Category Archives: Business, The Economy and The Markets

Pretty self-explanatory, isn’t it?

Back On The Shelf

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It was the humblest and most obscure among the DFL’s orgy of tax pushes this past session. 

And it may be the one that has the broadest impact fastest

The DFL imposed a tax on warehouse services this past session; basically, if it goes into a warehouse, you pay for it.  And pay.  And pay. 

And Minnesota businesses are not amused:

With a warehousing services tax looming next spring, Rochester businessman Eric Lawrence is rethinking the company’s expansion plans.

That means “not hiring any more people”.  Back to McDonalds, proles – and remember, it’s for A Better Minnesota!

The president and CEO of Red Wing-basedLawrence Transportation Company had been looking to build a new warehouse facility in Winona but tapped the brakes on the plan. While the warehousing tax isn’t the sole reason for delaying construction, he said it is a major factor.

“I want to grow this business. I want to offer the services and have the space to do it, but it’s not worth the risk,” he said.

With Hudson, Prescott and La Crosse just across the river and sharing the same (or better) transportation links that Red Wing has?  

The DFL-led Legislature approved extending Minnesota’s sales tax to commercial warehousing services last month. The proposal is expected to generate nearly $100 million for the state per year once it takes effect April 1, 2014.

It won’t, of course.   Ripping 6.75% plus out of the bottom line of the warehousers – which is not an especially high-margin business to begin with – makes it a no-brainer for any company.  

Senate Majority Leader Tom Bakk, DFL-Cook, said during a recent visit to Rochester that the warehouse tax enabled lawmakers to repeal a requirement cities and counties pay state sales taxes — a cost that got passed on to property taxpayers. It also helped fund an upfront refund for business capital equipment purchases.

“We thought (the warehousing tax) was a business-to-business service that wouldn’t harm economic growth, but we put it in effect in April so we could assess what potential issues that are with it because we’ve never had it before, and if there are some ramifications, there will be time to make some corrections to it,” Bakk said. “But right now, today, I don’t see it having a hindrance on economic output.”

“I don’t see it having an impact”. 

This is from the leader of a party that thinks “supply chain” is something you pay $20 extra for at Deja Vu. 

Critics disagree. They argue the tax will encourage Minnesota companies to warehouse their products in other states…Among the businesses concerned about the tax is Red Wing Shoes. The company declined to provide comment for this article. But in an interview with the Star Tribune’s Neal St. Anthony, Red Wing Shoes President Dave Murphy said the company has decided to delay plans for a new $20 million distribution center in Red Wing as a result of the tax.

I know of one major company in Greater Minnesota with a very large warehouse component that has been quietly renting up all the warehouses it can find in a neighboring lower-tax state (with better transportation connections and easier building permitting to boot); if that company leaves, it will gut the job market in its neighborhood.

It’s not just the warehouse tax that’s got them shopping.  But every little bit hurts, when you’re trying to be competitive with surrounding states thatjust plain get it – they understand competition, having spent the past forty years competing with their fat ‘n happy neighbor at the top of the Mississippi River. 

So when your warehouse gig moves off to Superior or Grand Forks or La Crosse, just remember - it’s For A Better Minnesota!

These Jobs Are Going, Boys, And They Ain’t Coming Back

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Demolition starts today at the old Ford plant in Highland Park, at the southwest heel of Saint Paul. 

Because they just don’t build Ford Rangers anymore, due to the vanishing market for half-ton pickups, leading to the complete bagging of the model, I’m sure.

Nothing to do with the state’s business taxes and environmental regulations.  Perish the thought.

This Is Your Obama “Recovery”

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Less than half of the wealth lost in the recession has come back in the “recovery”:

From the peak of the boom to the bottom of the bust, households watched a total of $16 trillion in wealth disappear amid sinking stock prices and the rubble of the real estate market. Since then, Americans have only been able to recapture 45 percent of that amount on average, after adjusting for inflation and population growth, according to the report from the St. Louis Fed released Thursday.

In addition, the report showed most of the improvement was due to gains in the stock market, which primarily benefit wealthy families. That means the recovery for other households has been even weaker.

To the extent unemployment is down, it’s in part-time jobs.  The average hours worked per week has dropped in recent months.

No.  You are not better off than you were four years ago.

And They Say DFLers Don’t Get Economics

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Let’s say, hypothetically, that you live in a city.

And in that city there are 19 big companies.   They have everything that makes up a big enterprise – a CEO, executives, management, stores, labs, manufacturing plants – in your city.

And then the economy picks up.  And the 19 big companies hire more people, because a good economy means good sales, which means you gotta develop, build and sell all of those 19 sets of products!

So what’s the measure of the good economy?  ”19″?  The number of big companies in your town?

We’ll come back to that.

Then, driven by high wages and the need to be competitive, the 19 companies outsource their manufacturing to the Philippines.  All the people in your town that earned a living from building things for those 19 companies are out of work.

How’s the economy measure?  Still a “19?”

And then the price of R and D rises, and the companies relocated their R&D labs to India and Singapore and Slovenia.  All your researchers are out of work.

Is your city still a “19?”

And then the economy tanks.  Stores scale back and lay people off, managers get RIFFed, the work force plunges.  Your town’s unemployment lines are getting longer and longer…

…but there are still 19 CEOs and corporate boards in town.  They administer companies that do their R&D and manufacturing elsewhere, and sell to whomever can afford the products through stores that are ever dingier and more understaffed.

But those 19 CEOs are still in your town.  So the town’s economy is healthy.  Right?

If you said “what, are you kidding?”, you might be a conservative.

If you didn’t, you probably think this piece by Dave Mindeman at MnpAct makes perfect sense.

North Dakota and Wisconsin taunt our borders with new signs that say – Our State Is OPEN For Business!

Everybody seems to be overlooking the basics here.

Sure taxes have some effect on business decisions….so do a lot of other things. Let’s look how Minnesota compares.

Now, let me make sure I reiterate; Mindeman is one of that tiny minority of Twin Cities leftybloggers that don’t need to be under police surveillance.

But when he says “let’s look how Minnesota compares”, what he really means is “let’s cherry-pick some non-sequiturs as absurd as the fictional list of company CEOs in my example above”.

No, literally:

The Facts: Minnesota has 19 Fortune 500 companies. Five are in the top 100. Fourteen in the top 300. United Health ranks the highest at #22. Minnesota ranks 17th in the nation for total GDP. We rank #14 in GDP per capita. Our current unemployment rate is 5.3%. Our high school graduation rate is 91.6% (National average is 85.4%) Persons with at least a Bachelor’s Degree – 31.8% (National Average – 28.2%) Median Housing Value – $201,400 (National Average – $186,200)

Let’s leave aside for a moment the factors that have nothing to do with measuring economic health (graduation rates are nice, and might – maybe - predict the future, economically.  Or they might not.  But if 100% of your town has masters degrees, but they’re all in Women’s Studies so the unemployment rate is 100%, what’s the real (hypothetical) measurement?);

We’ve got 19 Fortune 500 companies.  Bully.

Now – are those companies creating jobs in Minnesota?   Is 3M building new plants in Minnesota?   In fact, they literally exported one plant, with hundreds of jobs that used to be on the East Side of Saint Paul, to South Carolina.  And do you remember when they used to do R&D in the Twin Cities?  Welcome to Austin!

