All the Wrong Moves

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In his 2015 State of the Union address, President Obama asserted that his economic policies are working. "The economy is growing and creating jobs at the fastest pace since 1999," he declared. "The shadow of crisis has passed." Later, in March, a giddy Obama took credit for the recovery, saying that unemployment had fallen to 5.5% and that 60 consecutive months of job growth had created over 12 million jobs.

The crisis has not passed. Nor has its shadow, which, almost seven years after Mr. Obama promised jobs, GDP growth, and a middle class revival, grows darker and broader. Under his stewardship, the economy remains chronically stagnant, despite profligate stimulus spending by the federal government (that has run up the public debt from $10 trillion to more than $18 trillion) and the Federal Reserve (that has run up its balance sheet from $850 billion to more than $4.5 trillion).

The bold policies of Obama’s first term (the Wall Street bailout, the Stimulus, Obamacare, Dodd-Frank financial reform, the Green Economy initiative, etc.) — praised by many, and often considered to be urgently needed — failed to revive the economy, even though the recession was already winding down, officially ending in June 2009. Ironically, all these efforts have stifled the recovery, except for the so-called 1% — the wealthiest Americans, whom Obama frequently excoriates; their share of the national income increased from 18%, when he took office, to 22% today. For everyone else, income share has fallen. They are not part of the Obama Recovery; for them, the recession has not passed.

The crisis has not passed. Nor has its shadow, which, almost seven years after Mr. Obama promised jobs, GDP growth, and a middle class revival, grows darker and broader.

These economic castaways — who have experienced flat, if not diminishing, economic improvement for more than seven years — have not been fooled by the falling (from 7.8%) unemployment rate, so often celebrated as success by the Obama administration. This rate, which measures only unemployed workers who have sought employment in the previous month, provides an incomplete and misleading picture of the US labor force. While it has dropped, so too has the labor participation rate. Today, 93 million working age adults do not participate in the labor force (have no job or have given up looking). Thirteen million of them have dropped out during Obama's tenure. Some of these are retirees, but not as many as one might think. More and more, the elderly have been forced to postpone retirement or return to the labor force. Since January 2000, the participation rate for the elderly has soared by 50%; for elderly women, by 69%.

And the equally celebrated jobs numbers are no less incomplete and misleading. The net jobs gained since Obama took office are barely six million, not 12 million, and most of them are low wage, low skill jobs. The only contribution to middle-class employment under the Obama administration has been the addition of about two million jobs in healthcare, education, and social services (aka the HES Complex). But these HES jobs were not generated by the natural forces of capitalism. According to former Reagan budget director David Stockman, they are a result of "the $1.5 trillion being spent on medical entitlements and another $1 trillion each on tax-subsidized employer health plans and tax-supported education at all levels, including the massive student grant and loan programs."

The April 2015 Bureau of Labor Statistics (BLS) “Employment Situation Summary” posted 109.2 million jobs, excluding HES Complex jobs. The corresponding number for December 2007 was 109.1 million, an increase of 0.1 million jobs. That is, not counting the taxpayer subsidized HES jobs, 7.5 years of economic recovery has produced a net gain of 0.1 million jobs.

All these efforts have stifled the recovery, except for the so-called 1%; their share of the national income increased from 18%, when Obama took office, to 22% today.

Stanford economist John B. Taylor, attributes the slowness of the recovery to policies (monetary, fiscal, and regulatory) that, over the past 10 years, have become significantly "more discretionary, more interventionist, and less predictable." This policy shift no doubt contributed to the financial meltdown that caused the recession of 2008, but Obama's overbearing, anti-growth intrusion has stifled economic activity and made true recovery impossible. Normally, economic recovery proceeds rapidly, even from recessions associated with financial crises. As Taylor notes, the average annual growth rate from such recessions (we have had a total of eight in US recorded business cycle history) is 6%; for the Obama Recovery, it is barely 2%.

An annual capital injection of, say, a trillion dollars (for plant and equipment, research, new hires, etc.) should be more than enough to extricate a $17 trillion economy from its doldrums (indeed, doing so at a GDP growth rate of almost 6%). But American businessmen are paralyzed with fear about Obama's boneheaded, clumsy meddling. Although their profits have risen 35% during Obama's reign, investment in new plant and equipment has risen by a meager 2.6%, as corporations keep to themselves a $1.8 trillion cash hoard. Banks are sitting on $2 trillion, afraid to lend at artificially low interest rates. Another $2.1 trillion in the profits of multinational companies is stashed overseas to avoid taxes. It's not the economy, stupid. It's federal government policy.

Our own government, not unions and cheap foreign labor, is ruining the US manufacturing sector.

In addition to the confusing burden of fiscal and monetary policy, American business must contend with the crippling effects of regulatory policy. There is no greater middle class job killer than the stultifying morass of federal regulations that in recent years has grown with explosive speed. In his annual review of federal regulation (“Ten Thousand Commandments”), Wayne Crews of the Competitive Enterprise Institute calculates the annual regulatory compliance cost as $1.88 trillion, an amount that exceeds the combined total of corporate and individual income tax revenues. Such an astounding cost significantly reduces American competitiveness, innovation, and job creation, and punishes US households, who, in Crews’ estimation, are assessed "$14,976 annually on average in regulatory hidden tax."

Incapable of grasping the connection between excessive regulation and chronic stagnation, no one has done more with regulatory authority to destroy middle class jobs than Obama (“Regulator without Peer”). During its eight-year reign, the Bush administration increased the annual regulatory compliance cost by $318 billion. In only six years, the Obama administration has increased it by $708 billion. According to a recent study by the National Association of Manufacturers, the annual cost for the average US firm to comply with federal regulations is $9,991 per employee; for small companies, the engine of job growth during economic recovery periods, it is $11,724. Railing against the loss of middle class manufacturing jobs, Democrats blame companies that have outsourced to countries with cheap labor. Republicans blame labor unions. Yet the average US manufacturing firm must pay $19,564 per employee to comply with regulations; small manufacturing firms pay $34,671. Our own government, not unions and cheap foreign labor, is ruining the US manufacturing sector, and its unbridled fiscal, monetary, and regulatory "discretion" is destroying the middle class.

Unfortunately for the middle class, Mr. Obama's next move is to revive the middle class. According to the Washington Post, after six years of failure, "he's giving it one more try." His new plan is designed to reverse the decline of a beleaguered middle class that has been shrinking (in income, wages, savings, home ownership, stock ownership, pension ownership, and business ownership) since the day he took office. Its implementation once posed a "conundrum" for Obama, thinks the Post: "How to pitch policies aimed at a middle-class turnaround that his policies thus far have failed to deliver."

Such riddles are child's play for the clever Obama, who nimbly dubbed his new policies "Middle Class Economics" and, without taking the trouble even to define the concept, declared that "Middle-class economics works." He did, however, say what it is about: "lowering the taxes for working families by thousands of dollars, putting money back into their pockets so that they can have a little bit of cushion in their lives." Finally, the turnaround would be underway.

The 8.3 million jobs lost during the recession were mostly middle-class jobs. They have yet to return.

But a February Tax Policy Center report indicated otherwise. According to the New York Times, the Center’s analysis "found the president’s plan produced an average tax cut of just $12 for families in the middle quintile." The Obama Treasury Department shot back, insisting that "the average middle-income family would get a tax cut of about $150 under the president’s plan." No doubt this is intended to dispel any fear that the forgotten, shrinking middle class, which has lost thousands in annual income and tens of thousands in net worth over the last six years, will think it won’t get a big enough cushion.

