City Report

Whatever happened?

Did you notice that we no longer get an Annual Report.

I checked and we got them through the Pollard Administration. Then they ceased.

The Municipal Code has the following statement;

A. Chief Executive

The Chief Administrator shall be the Chief Executive and Administrative Officer of the City government, who shall enforce the laws of the City, the Commonwealth of Massachusetts and require the faithful performance of all administrative duties and shall:

1. Duties

a. Appoint, Dismiss, Etc.

Appoint competent, qualified officers and employees to the administrative service and shall have the power to dismiss, suspend and discipline, in accordance with the Personnel System, the Charter and Civil Service Law, where applicable, all officers and employees in the administrative service under his/her control.

b. Appoint to Acting Capacity

Designate himself or some other officer or employee, as provided in the Charter, to perform the duties of any other position in the administrative service under his/her her control which is vacant or which lacks administration due to the absence or disability of the incumbent.

c. Annual Report

Prepare and present to the Council an annual report of the City’s affairs for the previous fiscal year, including a summary of reports of department heads, and such other reports as the Council shall require.

d. Budget Report

Assemble estimates of the financial needs and resources of the City for each ensuing year, and shall
prepare a program of activities within the financial power of the City, embodying in it a budget document
with proper supporting schedules and analyses.

Wouldn’t you like to see these reports again.

They used to give us insight into how the government functioned.

Rules redux

I am back proposing new City Council Rule changes.
Council does not follow the rules but we should at least correct them so, one day, we will be able to enforce and they will be useable.

The following is a proposed change;
METHUEN CITY COUNCIL RULES AND PROCEDURES Amended February 2008

RULE II – AGENDA
A true copy of any order, request, resolution or other form of business to be presented to the City Council at its regular meeting for its action shall be filed in the office of the Clerk of the Council as follows:

1) Title for the Agenda shall be submitted to the Clerk of the Council no later than 3:00 P.M. on the Monday prior to the Council meeting. The agenda shall be prepared, posted and a copy mailed to each Councilor on said Monday prior to the regularly scheduled Council meeting.

2) All items to be placed on the agenda, including but not limited to, resolutions, ordinances, contracts and all back-up material relative to an agenda item, are to be submitted to the Council Clerk no later than 10:00 a.m. on the Wednesday prior to a Council meeting.

3) The Council meeting packets will be delivered to the Councilors on the Wednesday prior to the Council meeting, and, absolutely no items will [Shall] be considered for inclusion on the agenda after that time.

* Change will to Shall as noted above. *

4) Any material relative to an agenda item submitted to Council after the above described cut-off dates will [Shall] be stricken from the agenda and the action item, be it an ordinance, contract or resolution , will [Shall] be held over until the next regularly scheduled City Council meeting.

* Change will to Shall as noted above. *

Chapter 2, Section 2-18
No matter requiring final action in the form of an ordinance, resolution or order coming before the City Council shall be considered as a first reading item unless it shall be submitted in the proper written form of an ordinance, resolution or order; nor shall any such item be entertained for first reading until the City Council shall have affixed to such document a Council docket number. (See Ordinance #319, effective October 19, 1988, attached)

* Add the following two sections.*

Chapter 2, Section 2-18A
No order or resolution shall be received or acted upon unless sponsored by member of the Council or the Mayor per applicable Municipal Code (Section 2-17.). Sponsorship must be noted on the agenda.

Chapter 2, Section 2-18B
Every order, resolution, proposal, etc. appearing on the Council agenda be accompanied by approximate amount of the costs involved if at all possible that those costs can be determined prior to being placed on the Council agenda.

* Renumber this paragraph. *

Chapter 2, Section 2-19
Except in cases of special emergency, at least forty-eight hours before any meeting of the City Council is to be held, an agenda, containing all specific items which are scheduled to come before it at the meeting shall be posted. No action taken on a matter not included in the posted agenda shall be effective unless the body first adopts by special vote a resolution declaring that an emergency exists and that the particular matter must be acted upon at that meeting for the immediate preservation of the peace, health, safety or convenience of the City. A preamble which declares and defines the emergency shall be separately voted on and shall require the affirmative vote of two-thirds of the Council present. An emergency measure may be passed with or without amendment, or rejected at the meeting at which it is introduced. No measure making a grant, renewal or extension, whatever its kind or nature of any franchise of special privilege shall be passed as an emergency measure. (Ch. Ref. Sec. 9-11b; 2-9b)

These changes will bring us more in line with the rules and procedures of other Cities within the State and with the legislature rules.