Medtronic?  Aren’t they contracting?  Well, here they are.  In Tennessee?  Not so much.

Boston Scientific?  Well, they’re not expanding anywhere – but it’s here in MN that they’re contracting fastest.

When was the last time Ecolab built a plant in Minnesota?  (Trick question; it was the seventies).

It’s not just big Fortune 500s, of course; Red Wing Shoes is eyeing a move.  Jostens is shifting jobs from Owatonna to Texas, the first of what will likely be many moves to lower-tax states.  We talked about the iron mill that’ll be built in North Dakota rather than the Range last week.

But we have 19 headquarters here.  Right?

Well, doy.  Of course we do.  If you’re a Fortune 500 CEO, where would you rather live – around Lake Minnetonka, the Guthrie, the Ordway, with Cathedral Hill restaurants and Galleria shoppping, or up in some holler in Mississippi, sweating through your underwear? It’s a no-brainer.  And that creates jobs – for management, for MBAs and upper management, sure – and their administrators and financial planners, and bartenders and caddies and nannies and gardeners, too.

But where are you going to build the plant, and create the jobs, especially for the people who aren’t management?  Who  don’t have the MBA and the BMW and the career spent networking among the corporate elite and the decades of experience in a field?

You did see the paragraph about all the “Minnesota” companies building plants elsewhere, right?

Mindeman:

So, how do we compare with our neighbors?

Vs. North Dakota: Sure North Dakota has a very low unemployment rate. A big surplus. And most of all an oil boom. But North Dakota doesn’t have a single company in the state on the Fortune 500 list.  Not one single business.

Remember that next time you run into an unemployed Ford Plant worker; “hey, you’ve got no job, but at least we’ve got lots of headquarters here!”.

Of course Minnesota has the Fortune 500s.  Minnesota benefitted from what mattered to people, and companies, when population patterns were largely set, back in the 1800s and early 1900s;  proximity to resources, plus water, rail and eventually road communication, which led to an urban center; this center became the center the upper-midwest region, the part of the country west of Chicago and north of Omaha and Saint Louis and east of Denver.   The era when the big Fortune 500s we currently have were largely formed.  An  era that, according to some thinkers on the subject, is on its tail end, and will be over someday soon.

In total GDP, North Dakota ranks 50th out of 51 US economies – and although they do better in per capita rank (20th); of what value is a low GDP with a total population that would fit into Hennepin County?

Leaving aside that Mindeman brushes aside an amazing statistical anomaly – a state that was poor, with a low, agriculture-related GDP fifteen years ago, that is now batting thirty spaces above its weight, in league with the big, inflation-adjusted coastal economies – like it’s no big thing, he gets the real question backwards.

What could Hennepin County – whose unemployment and crime lead the state, whose schools are among the worst in the state, whose achievement gap is a state disgrace, and whose major city is rapidly fulfilling Joel Kotkin’s predictions of the obsolescence of the big central city – do if they used their resources, their inherent dynamism and their talents as wisely as North Dakota has?

North Dakota may be having an economic “boom”, [Why the scare quotes, Dave?  It's a boom.  No bones about it!] but why would any business consider a major move to a state that has a total market of about 800,000 people and a GDP that is about 1/8 of Minnesota’s? Really?

So many problems with that statement.  So many confirmations that DFLers just don’t get economics.  Where to start?

Mindeman is reliably imprecise when has asks “why would any business” move to North Dakota.

Any business?

Best Buy?  3M?  Starkey Hearing?  They’re not going to move to North Dakota.  What’d be the point?

You want to start a trucking company?  You’ll be making money hand over fist.  A machine shop in Minot?  You’ll be working three shifts seven days a week the moment you open your doors.  A house-cleaning service?  Accounting firm?  Security company?  Contract law firm?  Gas station?  Hotel?  You’ll have more business than you can handle.

Mindeman runs through all the neighboring states – focusing especially on the relative dearth of Fortune 500s in Iowa and the Dakotas – and asks:

Again, is that the type of market that can attract major business?

Why the obsession with “major” businesses?

The “Fortune 500″ is an arbitrary set of companies (or was – it hasn’t actually been published in ten years), set by the editorial staff of a magazine.  It focuses, by definition, on the 500 biggest companies, in terms of sales, profits, assets, market value, and employees.

Not growth.  Not innovation.  Just sheer size.

Are these companies the major sources of American economic dynamism?  Of innovation, strength, or even new hiring?  No.  They are not.  Small business is.

Sure there are plenty of people moving out of Minnesota and heading south, but that has been a weather trend that has been going on for decades. Our population is holding better than any of the states that border us.

Another factoid that Mindeman sails past like a mile marker on 94 headed west for good.

Why have people been leaving for decades?  Why is Minnesota on the cusp of losing a Congressional seat?

If you think it’s the weather – the Dakotas are growing.

Let’s put the question this way; if you’re a financial researcher with an MBA, your best shot at a job is in one of the big metro areas, with a big company.  Ditto if you work in political non-profits – you go where the politics are.  Big cities.

But if you’re a person with a high school education, maybe with a child to support and some bills to pay, which state would you rather be in right now – North Dakota or Minnesota?

Republican talking points are only so much hot air.

Minnesota’s quality of life is thriving and we are the Midwest model for business.

That’s what the facts say.

And maybe in a future post Mindeman will explain exactly why, in terms other than “CEOs per acre”.

Maybe.

Hello Steeltown; Goodbye, DFL

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Jamestown, North Dakota.

15,000 people.  At confluence of the James and Pipestem rivers, about 90 miles west of Fargo.  Home to a state hospital and psychiatric prison (which sounds like something the MN DFL would build for Republicans, but it’s really pretty normal), a school for the profoundly handicapped, a college (my alma mater, as it happens), and a whooole bunch of agricultural businesses…

…and, soon, an iron mill.

A North Dakota company plans to build a $60 million iron producing plant near Jamestown, N.D., using iron ore concentrate from Minnesota.

A subsidiary of Bismarck-based Carbontec Energy Corp. called E-Nugget North Dakota LLC has unveiled plans to churn out 100,000 metric tons of iron annually using North Dakota sugar beet residue in the mix instead of coke coal.

It’s an interesting project; the plant will extract ore from tailings from the old iron mines up north that used to be economically un-feasible to extract.  There are millions of tons of now-usable ore piled up up north.

It’s Minnesota ore, and the research has Minnesota ties…:

The E-Nugget iron making process was developed by Carbontec and Michigan Technological University over the past five years, including large-scale batch tests at a Minneapolis facility, John Simmons, president of Carbontec, said Monday. The company already has plans to expand to a 300,000-ton plant if the startup goes well.

But the plant is being built in North Dakota.  Granted, it’s Jamestown, which – as it’s been throughout most of it’s history – has been safely tucked away from excessive prosperity.  100 miles east of the oil fields and their jobs, and 90 miles west from cha-cha, booming Fargo (yes, I said “cha-cha Fargo”; it makes sense in context), Jamestown is one of few parts of North Dakota that isn’t overheating economically so far.

But it’s not Flint or Newark or Cleveland.  It’s not even Minneapolis, much less Grand Rapids or Virginia, unemployment-wise.

