks and does, then the rules on using your phone in public have permanently changed (for better or worse). What’s more, they’re likely to continue changing in the future: Pew found, predictably, that young people are “generally more permissive than their elders about cellphone use.” With that in mind, we combed through Pew’s report looking for behaviors and habits that more than half of all American adults either say that they find acceptable, or that they do themselves. This is the new normal, so to speak — our emerging consensus on when and where to use phones in public. Don’t gripe to us about it: You made this mess. Do: Use your phone in any ambient public space of your choosing, even if you risk running into someone. Just about everyone, of every age, agreed it was all right to browse your phone while walking down the street, waiting in line, or riding public transit. Don’t: Use your phone during meetings, movies, church services, or other places where you’re expected to be attentive to someone else. Etiquette sticklers rejoice: This is one area where public sentiment doesn’t appear to have changed at all. Nine in 10 people says it’s unacceptable to use a phone in these places. Do: Send messages in front of family or friends, provided they are quick and/or important. Even though most adults think whipping a phone out at a social gathering tends to hurt the dynamic — and even though science firmly supports that — most people do use their phones in front of other people. They just use them under specific circumstances: More people will read a text than will send one, for instance, presumably because reading a text is faster and less disruptive. Half of all people will get on their phones if it’s important, though: 52 percent have pulled out their phone in a recent social situation to “catch up on tasks (they) need to accomplish.” Don’t: Use your phone at meals, whether with family or at a restaurant. Most adults think it’s rude to use your phone during meals, particularly family dinners. That could change, though, given that half of all 18 to 29-year-olds think it’s cool to text at restaurants. Ugh. Do: Get your phone out to take photos and videos, regardless of where you are. Everybody accepts that phones are the new cameras. Almost 60 percent of respondents say they recently took a cellphone photo or video during a social outing; young people go even further, posting that stuff to social media while they’re still with the group. Do: Take calls in front of other people. Fifty-two percent of phone-owners say they do. Don’t: Use your phone as a shield to avoid people or conversations. Very, very few people admit to using their phone as a form of avoidance, which is probably a sign of how anathema the practice still is: Only 10 percent of adults say they’ve gone on their phones to avoid a conversation, and 16 percent because they’re bored of the group they’re with. Fascinatingly, however, the phone-as-shield tactic is more common among young women — perhaps because they’re the demographic that receives the most unwanted attention. Do: Get on your phone in front of family or friends to look up important, relevant information. You know the type that qualifies: directions, quick “are you here?” texts, Google searches needed to settle bets. Most phone-owners have done these things in social settings recently, and most reasonable people would agree they don’t kill the vibe too horribly. Don’t: Aimlessly browse the Web or check your phone for notifications in front of someone else. Relatively few people check apps or push notifications without any specific reason, or browse their phone in front of other people “just for something to do.” (Alas, a lot of young people do browse for the heck of it, so — that could be changing, too.) Much of this should be common sense, of course. (In theory, at least, most etiquette should be.) The bottom line is that our understanding of mobile phones is changing: Where we once saw them as tools in solitary endeavors — highly personal, self-directed, isolating screens — we now understand that they can also be used pro-socially. The rule here, as in all social endeavors, is to use them considerately. None of this will comfort the old-schoolers in the crowd, of course. What about the days when people looked at each other while they talked?, they ask. What happened to basic manners? To this, I can only point out that “manners” have always changed in response to new technologies, more or less since “manners” became a conscious, codified thing. Consider the lowly fork, widely viewed as scandalous when it was introduced to Europe in the 11th century. Before the fork, it was considered the height of rudeness not to eat from a communal plate with your bare hands; over time, the fork’s invention would rewrite that script, giving us place settings, dinner parties, Victorian table manners. Etiquette changes — it’s a fact of life, and it’s not inherently good or bad. In all likelihood, our cyborg descendants will look back on us and laugh. Dewey writes The Post’s The Intersect web channel covering digital and Internet culture. http://www.washingtonpost.com/news/the-intersect/