They take away some unwritten protocols and enforce the intent of the original ordinance.

Law Report

The following is from the City of Methuen website. It is listed under the Solicitor tab.

THE MUNICIPAL CODE OF METHUEN, MASSACHUSETTS 2000 .
[Use Caution-May not be up to date] Also, here.

Section 2.24. Department of Law

A. The Department of Law shall consist of the City Solicitor who shall, in accordance with Chapter 182 of the Acts and Resolves of 1985, be appointed by the City Council.

The City Council shall, on or before January fifteenth in odd numbered years, elect, by ballot or otherwise, a City Solicitor to hold office for a term of two years and until his/her successor is qualified.

He/she shall enforce all laws and act to protect the interests of the City and he/she shall:

7. Make Reports
a. Immediate report of decision.
Immediately report the outcome of any litigation in which the City has an interest to the Mayor and the Council.

b. Annual report of pending litigation.
Make an annual report, to the Mayor and Council, as of the first day of July of all pending litigation in which the City has an interest and the condition thereof. [italics added]

My question would be when does the Solicitor make that report?
I find none of the exclusions that would allow this to occur in Executive Session.
I have searched the Minutes since our Solicitor took office and find no agenda item which would satisfy the Code.

*Note: I have been informed, by reliable sources, that this report is made every July.*

This report would, I am assuming, be under the Agenda item;
8. OTHER OFFICERS AND COMMITTEE REPORTS

My supposition would be that it would state something like;
8. OTHER OFFICERS AND COMMITTEE REPORTS
a. Solicitor: Annual Litigation Report per MunCode Section 2.24 (7).
Then maybe list all pending cases and their condition.

As of today, that would be at least seven.

If you go to Justia.com and search for City of Methuen;
The following seven (7) Cases come up. I did no further research.

Solomon v. Manzi et al
Plaintiff: Joseph Solomon
Defendants: William Manzi, III and City of Methuen, Massachusetts

Case Number: 1:2011cv10794
Filed: May 5, 2011

Court: Massachusetts District Court
Office: Boston Office
County: Essex
Presiding Judge: Mark L. Wolf

Nature of Suit: Civil Rights – Other Civil Rights
Cause: 28:1331 Federal Question: Other Civil Rights
Jurisdiction: Federal Question
Jury Demanded By: Plaintiff
********************
Phillips v. Methuen, City of et al

Plaintiff: Larry Phillips
Defendants: Methuen, City of , Joseph Solomon , Randy Haggar , Michael Pappalardo , Katherine Lavigne , Joseph Aiello , Ronald Valliere , Methuen Police Patrolmen’s Association and John Doe

Case Number: 1:2011cv10171
Filed: January 31, 2011

Court: Massachusetts District Court
Office: Boston Office
County: Essex
Presiding Judge: Joseph L. Tauro

Nature of Suit: Civil Rights – Other Civil Rights
Cause: 28:1983 Civil Rights
Jurisdiction: Federal Question
Jury Demanded By: Plaintiff
*********************
Norcross v. City of Methuen et al

Plaintiff: Owen Norcross
Defendants: City of Methuen , Trombly Motor Coach Service, Inc. , Robert Jalbert , Paula Jalbert and S. Maher
Cross_claimants: Trombly Motor Coach Service, Inc. and City of Methuen
Cross_defendants: City of Methuen and Trombly Motor Coach Service, Inc.

Case Number: 1:2011cv10154
Filed: January 28, 2011

Court: Massachusetts District Court
Office: Boston Office
County: Essex
Presiding Judge: William G. Young

Nature of Suit: Civil Rights – Other Civil Rights
Cause: 20:1400
Jurisdiction: Federal Question
Jury Demanded By: Both
******************
Aiello v. Manzi et al

Plaintiff: Joseph Aiello
Defendants: William Manzi, Katherine Lavigne, Thomas Fram and City of Methuen, Massachusetts

Case Number: 1:2008cv10635
Filed: April 15, 2008

Court: Massachusetts District Court
Office: Civil Rights: Jobs Office
County: Essex
Presiding Judge: Judge Joseph L. Tauro