So why there?

Simmons said the Jamestown site is well-situated because of easy access to sugar beet residue feedstock and also because it is adjacent to a Great River Energy power plant and directly on the BNSF rail line. He said the iron ore concentrate could move from the Grand Rapids area to North Dakota in rail cars that move western coal east but generally have been empty on their return trip west.

“We can get the right quality material from Grand Rapids and the rail routes make sense,” Simmons said.

So let’s get this straight;  Jamestown ND, which is about 90 miles from the sugar beet waste, and probably 300 from the iron ore tailings, gets the plant.

Why’s that?

Magnetation expects to start construction on a fourth plant northwest of Coleraine this year. That plant will produce 2 million tons of concentrate [that's the part you dig up, before you process it into iron] annually and will be ready to feed a new Indiana pellet plant the company now is building to supply partner AK Steel with iron ore for its furnaces by 2015. That new Itasca County facility is expected to employ another 160 people. The Coleraine plant ultimately will shift to get its ore from traditional open pit mining. (The company has shelved plans to build a recovery plant at Calumet.)

 

Simmons noted Carbontec also created an E Nugget Minnesota LLC and considered building the plant in Minnesota using wood waste from logging sites as the reductant or binder. He said the company chose North Dakota instead, in part because it’s so much easier to get permits in North Dakota.

Score one for the DFL Environmental Lobby!  More jobs exported to North Dakota!

Let’s let that one sink in; between taxes and permits, it’s cheaper to ship rock 300 miles than it is to process it in Minnesota.

Thanks, Minnesota DFL!

We Can Call It The “Pony Bottle Express”

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Joe Doakes from Como Park emails:

In response to the legislature’s anticipated 600% tax increase on beer, I’m starting an express delivery service running between Hudson, Wisconsin and St. Paul. Please post this Want Ad on Shot In The Dark:

“Wanted, young, daring fellows, must be over 18 and expert driver, willing to risk death daily. Orphans preferred.”

Joe Doakes

Como Park

Might just solve that teenage unemployment problem.

Bleeding Slower

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Joe Doakes from Como Park emails:

Fewer people are applying for unemployment.  So there must more jobs, right?  Yes, the article says: “The job market has also improved over the past six months. Net job gains have averaged of 208,000 a month from November through April. That’s up from only 138,000 a month in the previous six months.” No wonder I keep seeing so many Help Wanted signs.

But then the writer follows up with this:  “Still, much of the job growth has come from fewer layoffs—not increased hiring.”

 

Screeech.  Hold on, what’s that?  How can Growth come from Layoffs instead of Hiring?  You didn’t get laid off, so that’s the same as being hired?

 

Turns out employers are still laying off people and aren’t hiring full time because of Obamacare and tax increases, but they are hiring part-time workers who don’t get Obamacare.  Those McJobs are the heros of this story.  People taking McJobs don’t apply for unemployment.  That’s your hopeful sign?

And the article doesn’t even mention discouraged workers.  Instead it says: “Applications are a proxy for layoffs. Weekly applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy.”  Okay, I can buy that applications are a proxy for layoffs.  When you get laid off, you go apply for unemployment.  Makes sense.  And I can believe there aren’t many layoffs coming anymore, most of the fat was wrung out of the system years ago.  So yes, very few layoffs after five years of lean is the same rate as very few layoffs when times are booming.  All that adds up to “we’re bottoming out” not “prosperity is right around the corner.”

And then, this howler:  “Wages rose 3.6 percent in April.  That’s comfortably ahead of the 1.5% inflation rate.”  My wages sure as Hell didn’t go up, but my grocery bill did and gas is back up to $3.77 today.

 

I’m actually impressed the Associated Press has managed to stuff so many ridiculous claims into one article and pass it off as good news.

 

Joe doakes

The U6 number – counting the percentage of unemployed and underemployed – is up, even as the number of unemployed dropped a bit. The average amount of time worked in a week dropped. That means the job creation is all part-time.

This isn’t a recovery. This is blood clotting and an infection forming.

Chanting Points Memo: Flat Versus Bouncy

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One of the left’s favorite chanting points this past few months has been that, supposedly, Minnesota’s job growth under an all-Democrat regime has outstripped that of newly-Republican Wisconsin.

Conservatives responded that Wisconsin was shaking off the after-effects of decades of “progressive” incompetence, and would take a while, while in the meantime Minnesota was still coasting on having had ten years of one combination of GOP governor or legislature or another.

Well, the coasting’s stopped:

There was a “substantial vacation” in U.S. entrepreneurial activity last year—but nowhere was it as pronounced as in Minnesota.
That’s according to The Kauffman Index of Entrepreneurial Activity, a report compiled by the Kansas City, Missouri-based Ewing Marion Kauffman Foundation. The study essentially defines entrepreneurial activity as being tied to the launch of new businesses, and it is meant to serve as an indicator of business-creation activity across the United States.
The report found that there was a national lull in entrepreneurship in 2012, when roughly 514,000 entrepreneurs opened new businesses each month, down from 543,000 in 2011.
The report defines entrepreneurial activity based on how many adults per 100,000 residents started a new business each month during the year. Minnesota fared the worst, with only about 150 out of 100,000 residents opening businesses on a monthly basis.

Minnesota has always been a difficult place to start a business.

Run a Fortune 500?  That’s a whole ‘nother thing – although ask yourselves how many Fortune 500s based in the Twin Cities are building non-retail operations in the state these days.

But how about Wisconsin?

This MPR story a few months back shows that while Wisconsin is lagging, a big part of the reason is that the Badgers are overcoming so much negative intertia from when the Democrats had full reign over the place.

Picking Winners

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Remember when Democrats claimed to be for the little guy and against big institutional businesses?

Obama supports the “Marketplace Fairness Act”, which would tax online purchases:

Senators advanced the bill in 74-20 procedural vote on Monday evening, just one vote short of the backing it received in a test vote last month. Twenty-six Republicans joined Democrats in moving forward with the bill.

(Or when Republicans claimed to be pro-business?)

Oh, yeah – both A-Klo and Stuart Smalley voted for the bill.

Major retailers are putting all their lobbying muscle behind the legislation, arguing it would close an unfair loophole that benefits online merchants over brick-and-mortar stores. The National Retail Federation, which represents chains such as Best Buy, Macy’s and J.C. Penney, and the Retail Industry Leaders Association (RILA), which counts Target and others among its membership, announced it would score lawmakers’ votes.

The bill would also make it possible for states to tax financial transactions – trades for your IRA, moving money around in your 401K and the like.

But signs of trouble for the bill also emerged as Wall Street groups urged the Senate to slow down and eBay began marshalling its users in a massive campaign to kill it.

The Securities Industry and Financial Markets Association and the Financial Services Roundtable said the measure could pave the way for financial transaction taxes on the state level, an idea that Wall Street and its supporters fiercely oppose.

“A transaction tax on financial services products will hurt retail investors, retired Americans, and small businesses, effectively making it more expensive for them to invest and plan for the long-term. Without hearings, these implications and others will not be properly addressed” [said Scott Talbott, senior VP of public policy at the Securities Industry and Financial Markets Association and the Financial Services Roundtable]

Democrats (and some Republicans); dragging the parts of the economy that work down into the same pit of suck that the rest of the economy is in.