American businessmen and entrepreneurs, intimidated and confused by fiscal and monetary policy, hoard trillions that could be injected into the American economy to create millions of good jobs. Oppressive regulations with dubious benefits continue piling up, diverting capital from, and stifling, industries such as manufacturing and energy — stalwarts of solid middle class occupations. Jobless working age adults also pile up, as fast as the federal government can borrow more money, or have it printed, creating a labor surplus that depresses the wages of those lucky enough to have a job. The 8.3 million jobs lost during the recession were mostly middle-class jobs. They have yet to return.

This is the Obama Recovery: a timid, sputtering burger-flipper economy, incapable of generating meaningful growth and high-paying jobs. The jobs that are being created are low-wage, low-skill jobs, appearing in monthly quantities large enough to fool Obama into thinking the crisis has passed. He flaunts this “growth” as evidence of a recovery, for which he then takes credit. To the low-wage cohort that is experiencing unprecedented growth under his policies, he offers an increase in the minimum wage. To the middle class, whose jobs are being replaced by the low wage jobs his policies generate, he offers a $150 tax break, calls it Middle Class economics, and pats himself on the back. He couldn’t even get the PR move right.




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What Obamacare Did for Me

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In January I was kicked off my health insurance and forced to buy an Obamacare plan through my state’s health insurance exchange. Let me tell you about it.

My monthly premium is now $315. I am poor and struggle to pay this bill. In fact, the $1,500 I have paid so far this year would torture the poor working class people Obama promised to help. My premium on my old health insurance was roughly the same. I thought the whole idea of Obamacare was that if everyone bought health insurance then premiums would go down. Why, then, is an Obamacare plan still so expensive?

Here it is worth noting that what I pay is $315 a month, but my premium is officially $385 per month, lessened by a $70 per month “tax credit” that the government pays because I bought an Obamacare plan. I would not complain if Obama gave me poor coverage but at least paid my premiums for me (although when I say this I choose not to engage my readers in the lengthy debate about whether fully socialized medicine would be even more horrible than Obamacare). But $70 is little enough, compared to what I pay each month. So I am still getting price-gouged and I don’t get free health coverage, either — when free healthcare is what the liberals and socialists thought Obamacare would lead to.

If I catch a cold, my health insurance is useful. If I get seriously sick, I am totally screwed.

Obamacare is actually the worst of both worlds, because meanwhile, I’m not getting the quality of service that would have come from a true free-market product. For my $315 monthly premium, I get a plan that has a deductible of $3,000 for in-network hospitals and $6,000 for out-of-network doctors and out-of-network hospitals. (The deductible for in-network doctors is also $3,000, but it’s waived for in-network doctor’s office visits, which require only a $30 copay. But see below.)

Which poor people have $3,000 or $6,000 to spare? I certainly don't. If I catch a cold, my health insurance is useful. If I get seriously sick, I am totally screwed.

In the interests of fair and balanced journalism, I will tell you that I had a respiratory infection in March for which I saw a doctor and took an antibiotic, and I guess my doctor's bills and medicine costs would have been much higher if not for Obamacare. This does not alter the fact that I now live in chronic fear of getting very sick. Nor does it alter the fact that if I had saved up my $1,500 of premium payments instead of paying it I might have been able to bear the cost myself.

My plan is with Anthem Blue Cross, the biggest Obamacare provider nationwide. When I call them I am kept on hold for over an hour. This has happened a dozen times.

When I bought this plan the policy disclosures said the deductible was waived for visits to certain types of specialists, so in those cases I would be liable only for a $30 copay. I saw such a specialist in February and promptly sent in a claim. I heard nothing for a month, called to follow up, and was told they had lost it. I resubmitted the claim. They lost it again. I followed up yet again, and was told that because my specialist is out-of-network, the deductible was not waived. This is not what the plan had said. But it turned out not to matter, because they rejected the claim anyway, because of my doctor's bad handwriting on an Anthem form.

Anthem has told me that I may resubmit my claim for the February office visit, but the hassle of dealing with them has scared me away. And I hesitate to bother, anyway, because if the claim is allowed the only result may be $150 going toward a $6,000 deductible. At some point I may try to submit the claim a fourth time, but I don’t expect anything good to come of it.

This is a true story.

I tell this to my liberal mother and she says all insurers are greedy.

The plan was designed by Obama. But for political partisans, blame is always better to give than receive.




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Not Just Your Typical Zombie Film

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"From forth the fatal loins of these two foes, / A pair of star crossed lovers take their life." These words from Shakespeare's Romeo and Juliet suggest that humans are controlled by destiny and fate, not by choice and accountability. Romeo and Juliet meet by fate; their families are at war by fate; and their story ends tragically by fate.

The foundation story appears in Greek mythology as "Pyramus and Thisbe," and is oddly set not in Greece, but in an unnamed location in the Orient. This suggests that the story has an even earlier foundation. It is also found in the Old Testament in the form of the story of Dinah, the Israelite daughter who goes for a walk in a heathen town and is taken by a local boy who wants to marry her. Shakespeare set his version of the story in Italy as Romeo and Juliet, and was so taken with the myth that he presented it again in A Midsummer Night's Dream through the clownish traveling troubadours. Prokofiev's ballet is another favorite, especially the powerful "Dance of the Knights" (Montagues and Capulets). Choreographer Jerome Robbins saw the exciting possibilities of Irish and Puerto Rican gangs duking it out through dance and convinced Leonard Bernstein and Arthur Laurents to write West Side Story. Other musicians and artists have adapted the story as well.

Often the sole focus of R&J is the love story, with the feuding families fading so far into the background that it is hard to understand why they are fighting, but that isn't always the case. One of the most fascinating interpretations I have seen of R&J was a recent production by the Hudson Valley Shakespeare Festival set in modern Afghanistan. In this version, Romeo is an American soldier, and Juliet is a local Muslim girl. Audiences truly "got it" in this interpretation when Juliet's mother appeared dressed in a burqa and her father smacked her so hard across the face that she fell down screaming. Still, her love for her soldier endured.

The core story of Romeo and Juliet has resonated throughout the centuries because it represents change and resistance to learned cultural values and prejudices. The star-crossed lovers from warring families epitomize independent thinking, change, tolerance, and acceptance. And it's a great love story to boot.

The latest offering is Warm Bodies, a film that opened this week. The movie focuses more on the differences between the two families, and the allusions are subtler than in most adaptations; in fact, it didn't hit me that R&J was the core story until the balcony scene, and then it all fell into place: the girl named Julie (Teresa Palmer), her dead boyfriend named Perry (Dave Franco), her new boyfriend known as "R" (Nicholas Hoult), her friend Nora (Analeigh Tipton) who wants to be a nurse. Oh — and did I mention that R is a Corpse?

The "idle class" is now made up of poor people, while the wealthy are working their tails off. We are being eaten alive by the entitlements given to the poor.

This unusual adaptation is set in a dystopian future where an incurable disease has turned humans into walking corpses who feed on living humans. Truly serious cases become "boneys," who "will eat anything." Uninfected humans have built a gigantic wall around their city to protect themselves, but they need supplies from the other side. At the center of the film is a love story between Julie, who goes outside the wall with her young friends to forage for medicine, and "R," a cute and quirky young Corpse who narrates the story. He communicates through grunting and doesn't know his own name, but he begins to change because of his growing love for Julie.

The film is fun and clever despite its zombified cast, and the young lovers are fresh and sweet. (Well, she's fresh. He smells like rotten meat — in fact, he protects her from other Corpses by smearing goo on her face to cover her fresh scent. But he does it in a way that is as likely to elicit an "Awww" as an "Ewww" from the audience.)