Nature of Suit: Civil Rights – Employment
Cause: Federal Question
Jurisdiction: Federal Question
Jury Demanded By: 42:1983 Civil Rights Act
********************************
Thompson v. Methuen, City of et al

Plaintiff: Kevin M Thompson
Defendants: Methuen, City of, Jeanne C. Whitten, Charles P. Littlefield, Massachusetts Teachers Association and Methuen Education Association

Case Number: 1:2007cv12196
Filed: November 27, 2007

Court: Massachusetts District Court
Office: Boston Office
County: Essex
Presiding Judge: Judge Douglas P. Woodlock

Nature of Suit: Torts – Injury – Other Personal Injury
Cause: 28:1332 Diversity-Personal Injury
Jurisdiction: Federal Question
Jury Demanded By: Plaintiff
**********************
Lopez et al v. City of Lawrence, Massachusetts et al

Plaintiffs: Pedro Lopez, Abel Cano, Kevin Sledge, Charles DeJesus, Richard Brooks and The Massachusetts Hispanic Law Enforcement Association
Defendants: City of Lawrence, Massachusetts, City of Methuen, Massachusetts, Commonwealth of Massachusetts, Paul Dietl, John Michael Sullivan and William Manzi, III

Case Number: 1:2007cv11693
Filed: September 11, 2007

Court: Massachusetts District Court
Office: Boston Office
County: Essex
Presiding Judge: Judge Joseph L. Tauro

Nature of Suit: Civil Rights – Employment
Cause: 42:2000e Job Discrimination (Employment)
Jurisdiction: Federal Question
**********************
Brearley et al v. City of Methuen, Massachusetts

Case Number: 1:2005cv10411
Filed: March 4, 2005

Court: Massachusetts District Court
Office: Boston Office
Presiding Judge: Magistrate Judge Robert B. Collings

Nature of Suit: Civil Rights – Other Civil Rights
Cause: 28:1983 Civil Rights
Jury Demanded By: Plaintiff

Weiner Month

I know, you thought, because of recent news headlines that June was Weiner Month.
Well, think again.
There is actually a National Hot Dog & Sausage Council. They have a website, hot-dog.org…I am not making this up..
The Council sponsors July as National Hot Dog Month. It could be the reason why Hot dogs are served on the Fourth of July.
They even have a photo contest you can enter (By June 17th).
Don’t know anything about hot dogs? Try this site for a quick course.
They were originally called frankfurters, because one of the most popular sausages of the middle ages was made in Frankfurt Germany.
Why Weiners?
Well, another popular sausage from the same time was made in what we now call Vienna, Austria.
It used to be called Wein, thus the sausage was a weiner, because it originated in that city.
All this information and more can be found at the sites linked in this post.
Enjoy reading and have a “dog” for the fourth. Take in a ball game. Real Americana…
Good eating.

Union…Should we be United?

Lot’s of discussion, every where one turns. Collective bargaining, union rights, etc. etc.

What does it all mean?
Are Unions good for the economy?
Are they good for the Government?

Requiring much thought and discussion, I present a few semi-random discussions that I feel you should read, think about and they may help you either decide your position or, even better, force you to start delving deeper into the issue and creating your own reasoned approach to the subject.

Here goes.
The Economist magazine has this article;
Public-sector workers. (Government) workers of the world unite!
Public-sector unions have had a good few decades. Has their luck run out?

Move on to this blog. Strangely named but filled with one perspective on the topic.
The current article is The Trouble with Public Sector Unions
Posted on February 21, 2011 by Drae
There is a whole section devoted to :The Public Union Debate. Scroll down the right sidebar to find the section and articles.

The article that started me thinking is in National Affairs, a quarterly journal of essays about domestic policy, political economy, society, culture, and political thought. It aims to help Americans think a little more clearly about our public life, and rise a little more ably to the challenge of self-government.

Each issue features lively yet serious essays on the range of domestic issues:
from economics and health care to education and welfare;
from the legal debates of the day to enduring dilemmas of society and culture.
They devote special attention to the deeper theoretical questions of American self-government—seeking to cut through the conventional wisdom, help you make sense of complex issues, offer concrete proposals, and illuminate the ideas that move our politics.

