DATELINE–WASHINGTON

When U.S. Federal Reserve Chairman Alan Greenspan hinted last week that he would continue to boost interest rates to reign in record consumer spending and the hottest stock market in decades, venture capitalist Hawkins Josseph shook his head.

Like a growing number of economists, Josseph, who until five years ago taught economics at the University of Chicago, believes that raising the rate at which banks lend to one another is not the nation’s best defense against inflation. Instead he advocates a macroeconomic theory that has become quite popular in academic circles, even though it has never been tested. Josseph wants to raise the unemployment rate.

By releasing nonviolent prison inmates.

According to Josseph, pushing unemployment rates upward will arrest inflation and promote general economic growth without need of interest rate hikes. What makes his theory seductive is its simplicity.

Most economists, Alan Greenspan included, cite the U.S.’s low unemployment rate of 4.1 percent as a harbinger of inflation. In this tight job market, Silicon Valley CEOs have demanded greater access to the foreign labor supply and have lobbied intensely to increase the number of temporary immigration visas available. Current Federal Reserve policy calls for raising interest rates to levels that dampen business activity, lower demand for workers, and, therefore, lessen inflationary pressures on the economy.

But Josseph argues that continued interest rate hikes could actually be catastrophic for the economy, and that there is another way to hike unemployment rates: increase the labor supply, creating a safety valve that allows the red hot economy to proceed apace without the danger of overheating. And where would Josseph find more unemployed workers to throw into the labor force? In the prison system.

Citing a recent study by labor economists Lawrence Katz and Alan Krueger, Josseph points out that one of the main factors pushing the unemployment rate to its lowest level in three decades is the nation’s growing inmate population. According to the U.S. Department of Justice’s Bureau of Justice Statistics, a black male has a one in four chance of being incarcerated in his lifetime and a Hispanic male one in six. Currently, 1.7 million people are incarcerated in the U.S., and, because prisoners are excluded from employment calculations, the unemployment indicators would be significantly higher than 4.1 percent if prisoners were taken into account.

“I’m not talking about a radical emancipation program,” Josseph says, “but if we scale back our sentencing requirements, institute treatment programs instead of jail time for drug offenders, and stop sending underage offenders to adult prisons, we can substantially grow the unemployment rate with minimal social impact.”

Josseph’s proposal could have appeal to both conservative and liberal agendas. Several prison reform groups, including the influential Criminal Justice for Criminals, embrace Josseph’s plan as an impetus for revamping a penal system that they believe is discriminatory at its core. Some conservatives, among them the Brookings Institute and former Reagan domestic policy adviser Don Gaiger, also laud the “less inmates and lower interest rates” approach as a nonintrusive answer to the impending inflationary dilemma. The libertarian-leaning Gaiger has been lobbying the Senate Republicans to sponsor a scaled-down version of Josseph’s plan.

“This is a win-win proposition,” says Gaiger, who cites statistics that show the percentage of violent offenders in prison has declined over the past 25 years, while the total prison population has tripled. “The results are positive across the board: You have stronger communities where men can participate in the lives of their families, you have less unchecked spending on gargantuan prison facilities, and you reduce the only threat against the longest economic winning streak in the history of the United States.”

Despite calls for an increase in unemployment rates by other means, analysts expect the Fed to raise interest rates by a quarter of a percentage point at its next meeting on March 21, with an additional half-point increase to come by summer. But with consumer confidence riding high, even elevated interest rates may not have the expected effect of slowing investment and spending. Stock prices have been mixed following news of the expected rate hikes. The Dow Jones Industrial closed yesterday down 122.84 points while the technology-heavy NASDAQ composite enjoyed a modest gain of 21.27 points.

DATELINE–MIAMI

Sources say the Federal Bureau of Investigation has arrested three suspects in conjunction with two seemingly unrelated attempts to take the life of Elian Gonzalez, the boy whose fate has sparked a diplomatic crisis between the U.S. and Cuba.

Gonzalez, who was rescued on Thanksgiving following a shipwreck that killed his mother and others seeking to immigrate to the U.S., is the subject of a bitter custody dispute between his father, a Cuban national, and his extended Cuban-American family in Miami. The arrests, which took place in Washington, D.C., and in Miami, occurred within days of each other.

Although the names of the suspects have not been released, details of what can only be described as bizarre conspiracies to assassinate the 6-year-old Cuban refugee have begun to circulate among law enforcement agents and the press.