What sets this film apart is the depth of possibilities provided by the core story — the star-crossed lovers from warring cultural groups who find a common ground of understanding and tolerance. I don't know what director Jonathan Levine and author Isaac Marion intended audiences to think, but that's the beauty of a well-formed myth or metaphor — it can be interpreted in a multitude of ways. I think this version makes an insightful statement about the conflict between working Americans and nonworking Americans.

As the film opens, R is wandering through an abandoned airport. Other Corpses wander there too. "I don't remember my name anymore," he thinks out loud. "Sometimes I look at others and try to imagine what they used to be. We're all dead inside." Like Gregor Samsa, the traveling salesman in Kafka’s The Metamorphosis, who wakes up one morning to discover that he has become a bug, R and the others in the airport have succumbed to the rat race. Work has dehumanized them. "It must have been so much better,” he muses, “when we could communicate and feel things."

Corpses don't work or produce anymore. They just eat people. I see this as a metaphor for the welfare state, in which more and more people are being infected by entitlements. A wall of intolerance is being erected today between working people and nonworking people. There is a deadness in the eye of people who scurry from business meeting to business meeting without time for love and relationships, but the tragedy of not working or producing is even more deadening. As the infection spreads and more people become nonproducers, even the producers begin to suffer. The collapsing standard of living is not caused by the wealthy having too much, but by the 47 % producing too little. Ironically, the "idle class" is now made up of poor people, while the wealthy are working their tails off. We are being eaten alive by the entitlements given to the poor.

Another interesting social commentary in this film is the way young people are treated. They are the draftees. While the older folks remain safely behind the wall, the youths are given a pep talk about honor and patriotism by Julie's father (John Malkovich) and then sent out to face the dangers of the Corpses and Boneys. Their mission is to bring back supplies for the grownups inside. Julie and Nora look sexy and buff as they cock their rifles to defend themselves. (And that's a little creepy, given all the crazy shootings that have been experienced in America lately.) When the older folks do go outside, they travel inside tanks and jeeps. They are the cavalry; the kids are the infantry. I guess that's where the word "infantry" comes from. How despicable is war.

What changes R? Partly it's the chemistry of love: his attraction to Julie reboots his heart. But it's more than that. Caught in the world outside the wall and surrounded by Corpses and Boneys who want to eat her, Julie needs protection. She needs food. She needs warmth, shelter, clothing, and entertainment. And R has to provide all these things for her. In the process of producing and providing, he becomes human again. I love that idea, whether Jonathan Levine intended it or not.

What changes the other Corpses? Hope. As they see R change through the power of love (or the power of producing), they gain hope that they might change too. They begin to sleep and to dream again, which is something Corpses aren't able to do. Their dreams cause them to wake up and act for themselves. They begin to come alive.

But they Boneys don't like it. They are like the politicians and welfare bureaucrats who want to keep the poor in their place, receiving their spiritually deadening entitlements but never learning to live or to feel joy. As R laments, "The Boneys are too far gone to change."

The Corpses are not "too far gone," however. They just need to wake up. We are surrounded by welfare Corpses today, and the infection is spreading to epidemic proportions. Some have become Boneys, but others can be cured. They can be changed through the power of pride and production and love. If they will join the Townies to fight against the Boneys, they can dream again. And wake up again. And live again.

#39;s the beauty of a well-formed myth or metaphor


Editor's Note: Review of "Warm Bodies," directed by Jonathan Levine. Summit Entertainment, 2013, 97 minutes.



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Neo-Socialism: The Results Are In

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Despite his campaign promise to govern as a moderate, President Obama has aggressively pursued what can only be described as neosocialist economics. This is a system of governance within which the government essentially runs business, but not in its own name — so that when failures occur, it can disown responsibility and blame business instead. It is a new and “improved” socialism, so to say.

The program has included outright government takeovers of most of the auto industry and the student loan industry, massive new control of the financial industry, near total control of the health industry, near total dominance of the energy industry, stimulus spending bills (often favoring campaign donors), housing bailouts, cash for clunkers, cash for weatherproofing, and so on. All of this is Obama’s doing. So is the $5 trillion he has added to the national debt — pushing us past France in debt as a percentage of GDP.

The result has been a long, lingering malaise — the Obamalaise — posing as a “recovery.”

The latest jobs report starkly illustrates the failure of Obamanomics. It shows that last month the economy — in the third year of an economic recovery — created a ludicrous 80,000 jobs. Considering that the economy needs to create about 125,000 new jobs each month just to keep up with population growth, this was a profoundly pathetic report card. The unemployment rate stayed at 8.2%, only because — again — more people dropped out of the work force.

Worse, of the 80,000 jobs created, 25,000 of them — nearly a third — were temp jobs.

Even worse, in June, while a net 80,000 jobs were created, 85,000 people went on federal disability! Yes, more people got on the SSDI disability rolls than got productive jobs. Indeed, since June 2009, while Obamanomics has created 2.6 million jobs, it has put nearly 3.1 million new people on SSDI disability. Moreover, a whopping 275,000 additional people have applied for disability. Obama is truly the Disability King.

Add to this the fact that yet more people went on food stamps, cementing Obama’s rightful title as the Food Stamp King. In fact, from June 2009 to April of this year, the number of food stamp recipients exploded upwards by 11.3 million, or nearly a third.

Amazingly, while Obama has his highest support among blacks, followed by Hispanics, and his lowest support among whites, it turns out that white unemployment stands at 7.4%, Hispanic unemployment at 11%, and black unemployment at a gut-wrenching 14.4%.

The general unemployment rate has now been over 8% for 41 months in a row, which sets another new record — one that beats all previous administrations over the last six decades. And the length of time the average person has been unemployed under Obama’s “recovery” has been 20.6 weeks, completely eclipsing the earlier record of 10.5 weeks.

If the labor force participation rate were now what it was when this neosocialist administration took power, the unemployment rate would be 10.9%. It is only as “low” as it is because many people have stopped “participating” (i.e., looking for jobs).

Three years of Obamanomics recovery has created job growth of 75,000 a month on average, or 2.6 million in total. By contrast, Reaganomics (neoliberalism) over the same length of time averaged 273,000 a month, or 9.8 million in total.

Of course, the nation was smaller then. If we correct for population size, the Reagan neoliberal recovery produced the equivalent of 360,000 jobs a month over the same period, or a total of 13 million.

The “recovery” brought by Obamanomics created a total expansion of real GDP of only 6.7% over eleven months. Again, by comparison, Reaganomics brought a total expansion of real GDP of 17.6% in the same period — or well over two and a half times as great a growth rate.

So what shall we call the president: The Disability King? The Food Stamp King? The Long Term Unemployment King? The Slow Growth King?

Perhaps “the clown-prince of neosocialism” will do.




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Lies, Damn Lies and the Bureau of Labor Statistics

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Wise men going back at least as far as the great George Orwell have pointed out that statists have little but contempt for objective facts, truth, or reality. In the present day, this contempt is proved most clearly by the parade of false reports and statistical manipulations issued by the Department of Labor. Headed by former congresswoman and current troglodyte Hilda L. Solis, the Labor Department has become — primarily through its Bureau of Labor Statistics (BLS) and Employment and Training Administration (ETA) — the real-world version of the Ministry of Truth. Every report is revised; every revision changes numbers to favor the state.

And reality goes down the memory hole.

Since the first of March alone, the Labor Department has revised three major reports on U.S. labor productivity, job creation and unemployment. There are several official explanations for these revisions; the main one is Solis’ intellectually dishonest commitment to making employment data “seasonally adjusted.”