In doing so, they strive to walk in the footsteps of our intellectual and institutional predecessor, The Public Interest, a journal that for decades enriched our public life with its unparalleled clarity and wisdom. National Affairs hopes to provide the same service to Americans addressing the problems of a new era, and to serve as a venue for a new generation of thinkers and writers seeking to influence the affairs of the nation.

Read; “The Trouble with Public Sector Unions” by DANIEL DISALVO, an assistant professor of political science at the City College of New York.

Happy reading. Be sure to check back. Leave your thoughts on this issue.

WED is Sunday June 5,2011

What is WED?
World Environment Day.
A celebration put on by the United Nations, each year.
From the website;
“WED celebration began in 1972 and has grown to become the one of the main vehicles through which the UN stimulates worldwide awareness of the environment and encourages political attention and action.

Through WED, the UN Environment Programme is able to personalize environmental issues and enable everyone to realize not only their responsibility, but also their power to become agents for change in support of sustainable and equitable development.”
The Theme
Forests: Nature At Your Service

“Forests cover one third of the earth’s land mass, performing vital functions and services around the world which make our planet alive with possibilities. In fact, 1.6 billion people depend on forests for their livelihoods. They play a key role in our battle against climate change, releasing oxygen into the atmosphere while storing carbon dioxide.”

“The Republic of India will be the host for World Environment Day, 5 June 2011, for the first time since the celebrations began in 1972. This year’s commemorations are expected to be the largest and most widely celebrated globally.”

How will you celebrate World Environment Day?

Click on the links to learn more. More informational materials.

Solicitor–Mission Statement

I stumbled upon the old Mission statement for our current Solicitor.
Got me thinking.

Here is the older Mission statement from the Solicitor.

Mission Statement

The City Solicitor serves the public as a whole by assisting local officials and employees in the lawful performance of their duties for the effective and orderly administration of the local government.

DUTIES OF THE CITY OF METHUEN SOLICITOR
The City Solicitor is the chief legal officer of the community.
The responsibilities and duties of the City Solicitor include but are not limited to the following:
– To provide legal advice for officials, officers, employees, and the local government in general;
– To defend the community (including its officers, officials, and employees) in claims and litigation;
– Represent the community (including its offices, officials, and employees) in litigation they initiate;
– Draft contracts of all types, legal documents, local laws, deeds, orders, proclamations, forms, and other documents;
– Render advice both orally, and in writing, draft opinions, advisories, memorandums, decisions and alike;
– Prosecute violations of local laws;
– Conduct internal investigations, make recommendations for actions to be taken, investigate claims.
Email: solicitor@ci.methuen.ma.us

The Solicitors picture was above the statement and his name was below the picture. If you clicked on the solicitors name the following email address used to pop up; pjmcquillan@ci.methuen.ma.us.
Remember when the City website used to include email addresses for all city employees?
Well, maybe not all, but for all elected officials and Department heads and Supervisors.
I recall those days. Their email would pop up if you clicked on their photo.
Try to locate the email address now. Good luck.
Helps to know the officials middle name.
Locally, email addresses are made up of the officials first initial, middle initial and last name.
Then one appends the @ci.methuen.ma.us.
This, generally, will get you to the correct person.
There are exceptions, usually for inexplicable reasons known only to the IT folks.

At some point the Solicitor re-wrote ( or more correctly, re-shuffled) the statement. here is what appears today;

Mission Statement:

The City Solicitor is the chief legal officer of the municipality.
The City Solicitor advises and assists all city officials and employees in the lawful performance of their duties for the effective and orderly operation and administration of local government.

Notice that the “chief legal officer of the municipality” moved from responsibility to mssion statement.Since the School System tends to have their own lawyers what does this statement mean? Guess it is the reason they want to hire more lawyers for the City. Hard to be Chief in a Department of one. (editorial)

We somehow also lost the “serves the public as a whole “  from the mission.

The responsibilities and duties of the City Solicitor include but are not limited to the following:
– To provide legal advice for officials, officers, employees, and the local government in general;
– To defend the community (including its officers, officials, and employees) in claims and litigation;
– Represent the community (including its offices, officials, and employees) in litigation they initiate;
– Draft contracts of all types, legal documents, local laws, deeds, orders, proclamations, forms, and other documents;
– Render advice both orally, and in writing, draft opinions, advisories, memorandums, decisions and alike;
– Prosecute violations of local laws;
– Conduct internal investigations and recommend appropriate action, investigate damage claims.