“Your Numbers Are Like Voodoo”

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(SCENE:  Mitch BERG is standing in the line for car tabs at the Saint Paul Sears with Avery LIBRELLE)

LIBRELLE:  I saw your blog post about the restaurant in Mower County that is offering discounts for gun nuts who bring guns into their restaurants.

BERG:  Yeah.  That’s pretty cool.

LIBRELLE:  I’m sure there’ll be a mass shooting there soon.

BERG:  (shakes head silently, with deep weariness)

LIBRELLE:  What this does mean is that they should raise their minimum wage.

BERG:  (wearily)  OK, I’ll bite.  Why’s that?

LIBRELLE:  Because the owner is giving away money.

BERG:  Er…huh?

LIBRELLE:   Discounts.  That’s money he’s giving away.  That means he could afford to increase his staff’s wages.

BERG:   Er, the discount – leaving aside the extent to which it might be a personal protest statement – is what’s called a “loss leader”.  It’s designed to get people to come out, bring their non-gun-carrying friends – to get people in the door.  Once they’re through the door, that’s more traffic, more word of mouth, more potential to win over customers that keep coming back and spending more money.

Sort of like when Chipotle has their Free Burrito Day.  They lose money on that day’s burritos – but hopefully create loyal repeat customers who come back later to pay full price.

LIBRELLE:  Well, if they can do that, they can afford to pay the dish washers and waitresses and counter staff more.

BERG:  Er, why do you think businesses do that?

LIBRELLE:  Because they’re rolling in money at the expense of the worker!

BERG:  No, it’s to increase business.  It’s called Marketing, and Advertising; spending a little money so that there’s more business, which in turn brings in more money, which eventually goes into things like paying off investors and turning a profit and expanding and remodeling and buying a new oven and, by the bye, salaries.   Because a successful restaurant can afford to give a raise, while an unsuccessful one can’t even retain workers.

LIBRELLE:  Giving away the workers’ money in this way is like the Bush Tax Cuts.  That money is needed.

BERG:  Government doesn’t need to advertise or market.  And even if the money were “the workers’ money”, it’s part of marketing a business, to try to make it successful  Like spending money on advertising, or on having clean restrooms and unripped seats, or laminated menus, or quality ingredients and attractive preparation and presentation; it’s about making people come to your business, and then making them want to come back.

But – and I can’t stress this enough – the business’ revenue is not “the workers’ money”.  The person or people who started and run the restaurant – which provides the jobs for “the workers” – has the job of using that money to the business’ best advantage, to promote and maintain the business.  Which includes paying salaries.

LIBRELLE:  It’s more important that they pay the salaries.  Without the workers, the owner is nothing.

BERG:  Er, what now?

LIBRELLE:  It’s the workers that make the business.  Without the workers, there’d be no business.

BERG:  I’m sure that’s news to every sole-proprietor entrepreneur out there…

LIBRELLE:  Look at Bain Capital.  Mitt Romney didn’t even show up to work for months at a time.  And yet the janitors had to show up every day.  Bain could have prospered without Romney, but not without janitors.  The janitors deserved the money more than Romney.

BERG:  (Stands, gobsmacked in stunned silence)

LIBRELLE:  Without those janitors, Bain would have failed.

BERG:  So you’re saying that janitors can manage venture capital better than managers can empty trash and sweep floors?  Or that restaurants would spontaneously form in Mower County without someone to rent a building, set up a kitchen and a counter and some tables and buy some inventory and hire and train some cooks and waiters and dishwashers.

LIBRELLE:  Of course not.

BERG:   OK, then…

LIBRELLE:  I’m saying that without janitors sweeping the floors, the capital would never have been managed.  Without a dishwasher, there’d be no restaurant.

LOUDSPEAKER:  ”Number 36″

BERG:  Oh, that’s my number.  What’s yours?

LIBRELLE:  Oh, I don’t have one.  I just love hanging out here.

BERG:  (shuffling toward the window)  You what?

LIBRELLE:   Yeah.  It’s a great lesson on how business should work!

BERG:  Huh.  Wow.  And to think some people say liberals don’t understand business.

LIBRELLE:  I know.  Right?

(And SCENE)

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The Ultimate “Public-Private Partnership”

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Liberals will occasionally try to sound “moderate” by claiming to favor “partnerships” between government and business.

These “partnerships” usually amount to one of a couple of things:

  • The worst of both worlds; the inefficiency of government combined with the lean capitalization of a business
  • The government picks a winner

In neither case do things work out well, as a general rule.

Except with this example, perhaps the most successful public private “partnership” in all history.

Just saying; if my financial planner hasn’t put a ton of money into Glock USA and Sturm Ruger, we’re gonna have to talk.

Attention Representatives Paymar And Martens

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Suck it:

The St. Paul-based outdoor goods chain already has 11 Gander Mountain locations across the state — all of which sell guns — but its store in the western Twin Cities suburb will have strictly a firearms emphasis. The company boasts it is “the nation’s leading firearms retailer.”

The 30,000-square-foot Rogers location — formerly a Best Buy — will have its official grand-opening in May.

“The new Firearms Super Center concentrates on firearms, ammunition, hunting and tactical clothing,” said Steve Uline, Gander Mountain’s executive vice president of marketing.

Watch for a bill in the next session banning gun stores larger than 1,500 square feet – and a Star/Tribune Minnesota poll saying 90% of Minnesotans disapprove of big gun stores.

More below the jump.

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Real Men Of Genius

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You build a better mousetrap – or urinal – and they will come.

A minor league baseball team in Pennsylvania will become the first professional sports franchise to offer urine-controlled video games in its restrooms when the season starts in April.

Used beer is now liquid assets – in gaming terms, anyway.

Pennsylvania’s Lehigh Valley IronPigs will debut the “Urinal Gaming System” in its men’s bathrooms—the custom urinals feature a “pee controlled” video screen that will entertain fans as they use the restroom.

Well, it’s good to see good ol’ American ingenuity finding a problem, stepping up and solving it…

The system is designed by a British company called Captive Media—in a demo for the urinal, the company shows a snowboarding slalom game in which the character is controlled by where the player pees.

Oh.

I’m waiting for urine-controlled Asteroids.

But I won’t hold my breath. This should be an interesting bit of Title IX litigation.

Governor Messinger Dayton: “The Beatings Will Continue Until Morale Improves!”

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Governor Messinger Dayton famously appeared at the Chamber of Commerce yesterday.

And boy, did he give ‘em what-for!

Gov. Dayton told a stunned luncheon audience that Minnesota is among the best places for business in the country, contrary to the Chamber’s message.

He said government spending is right in the middle, and that the state’s tax rank is dropping.

Dayton said he never heard the same criticism when Republican Tim Pawlenty was governor for eight years, and he asked his staff to investigate.

“And we could not find a single instance of the chamber calling for spending reforms during those eight years,” Dayton said. “Evidently, in your view, spending reform is needed only when a Democrat is governor.”

Messinger Dayton also said he was sticking firm to his promise to hike taxes on “the rich” (meaning “successful entrepreneurs and professionals who didn’t have the foresight or the fiscal and legal clout to move their money to dynasty trusts in South Dakota”, as opposed to, say, him).