In theory, seasonal adjustment is supposed to smooth statistical bumps like temporary retail hiring around the Christmas or summer holidays and make it easier chart trends. Fair enough. But, in practice, Solis’ staff of statistical manipulators uses perpetual revision to create the illusion that newer numbers are always an improvement over older ones.

When Labor released these cooked numbers, the mainstream financial press parroted the line that the number was the “lowest in four years."

I’ve done enough statistical analysis to know that even (or especially) the most honest analyst will occasionally revise results. And, to be sure, Labor isn’t the only federal bureaucracy that does so. But few other agencies do so, so systematically . . . or with such partisan willfulness.

Here’s an example of the revision game from the ETA’s most recent (April 19) report on new unemployment insurance claims:

In the week ending April 14, the advance figure for seasonally adjusted initial claims was 386,000, a decrease of 2,000 from the previous week's revised figure of 388,000. The 4-week moving average was 374,750, an increase of 5,500 from the previous week's revised average of 369,250.

See what Solis’ hacks did there? They claimed that the number of initial claims for unemployment benefits was a “decrease” from the previous week’s “revised” number. What they don’t say is that the revision to the previous week’s number was to increase it from the 380,000 they reported at the time to the new number of 388,000. So, they raised the previous week’s number in order to claim the new number was a decrease.

Keeping the four-week moving average for unemployment claims below 375,000 is important because that’s a common inflection point between a rising and falling overall unemployment number. Given the accounting trickery in which Labor engages, a number so close to the inflection point has to be taken with a large grain of salt. The real number may be higher — and overall unemployment may be rising.

Solis’ subordinates play the same sorts of games with the so-called “jobs created” numbers. According to the BLS, “total nonfarm payroll employment” rose by 120,000 jobs in March. This was perceived as a bad number — significantly lower than the jobs created in the previous few months. If then-current numbers held, the trend for the first few months of 2012 was bad, indeed: January, 284,000; February, 227,000; March 122,000.

Focusing only on people who’ve recently been laid off, are actively looking for work, or are applying for unemployment benefits hides the backlog of unemployed people who’ve stopped looking for jobs.

But the Labor staff had a plan for making the downward line on a graph of those numbers less steep. They revised the January and February numbers, moving some of the January jobs into February. The “revised” decline: January, 275,000; February, 240,000; March 122,000.

The net effect isn’t much different; but the optic is better. The graph looks more like a plane gliding to a landing than crashing into flames.

Here’s an even more extreme example, from the April 19 ETA report I quoted above:

The advance number for seasonally adjusted insured unemployment during the week ending April 7 was 3,297,000, an increase of 26,000 from the preceding week’s revised level of 3,271,000. The 4-week moving average was 3,317,750, a decrease of 21,500 from the preceding week’s revised average of 3,339,250.

So, the current number of Americans receiving unemployment benefits was up. But the revised four-week trend was down. How could that be? Solis and crew used revisions to inflate the numbers at the back of the four-week chart.

They had used revisions to similar effect a few weeks earlier, on March 29, when it trumpeted a “decline” in initial unemployment insurance claims. It announced:

Initial jobless claims fell 5,000 in the week ended March 24 to 359,000, the lowest since April 2008 . . .

Later, in the fine print, the agency admitted that it had revised the previous week’s figure to 364,000 from an initially-reported 348,000. So, if not for the revision, the newer number would have increased by more than 10,000 new Americans on the dole.

Also in small type: the Department announced that it had revised weekly data on unemployment claims (and other key indicators) going back to 2007 — in part, to reflect seasonal adjustments. This caused all numbers in 2012 to rise about 4%. And cast the “since April 2008” part of the big announcement into doubt, too.

The guys from Enron went to jail or committed hara kiri because of tricks like this. Instead, when Labor released these cooked numbers, the mainstream financial press — including Bloomberg, Reuters, and the Associated Press — parroted the line that the number was the “lowest in four years.”

The numbers I’ve been considering so far aren’t the government’s formal unemployment numbers. Economists rightly consider the weekly unemployment insurance reports “additional data” and of less reliability than the BLS’ more formal unemployment surveys.

As you might already know, the BLS tracks six different measures of unemployment. These six unemployment statistics are:

  • U1: the percentage of the U.S. labor force unemployed 15 weeks or longer;
  • U2: the percentage of labor force comprised of people who lost jobs or completed temporary work;
  • U3: the “official unemployment rate” — people without jobs who have actively looked for work within the past four weeks;
  • U4: U3 plus “discouraged workers,” or those who have stopped looking for work because economic conditions make them believe that no work is available for them;
  • U5: U4 plus other “marginally attached workers,” or “loosely attached workers,” or those who “would like” and are able to work, but have not looked for work recently; and
  • U6: U5 plus part-time workers who want to work full time, but cannot due to economic reasons (underemployment).

These numbers give economists several different perspectives on the issue. Since all of the numbers are estimates, the combined perspectives are meant to offer a “three-dimensional” view of unemployment, more accurate than any single number. But even these more formal surveys are subject to manipulation and revision. During the Clinton administration, the BLS revised the formal stats — changing the “official” rate to U3 from a predecessor version of U5, which is always a higher number.

There were several problems with this cynical move.

The U3 statistic, with a methodology closest to the “additional data” numbers that Solis’ hacks manipulate these days, is the least reliable of the formal measures.

But there’s a more philosophical problem with the Clinton-era revision: focusing only on people who’ve recently been laid off, are actively looking for work, or are applying for unemployment benefits tends to downplay the number of able-bodied adults who are out of work. It hides the backlog of unemployed people who’ve stopped looking for jobs. A nearly-permanent underclass that includes the nation’s most incorrigibly unproductive people simply doesn’t appear in the U3 number.

Older unemployment numbers are revised upward; new jobs numbers are revised downward. Everything’s always getting better in this workers’ paradise!

So, Solis’ BLS can boast (as it recently did) that “the unemployment rate” fell to 8.2% in March 2012 from 9.1% in August 2011. But that headline ignores the fact that U5 unemployment was about 2 percentage points higher during that period — and U6 hovered above 15%.

This may be what statists want, though: to hide the economic effects . . . and very presence . . . of the hardcore unemployed. Who are, of course, the most enthusiastic supporters of big-government social welfare programs.

Throughout, the operatives continue to use seasonal adjustment to justify their manipulation of employment numbers. Here’s one example of a weasel-worded footnote explaining the spin:

Data in this release reflect the annual benchmark revision of BLS Current Employment Statistics program data on nonfarm employee hours, and revised seasonal adjustment of those data. . . . Quarterly and annual measures . . . for all sectors were revised back to 2007 to incorporate the annual benchmark adjustment and updated information on seasonal trends.

So much jargon, so little truth.

Solis’ hacks cling to seasonal adjustment because it serves as a blank check, an open-ended excuse for revising every employment report to show an illustrious victory for our valiant leaders. Under this administration, essentially every Labor Department employment survey or report that’s been revised has been so in a way that makes newer numbers look like improvements. Older unemployment numbers are revised upward; new jobs numbers are revised downward. So everything’s always getting better in this workers’ paradise!

Or, as one internet commenter noted: “We’ve got the Christmas season, summer season, and — most of all — we’ve got election season.”

Many politicians talk about abolishing the Department of Education; that’s become a kind of short-hand for commitment to limited government. But it might do more good to abolish the Department of Labor, whose truth-twisting under Hilda Solis has become so blatant.




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Office Complex

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Recently, I missed a flight and ended up in a vast airport-adjacent suburb with a few hours to kill. My first stop was at a Starbucks to do some quick work. (Although I don’t drink coffee, I travel enough to know that Starbucks outlets almost always have clean bathrooms and reliable wireless Internet connections.)