China Economy Politics

China's economic woes expose drawbacks of president's power play

BEIJING — President Xi Jinping has set out a beguiling vision for what he calls the “great rejuvenation” of the Chinese nation, one where his country strides confidently on the world stage while, at home, a reinvigorated Communist Party curbs corruption and crushes dissent. It is a vision all about power and control, with Xi calling the shots. Yet, as China’s stock market plunge has shown, it has a crucial weakness. Xi, experts say, has failed to set out a coherent plan to rescue China’s slowing economy, caught between an old model of state intervention and a new commitment to market forces. Indeed, the reforms that China’s economy desperately needs involve measures that its leader instinctively cannot stomach: relinquishing control and surrendering power. “The only important thing to Xi is power,” said Liu Junning, an independent scholar and former researcher for the Chinese Academy of Social Sciences, a prestigious official think tank, who was fired in 2000 for criticizing the Communist Party. “There is no room for further reform without surrendering power.” The confusion at the heart of the government was exposed with its handling of the stock market — as authorities first pumped up the bubble and then intervened heavily in an attempt to prop shares up after the bubble burst. Earlier in the month, it paired its surprise devaluation of the currency with a statement that it was allowing the exchange rate to be set mainly by market forces. Since then, it has intervened heavily to prevent a further slide, noted Arthur Kroeber, managing director of Gavekal Dragonomics in Beijing. Recognizing concerns both inside and outside China, the Communist Party mouthpiece the People’s Daily carried a front-page commentary last week insisting that the pace and depth of reforms was unprecedented, but warning in unusually stark terms of the resistance they faced. “The enormity of the difficulties, the scale of the resistance — and the uncanny, complex, ferocious and stubborn ways of the forces that have not adapted to reforms — go beyond what people could imagine,” the piece argued. But Willy Wo-lap Lam, an expert on Chinese politics at Hong Kong University, says this article was a smokescreen — propaganda meant to distract attention from the fact that Xi was not really ready to embrace reform himself. “Stability is still the overriding consideration, and the huge state-owned enterprises are seen as an anchor of the economy,” Lam said. “State-owned enterprises are a manifestation of political control of the economy.” Kroeber is also skeptical. While Xi has talked of markets playing a “decisive role” in resource allocation, he has also reaffirmed the “dominant role” of the state sector. His government has reined in excessive credit growth and excessive investment, but it has failed to make good on promises of deregulation and curbing the power of state-owned enterprises, Kroeber wrote in a note to clients. “We are increasingly of the view that this mediocre result arises not because a bold and visionary reform program has broken up on the reefs of political opposition, but because the main aims of China’s leader Xi Jinping are political and geo-strategic, while his economic goals are contradictory,” he wrote. In preparation for Xi’s high-profile state visit to the United States next month, President Obama’s national security adviser, Susan E. Rice, is due in Beijing on Friday and is scheduled to meet with the Chinese leader. China hopes to use the visit to project Xi as the leader of a global power in the same league as Obama. But the stock market’s woes have dented his image and provoked mocking comments from some Republican presidential hopefuls. When Xi took power two years ago, China seemed to be drifting after a decade of ineffectual collective leadership by a cabal of uncharismatic men in dark suits. Reforms had slowed, government spending was out of control, and corruption was rampant. Xi has tried to change that by focusing on governance, fighting graft and centralizing power. He has established a series of high-level committees to run foreign, security and economic policy, each with him at the helm. Collective leadership has been replaced by more than a hint of a personality cult around China’s supposedly strong and decisive leader — a man whom Australian sinologist Geremie Barme has nicknamed the “Chairman of Everything.” When a stock market rally began to gather pace this year, sucking in tens of millions of retail investors, state media soon joined the party, loudly announcing that the bull market was only just beginning. The rally, experts say, seemed to serve two purposes: Politically it was easy to see it as an endorsement of Xi and his “China dream,” while economically it seemed like an easy way out of China’s problems. Andy Xie, an independent economist in Shanghai, said the authorities were “juicing up” the market as a substitute for real structural reform, hoping that an asset bubble would stimulate consumer demand, help inject fresh capital into businesses and cover up for increasingly unproductive state-led investment. “Structural reform had somehow not been considered. They thought the stock market would somehow make everything rosy and solve all the problems,” he said. “But when the market started collapsing, there was no Plan B. That’s why we are seeing such a haphazard reaction.” Victor Shih, associate professor at the University of California at San Diego’s School of Global Policy and Strategy, agreed. “The entire policy establishment was thinking they had found the magic bullet for corporate finance in China and not really thinking about where the money comes from,” he said. For Shih, the sorry episode also reflected a more fundamental flaw in China’s system, especially with power so centered in one man. “In dictatorships, when things are going well, nobody wants to end the party,” he said. “When anything goes well in China, people can attribute that to the top leader. But it would be very difficult for anyone to come and say, ‘Things are not going well; it’s a bubble and it’s about to crash.‘” “Had power been a bit more decentralized, people would have come to say, ‘Lets end the party.‘ There would be less fear of offending any particular leader.” Xi’s centralization of power, some experts and foreign business leaders say, has also undercut a strength of the Chinese system — decision-making by consensus, in which policy was implemented only after careful consultation and cautious experimentation. Today, they say, policy seems less considered, more haphazard. The stock market’s crash has badly dented the notion that China’s leaders were almost infallible guides for the nation’s economy. Concerns are now mounting globally about China’s economic slowdown and its ability to rebalance away from state-led investment and heavy industry toward services and consumer demand. Independent economist Xie believes his country still has enormous economic potential if it can manage that transition. But that, he says, requires a different approach from China’s top leaders. “There is a tendency to think power is everything, to think that political stability is based on raw power — that everything is okay if you can lock people up and no one can challenge you,” said Xie. “But that’s very wrong thinking. Political stability is based on economic prosperity. China’s rise in the past three decades is based on economic prosperity, and prosperity can only come from sensible economic management.”