A couple of observations:

Gov. Dayton told a stunned luncheon audience that Minnesota is among the best places for business in the country, contrary to the Chamber’s message.

He said government spending is right in the middle, and that the state’s tax rank is dropping.

Dayton said he never heard the same criticism when Republican Tim Pawlenty was governor for eight years, and he asked his staff to investigate.

“And we could not find a single instance of the chamber calling for spending reforms during those eight years,” Dayton said. “Evidently, in your view, spending reform is needed only when a Democrat is governor.”

A few observations:

Governor Whinypants:  Business never complained about spending on Pawlenty’s watch?   Huh?

During the first term, business complained about things like “health impact fees” – stealth taxes framed as compromises with the DFL in a legislature he didn’t completely control.  Just ask Sue Jeffers.   On the other hand, he generally held the line on taxes, pursuant to his pledge to the Taxpayers League.

During the second?  Pawlenty was faced with a wastrel DFL legislature; business rightly figured he was the last line of defense against the sort of pillaging the Messinger Dayton Administration and the Legislature have in mind.

And they were right then, and they’re right now.

Profiles In Leadership:  This is leadership?  ”If you don’t see things my way you’re a poopyhead?”

Reverting To Stereotype: Conservatives pillory liberals for being innumerate, having  stunted knowledge of economics outside of Paul Krugman’s ravings – the type who think raising the minimum wage cures poverty.

It’s on stories like this that you realize; the stereotype exists for a reason. .

Dave Mindeman at mnpACT put it a little differently, by way of cheering Governor Messinger Dayton on in a piece titled “To the Chamber of Commerce: SHOVE IT” in a flight of Oscar Wilde-like whimsy..:

So Dayton dropped the sales tax proposal with the caveat that his increased income tax on higher income earners would go forward.

But they object to that as well.

“Hey, we left your top line alone, more or less; you can’t complain if we attack your bottom line, now, can you?”

They continue to promote the addage that this tax will affect small business…and yes, here we go, the “job creators”. They continue this argument even though the Department of Revenue has shown that only 6% of small business would be affected. And again, we are only talking about the highest portions of their income. If they are making substantially more than $250,000, why the huge objection to paying some back to a state that has benefitted you greatly?

I can see Messinger’s Dayton’s disconnect; she he has never worked, and has no concept of what business is about.  Not sure where Mindeman comes at it from, and I’m not sure that it matters.

Messinger Dayton is daring business to pick up and leave.

She He doesn’t think they will.

I imagine we’ll find out sooner than later.

Leading Indicator

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The Dow wasn’t the only indicator to hit an all-time high yesterday:

As the investing world celebrates the all time nominal high of an archaically-weighted index of an ever-changing basket of stocks, there is another – this time unprintable asset – that appears in all-time high demand – firearms. Smith & Wesson just released earnings not only with record high revenues but increasing their outlook dramatically for fiscal year 2013.

The surge in ‘background checks’ and sales since the election (and furthermore since the Tragedy in Newtown) continues (+29% YoY) and as SHWC notes “The tragedy in Newtown has understandably inspired an important national discussion about how to cope with violence in our communities – we possess a broad range of products and a highly flexible manufacturing operation. Taken together, these allow us to be highly responsive should the market and/or legislative developments drive a change in sales mix.”

Note to my financial planner, should you happen to be reading this today; I really, Really, Really hope you plunked a ton of my portfolio into S&W, Sturm Ruger and Glock USA when I mentioned it last fall…

Chanting Points Memo: Ryan Winkler, Brezhnev-Style Economist

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Conservatives joke that liberals just. Don’t.  Get. Economics.

We joke, at times, that at some point a liberal is going to push for a “living wage” statute calling for a $100/hour minimum wage as a means to end poverty, followed by a bill barring any layoffs and banning bankruptcy.

It’s a joke.  Some liberals shake their heads and go “yeah, yeah, we’re not nuts”.

And then something comes a long to prove that they really, really are that dissociative.

Rep. Ryan Winkler (D St. Louis Park), also known as “The Eddie Haskell of the House” – is introducing a “Kill All” amendment to House File 92 that bars businesses from laying off workers, cutting hours or benefits due to minimum wage increases. 

I’m going to write that again, just to let it sink in.

Winkler’s bill would make it illegal for businesses to lay off workers, cut hours or benefits due to minimum wage increases.

No, I’m really not making it up; I’ve added emphasis to the original:

(c) Notwithstanding paragraph (b), during the first 90 consecutive days of employment, an employer may pay an employee under the age of 20 years a wage of :

(1) $6.07 per hour beginning August 1, 2013;

(2) $7.24 per hour beginning August 1, 2014;

(3) $8.41 per hour beginning August 1, 2015; and

(4) the rate established under paragraph (d) beginning January 1, 2016.

2.11 No employer may take any action to displace an employee, including a partial  displacement through a reduction in hours, wages, or employment benefits, in order to hire an employee at the wage authorized in this paragraph.

(UPDATE: Commenter Master Of None points out, the above section refers to a training wage – a wage that employers may pay for up to 90 days – and says it’s not quite as dire as I’d made it out to be.   I disagree; Winkler’s bill raises the already existing training wage, causing all the same problems that raising the minimum itself does, which negates most of the utility of a “training wage”, as well as starting some sort of enforcement mechanism to painstakingly adjudicate all disputes related to training and minimum wages.  Because Minnesota businesses needed more niggling regulations)

And as the Obama Administration launches into permanent quantitative easing, Winkler wants to key the minimum wage to inflation, ensuring that no wages will ever keep up with inflation:

2.14 (d) No later than November 1 of each year, beginning in 2015, the commissioner  shall determine the percentage increase in the rate of inflation, as measured by the Consumer Price Index for all urban consumers, United States city average, as determined by the United States Department of Labor, during the most recent 12-month period for  which data is available. The minimum wage rates in paragraphs (b) and (c) are increased by the percentage calculated by the commissioner, rounded to the nearest cent. The new minimum wage rates determined under this paragraph take effect on the next January 1

In other words: Ryan Winkler wants to…:

  • arbitrariliy set wages (higher than the federal minimum, no less!)
  • bar business from compensating for the arbitrary change in labor costs in any way but by increasing revenues in the middle of a crap economy (which Dayton’s business service taxes and Obamacare are making worse by the day).

It’s the sort of thing any Economics 101 student knows is madness if he or she wants to get better than a “C”.

Bonus Question:  Do you think Rachel Stassen-Berger, Tom Scheck, Tim Pugmire or John Cronyn will bring any of this up with Winkler or the leadership that enables him?

Like A LeBron James Slam Dunk

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Craig Westover – maybe the best libertarian-conservative intellectual writer in Minnesota today – took the “con” side of the minimum wage debate in the Strib last week, and stuck the landing:

Consider studies “proving” that when the minimum wage is raised, employers do not raise consumer prices. Because other economic forces are always in play, indeed, little quantitative effect may be seen in an industry affected by the minimum wage. What remain unseen, however, are the qualitative effects of the arbitrary wage increase on the industry and quantitative effects on the economy as a whole.

Raising prices is not as simple as changing an item’s price tag. Prices are always determined by what the market will pay and not by what the vendor needs or wants to charge. Not all cost increases can be passed on to consumers in higher prices.