One appeared quickly, at the corner of a big box shopping center. It was larger than most of the shops in the Pacific Northwest, so I figured there’d be plenty of room near noon on a weekday. But I was mistaken. The place was packed.

It took a few minutes to find an empty table where I could set down my tea and set up my laptop. In the meantime, I noticed dozens of commercial conversations, negotiations, and meetings going on in this semi-public space. It had the feel of a Middle Eastern bazaar.

A youngish man with a carefully cultivated scraggly beard and black apparel was plugged into his laptop via elaborate headgear. He was facing me, so I couldn’t see the screen of his computer; but, from the cadence of his talk, it was evident that he was participating in some sort of video conference. He made direct eye contact with me for a few moments — which I thought might be a reproach for looking at him — but then he changed his gaze to another person and spoke into his mic.

I noticed dozens of commercial conversations, negotiations, and meetings going on in this semi-public space. It had the feel of a Middle Eastern bazaar.

Something I’d read somewhere came back to me: videoconferencing veterans suggest choosing people or things in the room around you to represent the other participants in a conference call. On video, this creates the impression that you’re responding to specific others in the “meeting,” as if they were in a real room with you. He was just using me as an eye-contact avatar.

I couldn’t make out everything the fashionable man said. He was too far away and the Starbucks had too much background noise. But a few phrases made it across the space. “Elevations.” “Build-out.” “Retrofit.” “Improvements.” Because my wife is an architect, I recognized these as terms from a construction project — and, specifically, the expansion of an existing building.

Other snippets of words he used conveyed a certain fastidiousness; he constantly asked others what they thought and if they understood what someone else had said. Sounded like he was the construction manager or coordinator on the project.

I noticed that he’d chosen a seat with a blond panel wall behind it. The small video camera atop his computer screen would frame him in a background that could be from some fashionable office. And the elaborate headgear probably filtered out the background noise. Smart. His clients would have no idea he was sitting in a coffee shop.

Closer to me, a middle-aged salesman and saleswoman huddled at a smaller café-style table and swapped office gossip. The man did most of the talking — an overweight man with an overbearing voice: “The guy is so clueless that he has no idea Everett actually hates him. And he’ll never figure that out.” “I tried to give him some advice. Live on your draw and save your commissions. Don’t count on commissions for paying bills. But he doesn’t listen.” “I told him, ‘Look, it’s not my fault it’s like this. I mean, times are hard. We’re all cutting back.’”

The woman listened and nodded agreement with most of this. But she looked tired and clearly wished she were somewhere else.

As they reached the bottoms of their lattes, the salespeople plotted their afternoon. They were sharing one rental car but had separate appointments before their flight home that evening. He sketched out a plan for dropping her off at her next call while he made his and then switching driving chores, so that she’d drop him off at his last call while she made hers.

If times were better, they’d each have rented their own car.

Just behind me, two women — one older and very sharply dressed, one younger and casually dressed — talked about graphic design work. Their conversation was more about practical matters than aesthetics. The older woman opened a nice leather portfolio and showed the younger various business forms: letterhead, contracts, purchase orders and invoices.

It wasn’t clear whether the business forms were the product of the older woman’s practice or the forms that she used to deal with clients. And the younger woman’s questions were so elementary that they didn’t make matters any more clear.

This meeting seemed to be a “Can I pick your brain?” session. Perhaps the younger woman was the daughter of one of the older woman’s friends. The younger may have read somewhere that asking an established person for “advice” is the best way to get intelligence on employment.

Corporate America can’t afford to be the babysitter that it was for most of the last century. Working people understand this.

I’ve been on the older woman’s side of the table for a few of these meetings myself. I caught a glimpse of her face. She was in her late 40s or early 50s, quite attractive and carefully appointed. But her eyes looked sad. They squinted a lot — in contempt, I think — at the younger woman, whose childish questions and cadence made her sound simple-minded.

If the meeting behind me was a job interview, the younger woman wasn’t going to be hired. As the older woman folded up her portfolio, the younger asked her about any contract work that might be available. “It would be subcontract work,” the older said ruefully. “Give me a couple of business cards. I’ll keep them handy.”

Nearly finished with my emails, I took a break to use the men’s room. There were a couple of men ahead of me. While waiting, we listened to a white-haired man pitch four or five other older men and one woman on an investment scheme.

He’d handed each of his marks letters and information printed on heavy-stock paper which had a Baroque-style firm name ending in “Capital” at the top.

“ . . . our record speaks for itself, of course. But, like everyone, we are always looking for more business. And advertising on radio or television, frankly, isn’t something that interests us.”

The others nodded eagerly. This was a job interview. The white-haired man was selling them on becoming sales representatives for his firm — which was involved in some capacity with reverse mortgages. But my turn to use the bathroom came before I could hear the details.

Reverse mortgages are, essentially, the subprime loans of the coming decade. They are legal but unwise financial vehicles that are most effective at separating gullible people from their wealth. The gullible people, in this case, are seniors with real estate that they own outright or nearly outright; with a reverse mortgage, they get a monthly stipend in exchange for leaving their property to the mortgage company when they die.

If they die after just a few years of payments, the gullible old people have effectively sold their property for a fraction of its value.

Although he had the cheap sophistication of a game-show host, the white-haired man couldn’t have been very high up on the food chain of his shady industry. Multilevel marketing schemes are usually desperate to seem established, so they aren’t usually run out of coffee shops. But, hey, times are hard. And we’re all cutting back.

Back from the bathroom, I packed up my computer and scanned the place one last time on my way out. There were at least a dozen intense conversations going on; and another dozen or so people working intensely on computers or other devices. Did any of these people have “jobs” in the sense that the Department of Labor defines them?

Statist hacks like Robert Reich, Paul Krugman, and Barack Obama think of “jobs” as compliant proles lining up at the gates of General Motors for hourly-wage work, performing clearly defined tasks in clearly defined places. But this thinking is antiquated and wrong. Corporate America can’t afford to be the babysitter that it was for most of the last century. Working people understand this.

For most people, a “job” means — and will mean, for the foreseeable future — hustling for freelance work. Contracts and subcontracts. Commission sales. Multilevel marketing. There’s money in it, but that money doesn’t come easily. And, sometimes, it doesn’t come reliably.

That’s what I saw at the suburban Starbucks freelance labor bazaar.




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What Is a Job?

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The usual chatter has begun following President Obama’s Sept. 8 call for a $417 billion government spending package designed to stimulate economic growth and create jobs. As always, the commentary, both pro and con, focuses on speculation about the results of the program. Will this latest stimulus money actually reach “shovel-ready projects,” or will it disappear down the black hole of state subsidies for Medicaid and education? How many jobs will the program actually create, and what happens to those jobs when the program is over?

There is never any clear winner in debates of this nature. While the future is still unknown, Republicans will predict failure while Democrats will predict success. Once the program is over, Republicans will pronounce failure while Democrats will declare victory. The retrospective debate about the results of the program will continue until the media move on to something else. The debate will be resurrected at election time when Republicans will characterize the program as another “bridge to nowhere” and the Democrats will claim that it saved the economy.

Even after the fact, there is rarely a definitive answer to questions about the results of government action, as compared to government inaction. This may be one reason why most government programs never really end. The answers are much less ambiguous and elusive when the discussion is shifted from results to rights. But before exploring how Obama’s program affects the rights of the various parties involved, we must answer a previous question.

What is a job?

One might assume that everyone knows the answer to this apparently simple question, but I doubt that’s true. In fact, judging by what politicians, media, and even friends and neighbors have to say about jobs and unemployment, I’m convinced that almost no one in America today understands what a job really is.