Nice that his duties did not substantively change. No email contact information anymore.
Curious if the City has even drafted an email policy for employees?

Here are some other Mission statements (found on-line using solicitor in search field).

Look for these terms and ask why they are not in our Solicitors Statement.

  • To provide professional, ethical, cost effective, aggressive, and competent legal support to meet the legal challenges facing the City of Methuen in order to protect and defend the City’s interests.
  • To represent the interests of the citizens
  • To provide effective and efficient legal advice and representation…in order to enable the city government to operate at maximum potential with minimal risk.
  • committed to upholding the highest ethical standards
  • To provide exceptional legal services…through aggressive, effective legal reperesentation.

 Worth thinking about anyway…

MISSION:
To provide professional, ethical, cost effective, aggressive, and competent legal support to meet the legal challenges facing the City of Atlantic City in order to protect and defend the City’s interests.
Mission
To represent the interests of the citizens of Atlanta in all matters brought before the Atlanta Municipal Court by screening, investigating and prosecuting all cases, handling all appeals from the court and by providing legal assistance to the city administration, community groups, schools, colleges and by providing training to law enforcement agencies and private police forces.
Overview
Provides legal representation and support to the City of Medford and its officials, departments, agencies, boards and commissions, including litigation, claims, contracts, ordinances, and opinions.
Mission Statement
To provide effective and efficient legal advice and representation to all municipal elected and appointed officials and to all city departments in order to enable the city government to operate at maximum potential with minimal risk. Law Department Personnel are committed to upholding the highest ethical standards in its representation of the City of Medford
Mission Statement
To provide exceptional legal services to the City, its elected and appointed officials, boards, agencies and departments and further the city’s policy and public objectives through aggressive, effective legal reperesentation.

Verizon–be “future-proofed”?

Verizon is at it again.
Trying to legislate it’s way to profit.
What will future proofing do for YOU?

There will be a Public hearing on May 18th on Senate Bill S 1687 at the State House in Boston.

——————————————————————————–

Public Hearing on S 1687 Coming on May 18, 2011
Bill Proposes setting up a State Cable Licensing System and ending our current Local Cable Licensing System

Current Law Is Very Effective

  • Massachusetts’ Cable Act (Chapter 166A) has long protected the interests of the people of the Commonwealth.
    The statute provides a model for meaningful negotiations between cities and towns and large corporations during licensing.
  • One current benefit ensures that Massachusetts residents have access to their local elected and appointed officials as well as state representatives and senators by means of public, educational and governmental “PEG” channels.
  • There is no reason to gut and destroy a system that has, and continues to, provide so much value to the people of Massachusetts.

Verizon Fails To Establish A Predicate For Action – Current Law Has Served Them Well.

  • Verizon has successfully rolled out its television service in roughly 110 Massachusetts communities.
  • Verizon has never been denied a license in Massachusetts, but Verizon has refused to negotiate with some cities in the Commonwealth.
  • Verizon makes no promises that, should this legislation be adopted, it will serve all communities in the Commonwealth, a promise that the company has been willing to make in other states where it was also the local telephone company.

Legislative Proposal Jeopardizes Current Obligations

  • Legislation allows cable operators to escape the mandatory and beneficial provisions of 166A, by making those mandatory provisions avoidable “…by agreement with an issuing authority.”
  • In New Jersey, Verizon sponsored similar legislation, then sought to renege on its statutory franchise obligations to provide free connections to government buildings and support of PEG channel operations.

Legislation Proposes a Shot Clock Timetable That is Not Workable

  • It can take longer than 90 days to identify local cable needs, including development of capital and operating budgets for long term licenses.
  • Artificially limiting a time for negotiations can have the effect of tying the hands of local officials to get the best license for their communities.

Verizon Seeks To Reduce Traditional License Obligations To Their Benefit And At Expense Of PEG Operations

  • Bill limits access payments to “on or before March fifteenth…” rather than on the current quarterly payment or other flexible schedule.
    This could be unworkable in some communities.
  • Bill sets up a system where a new company can come in and get PEG signals at the expense of the incumbent company – which could seek relief via litigation – thereby jeopardizing the ability of all cable subscribers to obtain their local programming.
  • Bill would place a cap on negotiating funding for capital equipment that Verizon has not required in any other state.