If raising the price of a product or service in response to an increase in minimum wage drives the price higher than some people are willing to pay, they will buy less of the product or stop buying the product altogether and switch to substitutes.

Consequently, while some workers benefit from an increase in minimum wage, others in supplier industries suffer through job loss or lower wages resulting from the reduced demand for their products and labor. Eventually, even the boost in income for the few is offset by higher prices and lower future wages brought on by reduced economic growth — a net loss for them and the whole community.

Studies that claim to affirm the harmlessness of the minimum wage have to cherry-pick their criteria pretty closely.

Read Westover’s entire piece.

And Westover only covers the pure economics.  Libertarian-GOP activist Jake Barnett, writing about Westover’s piece on Facebook, adds:

“Craig Westover makes a sound economic argument here. Personally, I think that’s only half the issue. A significant portion of campaign contributions of those who make social justice arguments about the minimum wage come from trade and government unions. It just so happens that the majority of Union Contracts are tied to the minimum wage, and the pay of workers under these contracts would rise a result of a passage of this bill. I’m sure we’ll hear well intended emotional arguments from the dupes on the left who believe politicians seek first to help the poor, but we all know better. A DFL led legislature and Governor wish to increase their campaign funds for the next cycle, and this is an easy way to do so while pandering to their base. Now where’s that mission accomplished banner?”

SEIU will be waving one around the the end of the session.

Dime’ll getcha a buck the banner will be made in China.

The Myth Of The Harmless Minimum Wage Increase

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The left’s been bruiting about a study that shows unemployment isn’t that badly affected by minimum wage increases.

For example, the study claims that a 10% hike in the minimum wage translates over time into about a 1% hike in unemployment among low-wage, low-skill workers – the ones that get minimum wage.

BikeBubba, over at BikeBubba’s Boulangerie, unpacks the meme in a way most of the study’s proponents seem unprepared to:

So let’s work with that.   Let’s assume, for what it’s worth, that “low wage workers” includes about the bottom quintile, or about 30 million workers.  So that 1% decrease in employment impacts about 300,000 workers, which is about the same number of people as are currently employed by Sears, Roebuck and Company–which now includes Kmart as well.  In short, three of every forty minimum wage workers would lose their jobs.

In short, even a 10% increase in the minimum wage impacts a LOT of people.  But of course, the story gets worse, as President Obama and Governor Dayton Messinger are proposing 24% and 31% increases in the minimum wage.  So we would expect, if the relationship were linear, that over 700,000 people would lose their jobs from Obama’s minimum wage proposal–seven out of forty–and we can thank God that Mark Dayton is not the President.

All true.  And, as BikeBubba notes, probably still too pollyannaish; linear behavior is for sissies:

Of course, few things are linear in real life, and so I’ve constructed a model assuming that the actual productivity of labor is normally distributed somewhere above the minimum wage, and that those workers whose productivity does not exceed the minimum wage will lose their jobs.  If we assume that the current minimum wage deprives only 2.3% of these workers of work (-2 standard deviations), then we arrive at a mean productivity of $8.95/hour with a standard deviation of about $0.85.

And that means…

Shift the minimum wage to $9/hour, and we then predict overall job losses of approximately half of minimum wage workers.   Any historical comparisons?

Glad you asked.  From 2007 to 2009, there were three consecutive increases in the minimum wage exceeding 10%.  Here’s what happened to unemployment among young people:  it more than doubled as overall unemployment went from 4.6% to 10%.  When the increases in the minimum wage stopped in 2009, the trend in unemployment quickly stabilized and started to reverse.  In short, it’s exactly what one would predict if the productivity of entry level labor were normally distributed somewhere above the minimum wage.

 

Now granted, there were other things going on at this time, but reality is that it shouldn’t take a PhD economist to realize that when the price of labor rises, less of it will be demanded.  So if someone tells you he’s trying to increase the minimum wage for your good, let him know that you’d be thankful if he didn’t try to “help” you that way.

The only real way to “help” minimum wage workers is to teach them how to do median-wage jobs.

And the best way to do that – barring some flash of brilliance – is to stay in school, moderate your behavior so you can actually learn things, get a job and go to it every day without all sorts of drama, so you learn the behaviors that successful workers have, and learn a skill worth more, preferably way more, than whatever the “minimum” or “living” wages  are.

Increasing the minimum wage is not just pretty window-dressing on the poverty problem; it’s geometrically counterproductive.

Democrat: “We’re Screwed”

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Even some DFLers – the thin film of them that actually have to manage things in the private sector – are figuring it out.

This piece has made the rounds; it’s from the San Fran Chronicle, in a piece that gurgitates a whooooole lotta Minnesota myths:

“We’re screwed,” [Printing company owner Dik] Bolger said, if the tax goes through. His 79-year-old company competes nationwide and overseas for work with major brands like Chanel. “If you’re bidding for a $100,000 job on a national basis and tax expenses push you a couple of percent higher, then I’m not competitive.”

And I’m hearing this from businesspeople – some political, some not, and mostly off the record – all over the place.

For generations, Minnesotans lived out the progressive argument that high taxes and high services were what gave the state its fabled quality of life.

One thing Minnesota Democrats never, ever get; the “Minnesota Miracle” – creating a high-tax, “high-service” system that actually prospers – depends on several factors:

  • Being the uncontested biggest economy…
  • …within a national economy that has no serious competition (as the USA did not, between 1945 and the mid-seventies)…
  • …allowing near-unbridled prosperity…
  • …which supports boundless government spending.

These factors – especially the whole “only economy left in the world that hasn’t been bombed into rubble, taking nearly 30 years to get back up to speed” bit – are unlikely to be repeated anytime soon, or so we can hope.

But the patience of business owners is being tried more than ever, as Dayton and the Democrats who now control the Capitol mull a menu of tax increases that would primarily hit company ledgers — just as most states are going the opposite way.

Those “company ledgers” include mine.

The piece slathers on the Minnesota Myth – that “high-service” translates into high quality of life for everyone:

Dayton wants the new money to eliminate a $1.1 billion state budget deficit. He also wants more for public schools and colleges, job-creation programs and low-income medical assistance. He’s arguing that such amenities are what perennially put the state near the top of livability lists.

“I’ve heard this for 30 years and I’m not insensitive to it,” Dayton said of the argument that high taxes make businesses look elsewhere. However, “I say we’re not the lowest-taxed state, we’re the best value for people’s taxes.” Minnesotans try not to scoff as they contrast the state’s attributes with the likes of its more down-market neighbors. Minneapolis’ bustling downtown Nicollet Mall, the Twin Cities’ array of theaters and first-class museums, and the state’s expansive parkland and its 19 Fortune 500 company headquarters — the second-most per capita in the country_are what make talented people want to be here, they said.

Make no mistake about it; Minnesota is a great place – if you’ve got yours.  If you’re already a CEO – or a highly-paid non-profit executive, or government PR consultant, or anyone that’s already made your score – then a day of shopping and theatre downtown after a long day in your Fortune 500 office is mighty nice!

But for the people who get laid off because their companies are now 5.5% less competitive?  For the companies that relocate out of state because of the newly-ugly tax climate?  They won’t be shopping on Nicollet Mall or going to the Guthrie.