As I’ve said before, a job is a transaction between a buyer and a seller. The employer is the buyer and the employee the seller, selling his services to the employer for a mutually agreed upon price. This is a voluntary transaction for both parties, just like the buying and selling of lawn mowers or breakfast cereal. The buyer offers to purchase services at the price he can afford, and the seller decides whether to accept those terms or not. Both parties are free to decide not to go through with the sale. Unless a specific term of employment has been agreed to, both parties are also free to cease doing business at any time. The employee can quit the job (refuse to continue selling the service) and the employer can terminate employment (refuse to continue purchasing the service).

There is only one way in which a purchaser of services can continue to employ people on an ongoing basis. The services provided by the sellers must produce some product that makes a profit. If the firm loses money, then the employer must increase his sales or lower his operating costs. The latter solution most often means purchasing fewer services (layoffs).

The voluntary association between the buyer and the seller of services (the employment contract) depends upon another voluntary association between the firm and its customers. The firm’s customers must choose to pay more for the firm’s products than the cost of producing them, including labor, material, rent, administration, and all other costs of production. It is that choice by customers that creates a market value for the products, for the market value is merely the amount of money the highest bidder will voluntarily pay. If no one was willing to buy the firm’s products at any price, then those products would have a market value of zero.

When the opportunity exists to sell products at a higher price than the cost of producing them, it typically attracts more than one firm, and those firms compete with each other for the customers willing to buy their products. Thus, employment opportunities become abundant in that particular industry, as more and more firms enter the market to take advantage of the opportunity.

Before the first product of any of these firms is created, the owners must purchase the labor, materials, production facilities, equipment, and other capital goods necessary to make its products. The owners purchase these capital goods and labor with savings — which are the result of consuming less than they (or their lenders) produced over a period of time in the past. The only reason they choose to invest these savings is the opportunity for profits. Without that opportunity, they would consume their savings in the present or hold them for security against future misfortune instead of risking losing them by starting a new firm.

Almost no one in America today understands what a job really is.

As long as there are customers willing to buy the products the firm produces, the model is self-sustaining and productive. From a societal view, the owners, employees, and customers are adding more goods and services to society. Remember that the customers are only able to buy the firm’s products because of the products they’ve produced and sold to their customers, including their employers. Just like the firm, they must produce products that other people are willing to buy voluntarily. This is what gives them their purchasing power.

There is one word that sums up the entire process of economic growth and job creation: choice. The market price of products, the wage levels that can be sustained in the production of those products, the number of people who can be employed, and the quantity of products that can be produced — these all depend on the ability of economic agents to make rational choices in their own self-interest. Without freedom of choice, there can be no market, no division of labor, no prices, and ultimately no jobs. It is the degree to which all economic agents are free to make the best choices they can that determines how productive, efficient, and prosperous an economy will be.

All of this goes out the window the minute that one begins talking about the government’s “creating jobs.” By definition, nothing the government does allows any individual freedom of choice. This is where most people get confused, because they imagine the government to be a wealthy benefactor with money of its own. This misconception is reinforced whenever President Obama (and neither he nor the Democrats are by any means alone on this) refers to government spending programs as “investments.” It all sounds very prudent and morally sound, until one considers what is really going on.

Whenever the government “invests” in a particular industry, whether it is producing “green” cars, bridges, buildings or roads, it is overriding the choices made by customers. I refer to the choices made by taxpayers not to purchase that car, bridge, building or road, but to purchase something else, something they actually want and are willing to pay for. As we’ve seen, when there are people willing to buy products at a price higher than the cost of producing them, there are entrepreneurs ready to take advantage of that opportunity, and the products get produced. Customers do not choose to do this to help society, but to help themselves; nevertheless, they do help society by producing the needed or wanted products and employing the people necessary for that production.

Government-created jobs actually make society poorer, because they result in products that are worth less than the cost of producing them.

When government intervenes, not only are taxpayers forced to purchase products that they have previously chosen not to buy, but the entire nature of the employment contract is fundamentally changed. No longer does an employer purchase services from an employee for the sole purpose of realizing a return on his capital investment. Now, the taxpayer is forced to purchase the services of the employee, with no hope of the return he desired for his money. The best he can hope for is that somewhere a bridge, building, or road that he had previously chosen not to pay for gets built, or some service is rendered at a higher price than anyone had been prepared to pay. Employers who happen to be the beneficiaries of government intervention are able to make profits that would otherwise be unavailable to them, but only because the government has forced taxpayers to pay at least part of the operating costs.

While society does get a new car, bridge, building, or road, and some people get government services, the value of those products is lower than the cost of producing them. This is why government-created jobs end as soon as the government stimulus money is removed. If the products produced and the jobs related to producing them were economically viable, entrepreneurs would already be creating them. Government-created jobs actually make society poorer, because they result in products that are worth less than the cost of producing them. Ironically, politicians often boast that they created more jobs than their opponents — which actually means that they created more poverty than their opponents.

By definition, all government spending comes from savings, because it is wealth produced by economic agents but not consumed. Therefore, government-created jobs actually destroy capital, as no self-sustaining production or profits result from that capital investment. Not only is that capital wasted and destroyed on the unproductive temporary jobs, but it is no longer available to create other jobs producing products that people would voluntarily buy. But in terms of the economic harm caused by government stimulus, this is only the tip of the iceberg. For more, read Peter Schiff’s testimony to Congress on this subject as well as one of his primary sources, Frédéric Bastiat’s That Which is Seen and That Which is Not Seen.

Once you understand what a job really is, a lot of what you hear about jobs from politicians and the media sounds completely outlandish. You may hear it stated that everyone has a right to a job, but that can’t be true. How can anyone have a right to force other people to buy his products? If such a right existed, then no company need ever go bankrupt. Whenever it began losing money, it would simply appeal to the government to protect its right to force people to buy from it; the government would oblige; and the economy would support every one of the otherwise bankrupt businesses.

More often you will hear that everyone has a right to “a living wage,” but this makes no more sense. The price of any product in a free society is the result of mutual agreement between the buyer and the seller. Either party has the right not to make an exchange if he is not satisfied with the price. Government interventions, such as minimum wages, obviously interfere with this right. In fact, it is the seller of services (the employee) whose rights are most infringed by minimum-wage laws, which prevent him from selling his services below a certain price even if he wishes to, thereby enabling employers who otherwise could not afford him to offer him a job. That anyone believes that the government has a legitimate authority to set an arbitrary price level and then forcibly prohibit people from selling their services at a lower price speaks volumes about how little we value freedom in the land of the free.

No, the supposed right to a job or the right to forcibly fix the price of a job are not real rights. They both involve initiating the use of force against other people, and no one has a right to do that. In fact, the true rights that are at issue with this program are the rights of the unwilling buyers, the taxpayers. They have a right not to be forced to buy goods or services against their will. Yet violating this right is the only way in which any government can ever create a single job. The fact that the debate between either major party is over how the government could create jobs, rather than whether the government should attempt to create jobs, reinforces the fact that liberty is not even a consideration in the formulation of federal government policy.

It is the government’s thousandfold trampling of liberty that has created the economic malaise that the government is now trying to end. If we ever want to see the unemployed people get back to work, we have to understand what a job is and how and why jobs are created. Then the government's part in the solution will become clear: Start securing our rights instead of violating them. Stop wasting our money, and our opportunities, in the misguided attempt to “create jobs.”



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Why Obama is Losing the Latino Vote

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The recent news regarding President Obama’s support in the Latino community is quite amazing. In the 2008 election, Obama won 67% of their votes. But his support among Latinos has now slipped below 50% — 49%, to be exact, in a recent Gallup Poll. Why the slippage, and what does it mean for coming elections?