In one of the cases, it is believed the alleged assassin was convinced that the young Gonzalez was actually the illegitimate son of Fidel Castro and had been smuggled into the U.S. as part of an elaborate ploy to groom him for a future political career in America. Investigators are rumored to have discovered photocopied fliers, which describe in detail a Manchurian Candidate-like scenario in which “Alien Gonzalez” rises to power, first as a student leader at Harvard, and later as a U.S. congressman from Florida who, after a constitutional amendment is passed, becomes the first foreign-born president of the United States. A cache of semiautomatic weapons and what may be explosive devices was also found in the suspect’s Washington, D.C., motel room.

Two days later, in a separate incident, federal and state authorities apprehended a Cuban-American couple in Miami. The man and woman now in federal custody were purportedly plotting to abduct and possibly kill Gonzalez. In an unpublished letter sent to El Nuevo Herald, Miami’s Spanish-language newspaper, the suspects warned authorities that the Cuban government had collected Gonzalez’s DNA with the aid of the boy’s grandmother, Mariela Quintana. There were also repeated references to a “flotilla of Elian Gonzalez clones” that would invade Florida in the year 2006.

The letter, now in the possession of the FBI, apparently was sent in response to a Feb. 7 Miami Herald story that reported Quintana had bit her grandson’s tongue and unzipped his pants during a recent visit to “see how much he had grown,” and to make him feel comfortable. The couple claimed that the tongue-biting had been performed for the purpose of sampling the young boy’s genetic material. Although they consider the claims outlandish, authorities are treating the case with the utmost gravity after a search of the couple’s Hialeah home turned up a pair of false passports and an unspecified number of unregistered handguns.

While authorities are confident that Gonzalez is no longer at immediate risk, state and federal police have increased security at the Miami home of the boy’s great-uncle, in the event that the recent arrests inspire copycat attempts against Gonzalez’s life.

DATELINE–SAN FRANCISCO

In February 1999, Fritz Golger attended the International Food Fair at the Marin Civic Center just north of the Golden Gate Bridge, in search of the inspiration that might turn his luck around. Without a new product to distinguish his microbrewery, the Veritas Brewery Co., from the thousands of other small beer-makers with access to the national market, he would have to close down the business that his father built. Just past a Japanese fresh-frozen fried calamari seller and across from the hawkers of a mineral water exclusively marketed to dogs, Golger struck gold: PowerBar.

“Right then and there I knew I would be the first to bring to market the future of beer: an energy beer,” recalls Golger, who subsequently closed a deal with PowerBar Inc., the leading manufacturer of energy bars, to produce a nutritious beer drink. For an undisclosed amount, the Veritas Brewing Co. licensed the use of PowerBar’s proprietary TriSource protein and began concocting the strange brew that would eventually be sold as InnerG.

It is the first time in at least a century that beer has been made and marketed as a meal. In the 1800s, Britons of all ages consumed a porridgelike beer for breakfast and lunch. But as living standards rose in Europe with the advent of the Industrial Revolution, beer became more of a drink than a dinner. Fast forward to the late 1990s, when the demands of the workplace have sharply increased the number of hours logged by white-collar workers, especially in the U.S., which has surpassed Japan as the leader among major developed nations in annual hours worked per person.

Golger, who sometimes visits with customers at his Palo Alto-based brewpub, noticed that many of his happy hour guests were actually taking early evening breaks at his bar before returning to work. The same hard-working night owls often ordered “a beer with an espresso back.” It was with this growing market in mind that Golger developed InnerG.

Although brewed like most beers, InnerG receives a last-minute infusion of simple and complex carbohydrates, antioxidant vitamins, and amino acids before being flash pasteurized and bottled. This allows Golger to label his product as both a dietary supplement and an alcoholic beverage. But advertising this hybrid drink may be more complicated than the process by which it is created.

The Bureau of Alcohol, Tobacco, and Firearms proscribes advertising that suggests the consumption of alcoholic beverages will enhance athletic prowess, performance, or health. Golger complains that this restriction prohibits his company from properly describing and effectively promoting InnerG, which, in addition to its 4 percent alcohol content, contains ingredients widely accepted as “performance-enhancing.”

“The rules haven’t yet caught up with the reality of the market,” complains Golger. “We’re the ones pushing the envelope, and naturally we’re the ones who will have to fight for fair labeling laws.” Regardless of the outcome of the labeling dispute, Golger’s company now faces another and potentially more threatening opponent: a legal challenge by a coalition of seven African-American community organizations. The lawsuit, filed by Empower Our Inner City Communities (EOICC), accuses the Veritas Brewing Co. of unfairly targeting poor communities, where alcoholism and malnutrition are already large problems. “An alcoholic beverage that is meant to be consumed in lieu of a square meal may seem like a clever gimmick to some people,” argues EOICC spokesperson Antoine D’Suzen, “but it’s a devastating and calculated blow to others.”