PLEASE CONTACT OUR REPRESENTATIVES,

Let them know you are concerned about this proposed bill by May 19.

You can also contact the hosts of the public hearing,

  • The Joint Committee on Telecommunications, Utilties and Energy, at 617-722-2263.

Regional Health District

Methuen is looking at a Regional Health District.
Discussion will occur, hopefully, at the next City council Meeting. See TR11-30.
The text of the Grant and Contract is located on the City Council website.
It will be or is already, named Upper Merrimack Valley Health District.
It will, initially, include Haverhill, Lawrence and Methuen.
Over a period of time the group would like to expand to include Dracut, Georgetown, Groveland, Merrimac, Amesbury, Newburyport and Salisbury.
[Can you spell Gerrymander?].—can’t help myself.
They have been awarded a grant which requires city (Methuen) matching funds.
It will require hiring more personnel for the Department to manage the new District.

The district will try to create effective plans to fight obesity, smoking, teen pregnancy, lingering lead paint issues and outbreaks of Tuberculosis(TB).

All materials will be translated into Spanish to more effectively serve the Hispanic Community.

From The state webite[verbatim]:

New State Incentive Grant Program To Fund Regional Public Health Districts

——————————————————————————–
Geoff Wilkinson,
Senior Policy Advisor, Dept. Public Health

Massachusetts has received a new five year federal award to develop regional public health districts through an incentive grant program, which will be operated by the state Department of Public Health (MDPH). Groups of cities and towns are eligible to apply for planning grants of up to $40,000 to develop plans to share staff and services to improve the scope and quality of local public health services for their combined populations. Planning grant proposals will be due to MDPH at the end of February, and awards will be announced in March. MDPH expects to fund 8-10 planning grants.
The program is eligible for groups of municipalities interested in starting new districts and for existing districts that want to expand. Planning grant applications may be submitted by lead municipalities or by Regional Planning Agencies or Councils of Governments acting as fiscal agents for groups of municipalities applying together. It is not necessary for all municipalities applying for a planning grant to be fully committed to participating in the prospective public health district. Planning grants are intended to help engage appropriate stakeholders, secure commitments, and develop plans for how each district would operate.

Municipal groups selected in March to receive planning grants will be eligible to compete later in 2011 for multi-year operating grants. MDPH expects to provide extended support to enable 6 of the originally chosen 8-10 groups of municipalities to form districts beginning late in 2011. Each of these 6 districts will receive five years of flexible operating support—three years at full funding, followed by two years of reduced funding, leading to district self-sufficiency. Full funding per district will range from $75,000 to $150,000 annually. Additional technical assistance will be available to each of the 6 funded districts. Details about planning grant activities and performance standards that districts will be expected to meet will be included in the Request for Responses that MDPH will post to Comm-Pass before December 31, 2010. An updated note will also appear in City and Town when that post is ready; however we suggest you start local conversations immediately.

The program is intended to address gaps in the capacities of Boards of Health and health departments to protect and promote public health through food protection, sanitary code enforcement, disease prevention and response, and policies and programs aimed at smoking, obesity, health disparities, underage drinking, and other health threats. The program is funded under the 2010 national health care reform law as part of the U.S. Centers for Disease Control and Prevention (CDC) “Strengthening Public Health Infrastructure to Improve Health Outcomes” initiative. For more information, contact Geoff Wilkinson, Senior Policy Advisor in the Office of the Commissioner at MDPH, at geoff.wilkinson@state.ma.us.

RFR #107212 – Public Health District Incentive Grant Program – December 28, 2010

Age of America Nears End

From the 1890′s until 2016, America was THE world economic power.
China will overtake the US in 2016 and we are won’t to make corrections due to lack of REAL leadership.
The following article appeared in the Wall Street Journal. (minor edits made)
Read this…think about it…worry???

IMF Bombshell: Age of America Nears End by Brett ArendsTuesday, April 26, 2011

This column has been updated to include a reaction from the IMF.
The International Monetary Fund has just dropped a bombshell, and nobody noticed.
For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.
And it’s a lot closer than you may think.