One suspects that (in part) Obama’s remarkable loss of Latino support is of a piece with his loss of support among independent white voters. It has to do with broken promises, specifically, and a failure to deliver economic health, generally.

Consider independent white blue-collar voters. Running for office, Obama played the role of Post-Racial Man. He insinuated that he understood white workers' anger at racial preferences in college admissions, hiring, and promotions. When it was discovered that he was a long-standing member of a “black liberation theology” church, he feigned ignorance and dropped out of church.

But in office, he has pushed race preferences with a vengeance, appointing two unabashed Quota Queens to the Supreme Court. And Obama's attorney general, Eric Holder, has seemed to many to be racially biased in the way he has handled several issues, such as the case against the Black Panthers who were charged with voter intimidation in a lawsuit filed in 2009 by the Justice Department.

The point here is that when someone has little record in office and a mainstream media completely supportive of — nay, sycophantic toward — him, he can portray himself as anything he cares to look like. But once in office, he will have to make choices, and those choices will then define him.

In his campaign for Latino votes, Obama cleverly played the part of the Universal Minority Man, a victim-just-like-you kind of guy, promising to listen to Latinos in a way that the hate-filled nativists on talk radio could never do. He would solve the seemingly intractable problem of immigration, and open the doors to everybody who wanted to come in.

In doing so, he deliberately obscured some issues that would have troubled Latinos, had he spoken openly about them.

For one thing, he never revealed to Latino audiences that as senator he did virtually nothing to help Bush and McCain get their compromise comprehensive immigration reform bill through Congress. It came close to passing but died under a firestorm of populist anger, fanned by the “talkerati,” the conservative talk-show hosts. In fact, Obama voted for an amendment to strip the legislation of its temporary worker visa program, thus helping to scuttle the bill. It isn’t clear why he did that. Part of the reason had to be an attempt to curry favor with those in organized labor and in his own ethnic community who are fearful of more workers coming in.

This last point touches another topic Obama sidestepped during his campaign: African-American antipathy toward Latinos. In many segments of the African-American community, there is a deep resentment of Latinos. Latinos are seen as competing for many of the same jobs that African-Americans want to get, as well as for the same space in the same neighborhoods. Even more galling, Latino activists are viewed as pushing their own “victimhood” narrative, which dilutes the spoils of the victim status that African-American activists have taken for granted for decades.

After all, affirmative action — usually a euphemism for hiring a less qualified “minority” over a white or Asian male — is obviously more beneficial to African-Americans if “minority” means only “African-American” than if it means “African-American, Latino, Pacific Islander, Native American, Asian woman, white woman, or GLBT.”

In office, Obama has given Latinos more reasons to become disenchanted with him.

For example, Obama — who, to be fair, had signaled during his campaign that he held NAFTA to blame for costing American jobs (a stance that cost him the primary election in Texas against Hillary Clinton, whose husband had signed NAFTA into law) — started a trade war with Mexico the minute he got into office.

Yes, the newly elected Obama decided to throw a bone to the Teamsters union (which had supported him lavishly in his campaign) by denying even a small number of Mexican truckers the right to drive American routes, on a trial basis — a right given to them by NAFTA. The president didn’t just stiff the truckers; his supporters spread the nasty story that Mexican truckers are inferior drivers and that Mexican trucks are all unsafe, even though under the earlier agreement, those trucks would be constantly monitored.

Mexico was rightly furious and retaliated by slapping massive tariffs on a wide range of American products, especially agricultural ones. These tariffs cost upwards of 25,000 American jobs, many of them held by Latinos. So an act intended to hurt Mexican workers wound up hurting Mexican-American ones far more.

Then there was Obama’s conspicuous failure to deliver on comprehensive immigration reform. For two years his party completely controlled Congress, and could easily have passed — probably with bipartisan support — a reasonable reform bill. But Obama showed no particular interest in the topic; much less did he push any such bill through Congress, in the way he rammed through Obamacare. In fact, he didn’t even push the Dream Act through Congress when he controlled it. This, unlike his earlier, covertly obstructive actions regarding the Bush-McCain legislation, Latinos noticed, because now he was president.

While Bush tried his best to get an immigration reform bill through a Congress he couldn’t control, Obama never tried to do the same when he virtually owned Congress.

Of course, when the Republicans won back the House of Representatives last year, Obama tried floating the narrative that he desperately wanted comprehensive immigration reform, but the Rascally Racist Republicans were in the way. He taunted the Republicans in a speech before a primarily Latino audience in El Paso in May of this year, saying that when the Republicans were urging him to protect the border, they were being disingenuous and silly: “Maybe they’ll need a moat. . . . Maybe they’ll want alligators in the moat.” But the stark reality facing Latinos is that while Bush tried his best to get a deal through a Congress he couldn’t control, Obama never tried to do the same when he virtually owned Congress.

Other major reasons for Obama’s loss of Latino support are his two major policy changes on the handling of undocumented workers, both of which have produced large unintended, and unfavorable, consequences.

The first concerns companies that employ illegal aliens. In 2009, Obama’s Immigration and Customs Enforcement (ICE) department started aggressively auditing companies to see if they hired undocumented workers, and severely punishing companies that did. That is, Obama had his myrmidons deliberately transfer to business the burden of securing the border. If ICE catches a company employing illegal aliens, the company is subject to heavy fines and sanctions, while the workers go free.

This essentially reversed the policy of prior presidents, which had been to deport illegal aliens when caught, but not necessarily punish the companies employing them (unless there was specific evidence of intent to employ illegals). No doubt Obama’s decision grew out of his instinctive, visceral animosity toward business, as well as his desire to regulate and control it.

However, this policy has bitten deep, as ICE has hammered employers it considers “magnets” for illegal workers.  Companies like American Apparel (in 2009) and Chipotle Grill (in 2010) got hit hard, with ICE looking especially closely at companies in the agricultural, construction, food processing, and restaurant sectors. And there are a lot of these companies — nearly 2,400 were targeted last year alone.

The fines have often been brutal. One company, Yamato Engine Specialists, had to pay a $100,000 fine — for employing a couple of dozen undocumented workers. American Apparel had to pay $35,000, not to mention losing one fourth of its work force.

In this policy as in most of his others, Obama sought a dramatic increase in the regulation and control of private industry. Immigration activists — who are typically ardent leftists with a deep-seated aversion to business — originally supported it. But they quickly learned a lesson in the law of unintended consequences. Employers dumped a lot of illegal aliens who, yes, weren’t deported. However, that in turn meant that while those workers by and large remained in America, they also that they had to take worse jobs or remain unemployed — displeasing both the undocumented workers and the pro-immigration activists. And the businesses targeted now have a powerful reason to avoid hiring any Latinos, which has got to displease Latinos generally.

No doubt Obama’s decision grew out of his instinctive, visceral animosity toward business, as well as his desire to regulate and control it.

The other policy change regarding the treatment of illegals is one that Obama's Homeland Security Department has been implementing since 2008. It's the Secure Communities Program, “S-Comm” for short. When local or state police arrest anyone, they run the suspect’s fingerprints through the FBI criminal database to see if he has a criminal history. Under S-Comm, the cases in which an illegal alien has been arrested and looks as if he may have a criminal background are sent to the DHS so ICE can determine whether this person should be deported. In the past, states could choose to participate in the program if they wished, but now it is becoming mandatory for all states. The idea of S-Comm is to prioritize deportations, so that convicted criminals are deported first.

ICE head John Morton has said that 90% of those deported over the last two years — nearly 400,000 per year — have been either criminals or people who had earlier been ordered to leave the country.