In its legal brief, the EOICC cites the name of Golger’s brew, InnerG, as evidence of targeted marketing. “G” is widely used as shorthand for “gangster” or “gang member” in urban slang.

DATELINE–Los Angeles

On the night of Wednesday, Jan. 6, 1999, Leticia Alvarez de Toledo spent the night at work. It was a new job for de Toledo, and she often arrived home in a state of near exhaustion. Yet, she had never arrived later than 11 p.m. Her husband, Jorge Luis, feared something had gone terribly wrong.

E-ProMOTION is a start-up Internet marketing firm located just outside Los Angeles with a staff of 25 full-time employees specializing in niche-marketing on the Web. The two-year-old company already boasts such high-powered clients as Time Warner and Prudential Insurance.

Less than a month before the close of 1998, E-ProMOTION moved into larger headquarters in Malibu Shores. The company expects its staff to double within the first quarter of 1999, and its new offices, with over 2,000 square feet of space, are handsomely equipped to facilitate this expansion. Shortly after the company’s relocation, it signed a yearlong contract with California Corporate Custodial.

De Toledo began working nights at E-ProMOTION as an employee of CCC two days after Christmas. Her nightly chores consist of cleaning the bathrooms, emptying out the trash bins, vacuuming and tidying up in the staff kitchen. By the time she reaches E-ProMOTION at 8 p.m., she has already worked 10 hours doing similar tasks at other offices. It’s her last assignment, and it usually takes Mrs. de Toledo less than two hours to finish her duties there.

Which is exactly how long her shift lasted on the night of Jan. 6. At only a few minutes past 10 p.m., Mrs. de Toledo had already packed up her cleaning gear and was ready to go out to the parking lot and await the CCC van that would drop her off near her apartment in La Puente. But when she attempted to walk out of E-ProMOTION, she found that the high-security gates had been locked from the outside. de Toledo was trapped inside.

Annoyed that she would have to wait for a CCC manager to arrive with the master keys, de Toledo attempted to telephone her family. After a few failed attempts (after 6pm, the phones at E-ProMOTION only dial preprogrammed numbers without a password), she finally called CCC to inform them of her predicament. The dispatcher at CCC was no longer picking up the phone. Instead, Mrs. de Toledo left a message explaining her situation.

Thirty minutes passed and there was still no sign of the CCC van. Delays of an hour or more are not unheard of in the custodial business. CCC employs more than 30 janitors and is responsible for both dropping them off and picking them up at work sites throughout the Los Angeles County. CCC provides the escort not as a service to the janitors, but as a quality control measure for the companies that contract its services.

At the pickup, a manager from CCC confirms that the custodians have done their job and makes sure they have not stolen anything from the work site. A full inspection of both worker and premises is performed daily as standard operating procedure. At 11 p.m., de Toledo began to worry there would be no such inspection that night. Sometime after 11:30 p.m., she made a series of frantic calls to CCC. None were answered.

At this point, another worker might have called 911 or at least telephoned a contact person at E-ProMOTION. But de Toledo was afraid to blow the whistle. Though both of her daughters were born in the United States, de Toledo was not. She is one of tens of thousands of illegal residents who work so-called “underground jobs” in the Los Angeles metropolitan area for substantially less than the minimum wage. There is no emergency relief for Mrs. de Toledo. She would just have to sit tight until the CCC van showed up.

And sit down she did, but not quietly. Two weeks earlier, de Toledo and her husband had purchased a used computer for their two young daughters. The Christmas gift came with a modem, and twelve year-old Isabel, de Toledo’s youngest daughter, had shown her mother how to use the Internet.

It was the first time de Toledo had used a computer, but having been an accomplished typist during her high school years in Lima, Peru, the 42-year-old took an instant liking to it. And to America Online.

At 12:14 a.m., de Toledo logged on to AOL using one of the many Web design workstations still up and running at E-ProMOTION. At 12:17 a.m. she posted an exasperated request for help to a Spanish-language chat room dedicated to telenovelas, the soap operas that play nationally on Hispanic television.

She asked if someone in the Los Angeles area could please call her family and inform them of her situation. Two L.A.-based AOL users who read her message reached her husband by telephone at approximately 12:30 a.m. de Toledo was then able to communicate directly with her husband via their daughters’ computer, although it would be another nine hours before she came home.