It’s no coincidence that Minnesota’s unemployment rate is lower than Wisconsin’s (5.5 percent vs. 6.6 percent in December) and its per capita income higher ($44,560 vs. $39,575).

This is one of the arguments that the DFL’s been floating among low-information voters lately.  Wisconsin, addled by a more virulent strain of “progressivism” even longer than Minnesota, and stuck between two larger economies, lagged Minnesota for a generation or two.

But what’s happened lately?  We’ll go through that next week, hopefully.

The Minnesota DFL is clinging to the myths, and hoping they continue to fool enough low-information voters to keep them in office.

———-

The piece should end there.  But I couldn’t resist this next bit:

“What’s real is that quality of life is a decision-maker for the big players,” says Democratic Rep. Alice Hausman.

What “executive” wouldn’t relish a chance to play hooky at the Ordway on a tough day at the office?

A Conversation About The Minimum Wage

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I had a chat with Avery LIBRELLE, a liberal friend of mine at a local coffee shop in Saint Paul; Avery had just gotten off from a shift of answering phones for MPR’s pledge drive.

LIBRELLE:  I’m glad the DFL are talking about raising the minimum wage.  It’s time the working poor caught a break.

ME: Well, that’s kind of untrue.  Most of “the working poor” work for more than whatever the minimum is.  The vast majority of people earning the minimum wage are young, entry-level workers.  Very few people over the age of 16 actually make the minimum wage – and those over 25 that do usually do it because of choices, good or bad or indifferent, that either they or their parents made.

LIBRELLE:  Well, it’ll be good for them, too.  More money is good, right?  It stimulates consumer spending when workers have more money!

ME:   Well, yeah, but where does that “more money” come from?

LIBRELLE:  Employers!

ME:  And…?

LIBRELLE:  They’ll pay more!

ME:  Er…why?

LIBRELLE:  Because the law will say so!

ME:  Um…no, they won’t.

LIBRELLE:  Sure they will.  $9.50 is more than $7.25!

ME:   Well, yeah – any minimum-wage worker will get more money per hour.  But it doesn’t mean their employers will spend more, especially in a tough economy.

LIBRELLE:   Well, that’s Bush’s fault.

ME:   Be that as it may, look at it this way.  Let’s say a store owner has $100 an hour to spend on payroll at her small business.  That’s her labor budget; it’s what she can afford to spend, given the revenues she brings in, on labor, on top of materials, rent, utilities and a modest wage for herself – and just to keep from going crazy, I won’t add in all the service taxes she’ll be paying under Governor Messinger’s Dayton’s tax proposal.  Currently, that allows her to employ about 14 people at minimum wage.   If the minimum wage goes up to $9.50, that means she can employ ten people.

And that’s not even counting the changes to the payroll tax, which bring it down to more like nine.  And that’s leaving out healthcare.  So – nine employees get a raise, and five get laid off.  Meaning the nine who are left are going to have to work a whole lot harder.

LIBRELLE:   The employer can just budget more for labor!

ME:  Yeah, there’s not actually room in her budget to increase her labor costs by close to 50%.  Not unless her business’ revenues zoom upward which, by the way, isn’t happening these days.

LIBRELLE:  She can take it out of her salary!

ME:  Did you catch the part about her having a “very modest” salary after all her expenses?  If she tacks $40 an hour onto her labor costs, she’ll be working for free – which is less than the minimum wage.  She may as well close the business, then – which means instead of laying off five, she’ll be putting all 14 out of work.

LIBRELLE:  Maybe the workers should unionize!

ME:  And that’ll increase revenues how?

LIBRELLE:  Why do you hate children?

(And SCENE)

My Sympathy Is, Shall We Say, Tempered

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Matt Yglesias, a deeply logic-challenged person with a grievously warped sense of moral order, is nothing if not a reliable toady of the Obama Administration, or for that matter any other Democrat for whom he shills.

And so it’s truly crocodile tears I cry for him as he relates the difficulties involved in starting a small business in the City That Big Progressive Bureaucracy built, Washington DC:

My wife and I bought a new place, and instead of selling our old condo, we’re going to rent it out. And thus I became a small-business man.

Or, rather, I’m becoming one. Entrepreneurship—even on the smallest and most banal scale—turns out to be a time-consuming pain in the you-know-what. My personal inconveniences aren’t a big deal, but in the aggregate, the difficulty of launching a business is a problem and it may be a more important one as time goes on.

Why yes, Matt. It just may be.

He relates in painstaking detail the rigamarole it takes to set up a “business” whose only product is an overpriced condo:

In the District of Columbia, I need to get a simple Basic Business License to rent out a single dwelling. After puzzling over the Department of Consumer and Regulatory Affairs website for a bit, it became clear that step No. 1 was actually to file form FR-500 with the Office of Tax and Revenue, which you can do online. Then it was time to hustle down to the DCRA (which closes at 4:30 p.m.) to file the paperwork. Once there, I learned that filing the FR-500 online wasn’t good enough—I needed a hard copy. Fortunately, the Office and Tax and Revenue was right across the street, so I went there and refiled. Then it was back to the DCRA to stand in line to get a number, wait for the number to be called…

It goes on from there.

Yglesias does make one good observation…:

Not that I expect your pity. I don’t even pity myself. Going through the process, I mostly felt lucky to be a fluent-English-speaking college graduate with a flexible work schedule. But the presence of a stray pamphlet offering translation into Spanish, Chinese, or Amharic seemed like it would be only marginally useful to an immigrant entrepreneur. A person who needs to be at her day job from 9 to 5 would have a huge problem even getting to these offices while they’re open.

Yep.  Very, very true.

Yglesias asked for this kid of government – and I don’t mean in the figurative, “you voted for Barack Rex, take your medicine, Ivy-League hamster!” sense of the term.  I mean literally; one of his articles was  entitled “Regulation Breeds Innovation“.

It does indeed.  Black markets and off-the-books sublets are, in fact, a form of innovation.

Side note:  He didn’t build that.

Slouching Toward Hawley

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First things first: Charlie Quimby of “Growth and Justice” and Dave Mindeman of MnpACT are two of a small, select set of Minnesota liberal bloggers who needn’t be under police surveillance or at the very least restraining orders.  I’m just giving credit where it’s due (although the idea that a group can be named “Growth and Justice” yet still stand for neither is just a tad bemusing).

But over this past week, both of them assailed Rep. Pat Garofalo’s statement on this past week’s “TPT Almanac” program; the Lakeville Republican claimed, in what struck me as a bit of hyperbole, that the broadening of the state’s sales tax to cover clothing will “destroy” border communities like Moorhead.

Always on the lookout for hyperbole to dissect, Mindeman and Quimby were on the job pronto.

Quimby was – as is his unfortunate wont – dismissive, in a post subtitled “Do We Believe Our Lying Eyes?”

Back in 2007 when Growth & Justice was presenting its Invest for Real Prosperity tax proposals to the legislature, I recall a member waxing nostalgically about his parents hauling the family across the North Dakota border to buy untaxed clothing in Minnesota.

The point of his anecdote was that if Minnesota lowered its sales tax and broadened its tax base—as economists recommend—this lucrative cross-border school clothing traffic would dry up, with terrible consequences for Minnesota’s border city retailers.