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.
According to the IMF forecast, which was quietly posted on the Fund’s website just two weeks ago, whoever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
Most people aren’t prepared for this.
They aren’t even aware it’s that close.
Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.
But they’re miscounting.
They’re only comparing the gross domestic products of the two countries using current exchange rates.
That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.
The Comparison That Really Matters
In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, real-terms picture of the economies using “purchasing power parities.”
That compares what people earn and spend in real terms in their domestic economies.

Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016.
Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion.
That would take America’s share of the world output down to 17.7%, the lowest in modern times.
China’s would reach 18%, and rising.

Just 10 years ago, the U.S. economy was three times the size of China’s.

Naturally, all forecasts are fallible. Time and chance happen to them all. The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt.

This is more than a statistical story.
It is the end of the Age of America.
As a bond strategist in Europe told Brett Arends two weeks ago, “We are witnessing the end of America’s economic hegemony.”
We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else.
America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.
And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property.
China has none of those.
The Age of China will feel very different.
Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers. “The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”

The rise of China, and the relative decline of America, is the biggest story of our time.
You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities.
Last fall, when Brett Arends attended a conference in London about agricultural investment, he was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies — from South America to China and elsewhere.
This is the result of decades during which China has successfully pursued economic policies aimed at national expansion and power, while the U.S. has embraced either free trade or, for want of a better term, economic appeasement.
“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”

The next chapter of the story is just beginning.
U.S. Spending Spree Won’t Work

What the rise of China means for defense, and international affairs, has barely been touched on.
The U.S. is now spending gigantic sums — from a beleaguered economy — to try to maintain its place in the sun.
It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.
Equally to the point, here is what this means economically, and for investors.

Some years ago Brett Arends was having lunch with the smartest investor he knew, London-based hedge-fund manager Crispin Odey. He made the argument that markets are reasonably efficient, most of the time, at setting prices. Where they are most likely to fail, though, is in correctly anticipating and pricing big, revolutionary, “paradigm” shifts — whether a rise of disruptive technologies or revolutionary changes in geopolitics. We are living through one now.

The U.S. Treasury market continues to operate on the assumption that it will always remain the global benchmark of money. Business schools still teach students, for example, that the interest rate on the 10-year Treasury bond is the “risk-free rate” on money. And so it has been for more than a century. But that’s all based on the Age of America.

No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be? The euro would be fine if it acts like the old deutschemark. If it’s just the Greek drachma in drag … not so much.
The last time the world’s dominant hegemon lost its ability to run things singlehandedly was early in the past century. That’s when the U.S. and Germany surpassed Great Britain. It didn’t turn out well.

Updated With IMF Reaction
The International Monetary Fund has responded to my article.

In a statement sent to MarketWatch, the IMF confirmed the report, but challenged Brett Arends interpretation of the data. Comparing the U.S. and Chinese economies using “purchase-power-parity,” it argued, “is not the most appropriate measureÂ… because PPP price levels are influenced by nontraded services, which are more relevant domestically than globally.”
The IMF added that it prefers to compare economies using market exchange rates, and that under this comparison the U.S. “is currently 130% bigger than China, and will still be 70% larger by 2016.”

My take?[Bret Arends]
The IMF is entitled to make its case. But its argument raises more questions than it answers.

First, no one measure is perfect. Everybody knows that.
But that’s also true of the GDP figures themselves. Hurricane Katrina, for example, added to the U.S. GDP, because it stimulated a lot of economic activity — like providing emergency relief, and rebuilding homes. Is there anyone who seriously thinks Katrina was a net positive for the United States? All statistics need caveats.

Second, comparing economies using simple exchange rates, as the IMF suggests, raises huge problems.
Currency markets fluctuate. They represent international money flows, not real output.
The U.S. dollar has fallen nearly 10% against the euro so far this year. Does anyone suggest that the real size of the U.S. economy has shrunk by 10% in comparison with Europe over that period? The idea is absurd.
China actively suppresses the renminbi on the currency markets through massive dollar purchases. As a result the renminbi is deeply undervalued on the foreign-exchange markets. Just comparing the economies on their exchange rates misses that altogether.

Purchasing power parity is not a perfect measure. None exists.
But it measures the output of economies in terms of real goods and services, not just paper money.
That’s why it’s widely used to compare economies.
The IMF publishes PPP data. So does the OECD. Many economists rely on them.

Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for The Wall Street Journal.
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