Lock-ins like the one that happened to de Toledo are not uncommon. In fact, California labor commissioner Jose Millan recently announced the results of a six-city probe by the Underground Economy Task Force that documented hundreds of similar cases. Assigned to clean retail stores and offices after closing, many workers were locked in overnight so that managers arriving the next morning can check them for stolen goods. The workers receive no additional pay for their overnight detention.

Mrs. de Toledo’s story would have remained just another anonymous incident of employee abuse had it not been for one incredible coincidence. One of the users logged on to the telenovelas chat room that night happened to be a clerk for Gil Garcetti, L.A.’s district attorney. Charges are currently being filed in Los Angeles Superior Court against CCC for several tax and labor law violations.

DATELINE–SAN FRANCISCO

“Haven’t you people ever heard of apartment buildings?” New York émigré asks.

Donald Raflek is a man on a revolutionary mission. The 32-year-old expatriate New Yorker and real estate developer spends his days and nights speculating excitedly about his visions for the future, which include late-night restaurants, magazine stands outside downtown, and an expansion of the public transportation system serving his adopted home. But what has landed Raflek in hot water with some San Franciscans is his latest proclamations of oh-so-urban dreaming, put in the form of a question: “Haven’t you people ever heard of apartment buildings?”

Raflek is convinced that the first step toward making San Francisco a viable 21st-century city is, quite simply, the construction of several large apartment complexes. As people move to the city to take jobs in Internet-related industry, the city has found itself in a severe housing crunch that has sparked conflict between longtime residents and tech-savvy newcomers.

To date, the only supply-side attempts to deal with the housing shortage have involved the construction of a few hundred upscale “live-work” loft condominiums. The lofts have inspired a feisty grass-roots opposition that indicts all new residential development as gentrification. Ironically, it is precisely this blanket opposition to residential construction that has led to the great disparity between housing demand and supply, and huge recent increases in property prices and rental rates.

Raflek hopes to transform both the city’s entrenched anti-development attitudes and its supply-demand housing imbalance by building apartment towers with a social conscience.

“The young people who are moving here to work at Internet companies don’t want to take Victorians out of the hands of poor families; they just want a place to live,” asserts Raflek. “I say give them a big apartment building with a doorman, and they’ll leave the low-income neighborhoods alone.”

The scrappy developer has persuaded Rob Howland, a longtime San Francisco tenants’ rights activist, to join the apartment-building cause. Howland was recently evicted from his Victorian flat under the Ellis Act, a state law that allows property owners to remove their real estate from the rental market.

Howland’s position on apartment towers took a 180-degree turn after the eviction, when he personally confronted the scarcity of affordable housing in San Francisco. Now, he believes that had he not opposed large-scale residential construction in San Francisco’s mid- and upper-Market areas three years ago, he might have been able to find a new place to live without months of searching. And today, Howland advocates Raflek’s apartment tower plans before the very community-based organizations that used to be his allies, and that would most likely attempt to block the projects at City Hall.

“At the time, I thought it was so grim; how could a large, impersonal building be allowed to replace a quaint one- or two-family house?” confesses Howland. “But now, I could see living there – the people close together, pooling their resources, supporting the independent businesses on the block with their foot traffic.”

Raflek’s first proposed apartment complex is a two-building, 15-story development that he plans for the blighted mid-Market Street neighborhood. The development will feature 120 rental units; one-third will be allocated to families with children or other shared households, one-third to couples, and one-third to singles seeking studio-style accommodations. On the ground level, small commercial spaces will be leased to independent businesses such as copy shops and cafes.

Even though his proposal is overtly inclusive, local housing activists (who openly refer to Raflek as “Le Freak") decry the would-be developer as just another greedy landlord whose interest is profit, rather than community development. At a city planner’s meeting last month, a group of protesters (dressed, inexplicably, in surgical gowns) taunted Raflek with jeers that included “Carpetbagger go home” and “One house, one people, one city.”

In an effort to curry community support, Raflek and Howland have agreed to place the new units under rent control laws that strictly limit rent increases, even though new developments are not legally subject to rent control. “Don is putting his money where his mouth is,” Howland says. “Instead of building low-income housing, we just have to build enough housing. The market will stabilize, and it won’t make any difference whether a new unit is under rent control or not.”

Despite what promises to be stiff opposition, the man who would Manhattanize San Francisco is convinced he can win over the city – if people will just hear him out. “Protesting new construction isn’t going to save the character of San Francisco, because that character is people,” Raflek sputters. “And people need two things: They need food, and they need housing.”