But there have been a number of bad unintended consequences. Start with the fact that 28% of those deported under S-Comm actually had no criminal records. Some had just gotten traffic tickets.  S-Comm has clogged the immigration courts, as people wrongly nabbed fight to keep from being deported, which often means a breakup of a family. Worse, many of the non-criminals were picked up on the database check not because they themselves had criminal histories but because they had worked with the police in a criminal investigation (as witnesses or informants). Thus S-Comm discourages cooperation with police in solving serious crimes.

Yet another major reason Latinos are abandoning Obama is the high unemployment rate among their population (which typically has lower than average unemployment rates), because of Obama’s baleful economic policies. Nationally, while the general unemployment rate is about 9%, Latino unemployment is at 11% — or about a fourth again higher than the country as a whole. It has not escaped the notice of Latinos that Mexico now has a much lower unemployment rate (at 4.9%) and a much higher economic growth rate (at 4–5% annually) than the United States. It is almost insufferably rich that California has lost about 300,000 illegal immigrants since Obama took office, with many of them moving back to Mexico, where they report that it is easier to buy a home and send their kids to college.

One last reason for the drop in Obama’s support among Latinos should be noted. This one is harder to quantify precisely, but in my view is still immensely important. Latinos culturally are extremely enterprising and entrepreneurial. While they attend college at lower rates than Asians and whites, they run small businesses at a disproportionately higher rate than the population as a whole.

But Obamanomics has been especially pernicious when it comes to the formation and flourishing of small businesses. Regulations that are merely onerous to big businesses (with their large accounting departments and access to legal power) are death to small ones, because they find it harder to absorb or pass along the costs. And the essence of Obamanomics is the dramatic increasing of regulations of every sort.

The news of the collapse of support among Latinos has obviously rocked the White House. It has recently taken steps to reverse or mitigate its earlier policies, obviously wishing to recover that support.

First there was Obama’s complete capitulation, two months ago, in the trade war he started with Mexico. Bluntly put, the great American-Mexican trade war ended not with a bang but with an Obama whimper. Under a deal signed in July, Mexican truckers will be allowed to drive American routes. As soon as the first Mexican truck is allowed entry, Mexico will end its tariffs completely.

Obama must have calculated that the labor support he would lose by throwing the Teamsters under the bus — or more exactly, the truck — was a sacrifice he would have to make to help regain his standing in a crucial ethnic group.

Second, and seemingly out of the blue, the White House recently announced that it is changing its policies on handling illegal immigrants. It now will review the cases of 300,000 illegal aliens awaiting deportation and allow those who are not criminals or threats to public safety to remain here. While the administration portrayed this as a way for federal agencies to better their focus on real security threats, the claim was clearly a rationalization.

Obama’s difficulties with Hispanic voters offer the Republican Party an extremely rare and important opportunity to reshape American electoral politics for generations to come. It is clear that there is a demographic shift under way, with the percentage of Latinos in the population rising. If the GOP can start to split that vote more evenly with the Democrats, or perhaps to win the majority of it, the GOP will be well served.

Obama must have calculated that the labor support he would lose by throwing the Teamsters under the bus was a sacrifice he would have to make to help regain his standing in a crucial ethnic group.

This requires two things at least. For one, the Republican Party needs to learn to play ethnic politics better. It needs to actively groom and advance lots of conservative Latino political leaders. It has made a modest start, offering a number of impressive politicians, including Susana Martinez of New Mexico, Ted Cruz of Texas, Brian Sandoval of Nevada, and most prominently Marco Rubio of Florida. But the Republicans are going to need many dozens of such leaders at all political levels.

Parenthetically, knowing that Obama has now got to fight for the Latino vote, Marco Rubio is more compelling than ever as a choice for Vice President by whomever wins the Republican nomination for President next year.

But even more importantly, the Republican Party has to come to some kind of reasonable agreement on immigration reform. Put together a compromise solution of wide appeal, and build it into the party platform. The GOP needs to get this incubus off of itself for good. If that displeases some of the more nativist talkerati, so be it. One such host — who ran parodies such as “Jose, Can You See” and talked about “another stupid Mexican coming across the border” — without doubt cost the GOP enormously in several states where those comments were played in Democratic campaign ads. That is not the sort of person to whom the GOP needs to cater.

The talkerati are after higher ratings, and will try to get them by spewing whatever populist clap-trap they think will appeal to their listeners. But the GOP needs to position itself for the future, and can do so if it can finally get real about ethnic politics and immigration policy.




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We're Number One!

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A report from the Tax Foundation gives us the happy news that as of next month, America will be number one in a new field: corporate income taxes.

The combined federal and (average) state US corporate tax is 39.2%. Among the Organization for Economic Cooperation and Development (OECD) countries — the 34 most prosperous countries, which include all of our major economic competitors — this is exceeded only by Japan, at 39.5%.

During the last decade, nine of the OECD countries cut their corporate tax rates by 10% or more. The biggest tax-cutters were Canada, Germany, Greece, Iceland, Ireland, Poland, the Slovak Republic, and Turkey. The average corporate income tax of the OECD nations, excluding the US, has fallen from 38% in 1992 — which was the first year in which the average dropped below the U.S. level — to 25.5% today.

And 75 of the non-OECD countries have also dropped their corporate tax rates since 2006.

Now Japan has announced that effective next month, its corporate tax rate will drop, too. It will fall by 4.5%, to 35%. England is also lowering its rate next month, from the current 28% to 27%, on the way to a scheduled 24% within three years. That will leave the US with the highest rate in the developed world — a full 10% above the non-US OECD average.

If the US wanted to match the OECD average and China’s current rate (the rate was lowered in 2008), it would have to fall to 20% at the federal level. This is most unlikely under Obama’s regime.

So we will remain less competitive, and wonder why our unemployment remains high.




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The Government's "Green" Jobs

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Jonathan A. Lester, president of Continental Economics Inc., has written an insightful critique of artificial stimulus to wind power and the like (“Gresham’s Law of Green Energy,” in the Cato Institute’s journal Regulation, Winter 2010–2011, pp. 12–18). Like similar critiques, however, it could benefit from better placement of emphasis.

Lester laments the wasteful diversion of resources into uses that would otherwise not pay (waste, that is, barring untypically sound “externality” arguments). Furthermore, as for jobs created by subsidy- or regulation-based spending on green energy, the money so spent would have to come from somewhere. It would necessarily be diverted from spending on other public or private activities, where jobs otherwise created or maintained would be lost.

Such arguments put too much emphasis on spending itself relative to the allocation of real resources, including labor. Would the workers newly drawn into green jobs come from elsewhere, or would they have otherwise remained unemployed? Do green subsidies, tax breaks, and regulations really remedy economy-wide unemployment exceeding the frictional unemployment of normal times?

Unemployment in a recession reflects discoordination. Mutually advantageous transactions among workers, employers, and consumers are somehow frustrated. That is what needs attention. Putting emphasis on spending and its destinations is superficial. As W.H. Hutt used to say, spending is a measure of transactions accomplished; it is not what drives transactions.

Now, what impedes transactions in a recession? Usually or often it is a deficient quantity of money in relation to desires to hold it at the prevailing price and wage level. Sometimes (as now, apparently) the demand to hold money has increased, even if only passively or by default, because individuals and firms are especially uncertain about what transactions would be worthwhile. Adding to the usual uncertainty about business is uncertainty about taxation, government deficits and debt, complicated and costly regulations, and other government interventions, including unintended consequences of earlier ones.  This is what needs attention, not the allocation of spending between green and other employments.

Recession is not something to be remedied by shifting resources around. Besides channeling resources into relatively inefficient uses, artificially favoring green energy obscures the true nature of recession.




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