We’re hearing a version of the same tale…This week, Rep. Pat Garofalo objected on TPT’s Almanac: At the Capitol. He reported that a North Dakota Democrat was proposing eliminating the state’s tax on clothing as a form of tax relief.

“Retail businesses in border communities like Moorhead will be destroyed,” Garofalo said, attracting blogger Dave Mindeman’s skeptical response:

Mindeman interspersed some facts with the snark (which is to his style what dismissal is to Quimby’s) in his piece, noting – correctly – that North Dakota has a 5% sales tax, onto which Grand Forks and Fargo lard 2% in city sales taxes.

Oh my God….how would Minnesota compete?…Garofalo loves that flaming rhetoric doesn’t he?

Fact: North Dakota sales tax is currently 5.0%. Fargo, ND which is the booming ND metropolis across the river from Moorhead adds a 2% city tax. So here is the facts. Under Dayton’s tax proposal, Moorhead (which adds no city tax) would be 5.5%. Fargo would charge 7.0% Clothing may be exempt in the future, but Moorhead will still have clothing under $100 exempt as well.

And like most DFLers, Mindeman, like Quimby, can’t resist taking a homer shot at the Dakotas:

But let’s suppose North Dakota finally drops its state clothing tax just when the gap with Minnesota is closing.

Then what? Will Minnesota border towns really suffer? Were North Dakota retailers in the thriving cities of Fargo and Grand Forks suffering in silence all these years?

To which Quimby assents – with, to be fair, an actual study with real numbers:

As the Minnesota legislator said in that 2007 hearing, should I believe you or my lying eyes?…Looking at the literature studying economic activity in response to sales tax rates, I found research that supports the following points:

Response to differences in the sales tax depends on proximity of border communities. In other words, the farther you have to drive to avoid the tax, the less likely you are to do so.

How much does distance matter? A 2010 Utah study of local option sales taxes PDF* that investigated distance as a variable found increasing the tax rate lowers taxable sales (all else held equal) when there is a jurisdiction with a lower tax rate within 5 km, or about three miles. The effect disappears altogether within about 40 miles. This is to be expected for low-cost goods and everyday commodities. But it also appears to hold for expensive major purchases such as new or used automobiles.

All of that may be true.

But the effects of an individual tax like the Sales Tax, and its nuts ‘n bolts comparison with other sales taxes, while potentially interesting and certainly economics-class-fodder, are the trees that help you miss the forest.

For the real comparison between the states’ tax burdens – not just sales taxes, mind you, but taxes across the board – you need to ask yourself a key question:

“What did I see last time I went to the Moorhead/Fargo area?”  Or you could fill in the “East Grand Forks / Grand Forks area”, or the “Breckenridge / Wahpeton” area, or for that matter the “Worthington/Sioux Falls” metro area?

For starters, you’d know they’re called “Fargo/Moorhead”, and “Grand Forks/East Grand Forks”, “Wahpeton/Breckenridge” and “Sioux Falls”.  Because in every case, the North/South Dakota side is where the action is.

And it’s not just force of habit; it’s not even close.  The Minnesota sides of each of these metro areas (or clusters, in the case of Wop/Breck) are sleepy, moribund and dismal out of all proportion to their North Dakota neighbors.  They’re not competitors in any meaningful way.  They are all sleepy little bedroom communities with highway exits; whatever commerce, dynamism and action is happening in the area is happening west of the Red (or the Bois de Sioux, or County 17, as the case may be).

Forty years of wide tax disparity – Minnesota has the #7 overall tax burden in the US, while North and South Dakota are 35 and 49, respectively) has left a clear choice to all of those places; move west, and keep more of what you have.  The choice was more nuanced, of course, 40 years ago – when North Dakota was a sleepy agrarian backwater.  Today, with my home state an economic dynamo in both energy and technology, things are a little clearer-cut.  And at any rate – as noted by Quimby and Mindeman – fluctuations in the sales tax, or any individual tax, are background noise to the larger effect of decades of disparity; the Dakotas have better business climates; while the western 3/4 of both states are limited by their sparse populations (which is why working on the rigs out in the Bakken pays so very very well), but Fargo, Sioux Falls and Grand Forks are all well-developed cities with young, highly-educated populations and, at least in North Dakota, K-12 schools that are as good as or better than those in Minnesota.

So once you take a step back and stop the pointillistic crabbling about this remark or that individual tax rate, you see that the real issue is the long-term effects overall tax burdens have.  As the Dakotas prosper more generally and gain more people and – as seems to be their goal – turn more of that prosperity into tax relief, that disparity is only going to get starker.

Put briefly – the reforms of the sales tax won’t destroy Moorhead, because tax policies took care of that forty years ago.  There’s really not that much to destroy.  It’d be like harming business in Saint Anthony compared to Minneapolis; who’d know?

So here’s another question:  Up until 2 years ago, Wisconsin was addled by governments more dementedly “progressive”, as a rule, than ours.  That changed in 2010, right about the time Minnesota seemed to have some hope of shucking off some more of the dross of DFL legislative control.  Now, as NPR noted last week – in a report I’ll be going over later this week – Minnesota’s economy is stronger as a whole than Wisconsin’s.  But the improvement in Wisconsin since 2008 is dramatic;it’s improving fast, bouncing back from decades of neo-socialist perfidy.  What’s going to happen in Minnesota?

What do you think?  We’re raising taxes in the middle of a recession!  What happened in California, Illinois and France?

That said – we won’t know what’s going to happen until things tamp down for a while.  Will Minnesota’s government remain the shiny toy of Alida Messinger’s band of plutocrat dabblers and union fixers?  Will Republicans retain control in Wisconsin?  If so, give it a few years.  Then we’ll check back.

As to Fargo versus Moorhead?  That train left the station decades ago.  Changing the sales tax one way or another is just bouncing the rubble, as it were.

This Is Your Obama “Recovery”: Welcome To 2013, Same As 2012/2011/2010…

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The BLS numbers for January came out last Friday.  And they showed what pretty much everyone expected them to show after the holiday and the election wore off; the economy still sucks.

The headline story is that unemployment crept up again, to 7.9%, after dropping (putatively) to 7.7% in November.

But in my book the real story is this; even with the top-line unemployment number under 8%, the work force participation rate is stuck at 63.6%, right where it’s been for three months after blipping above and below that figure for most of the past year.

Which means when you take the 7.9% unemployment rate out of that low labor force participation rate, you get 58.58% of the workforce actually working.

That compares to: 60.58% – exactly two points higher – when Obama took office (with an unemployment rate of 7.8%).  That translates to six million fewer people working in the labor force now, even with an unemployment rate that’s supposedly nearly the same.  Or to  58.50% in October 2009, when unemployment peaked at 10%.

That’s right; even with the unemployment rate supposedly two points lower than the recessions nadir, the actual portion of the population working is nearly unchanged.

And to show how in-set this recession is?  Here’s a list of

As you can see, the average of monthly employment rates (after taking the unemployed out of the participating labor force) is lower than it was when the recession supposedly bottomed out.

This isn’t a recovery.  This is an extended coma, with neither improvement nor much deterioration beyond the already awful state we’re already in.

And for 53% of the American people, it was apparently just good enough.