Category Archives: Business, The Economy and The Markets

Pretty self-explanatory, isn’t it?

Pop

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Joe Doakes from Como Park emails:

A buddy wonders why, if the economy is as bad as Republicans claim, the stock market is roaring?  Doesn’t that prove Republicans are lying?

I’m no expert but even I have noticed the S&P 500 and NASDAQ have hit highs while the Dow Industrials and Dow Transport have not.  What’s the difference?  The high-flying stock exchanges buy and sell stocks in companies that are NOT industrial or transport.  So what are they?  The NASDAQ-100, the top performing companies, is composed of banking, insurance, mortgage and brokerage companies  . . . in other words, companies that own a lot of paper but nothing else.  They are dependent on the federal government continuing to dump $60 Billion per Month into the economy to prop up lending and housing.  When that gravy train stops, those companies will collapse.

Industrial and transport – companies that own a lot of heavy iron – have been wrung dry for a decade and thus are far less dependent on stimulus but also far less profitable right now.  Major contractors don’t order billions of heavy machinery for a short term burst of government work; instead, they do the jobs with what they have, defer maintenance, scrape by.  The real orders for machinery, jumbo jets, etc. go to companies that are seeing real growth.

The true measure of the economy is not reflected in paper companies that shuffle stimulus money back and forth, skimming a percentage off the top each time.  The true measure of the economy is iron companies that make things that do stuff.  And that economy is not robust at all.

Joe Doakes

To take the absurd extreme, if I had a Dow Jones company, and I laid off all the employees and sold all the inventory and buildings and land, and took all that cash and the bailout payment besides and stuck it in a Swiss bank account, my stock value would be…

…well, probably 0, and I’d probably be in jail for something or another.

But leave out the “selling the plants and land” bit, and don’t lay off quite as many people, and my stock value would soar, because I’d be in a freaking awesome cash position.  No matter that I’m producing less, employing fewer, shedding payroll, and just waiting for things to get better.  My shareholders are happy.

Isn’t that the sort of thinking – thinking for profits? – that liberals claim to criticize in business?

All In A Day’s Work

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A high school friend of mine who lives in Texas, Jim, posted this on Facebook over the weekend:

———-

Q: Why does world-famous violinist Joshua Bell make $1M for each performance?

A: Because no one is stupid enough to pay him $2M – he’s just not worth that much.

(Implication: what you do has value. A finite value. And if someone else can and will do the same things you can do, for less money, then your value has been reduced to that lower amount. Unless, of course, one of a number of things happens:

  1. that other person is already working for someone else (more jobs, scarcity of labor),
  2.  you increase your value (through experience, education, or any of a sea of other factors),
  3. you decide to assume a greater share of the risk (starting your own business doing what you do, for example), or
  4. you find something new that you can do which will have greater value (new career, more responsibility, …).

What is exciting about all of these options is that, except for the first one, all are activities that you can do yourself. They don’t require that you supine yourself before some benefactor who will then own your future. What went so wrong with a society that no longer recognizes the beauty inherent in self-determination?

———-

What’s wrong is that we have a large, powerful interest in our society that profits handsomely from selling victimhood and dependence; the idea that all violinists, even people who’ve just picked up the instrument, should be making a “living fee” for their performances, just from pure fairness.

It’s a way of buying votes but making someone else pay for it.

Economic Whack-A-Mole

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Joe Doakes from Como Park emails:

Liberal rag Washington Post finally notices that student loans prevent young people from buying a home.  And it’s getting worse as home prices are starting to climb in some areas.  Holy Study Hall, Batman: debt is Bad!

Geez, ya think?  It all comes back to the Instapundit’s observation on middle class markers. That’s the mentality that got us into this mess.

Middle class people need decent jobs.  Decent jobs require college degrees.  College is expensive so government gives out student loans to help people achieve the middle class marker of having a college degree to get a decent job.  Makes sense, right?

Middle class people own their own homes.  Homes are expensive so government guarantees home loans to help people achieve the middle class marker of owning a home.  Seems reasonable, doesn’t it?

Everything sounds great until we realize that student loan debt makes students ineligible for guaranteed home loans.  Worse, we can’t give debt relief to students because the profits from student loan interest payments are pledged to pay for Obama-care — we need the money from Peter’s student loans to pay Paul’s health insurance premiums.

Wouldn’t be so bad if homes were more affordable except the reason home prices are high is the Fed is pumping $60 Billion Per Month into the banking economy to shore up home prices so existing homeowners feel like we’re in a recovery, thus freezing out future generations from buying.

Do you ever wonder what would happen if we just stopped?  Just . . . stopped?

Stop subsidizing student loans.  What would happen?  Colleges would restructure themselves to become affordable.

Stop subsidizing banks.  What would happen?  Banks would adopt sensible banking practices to stay afloat.

Stop propping up home prices.  What would happen?  Home prices would collapse now so our children can afford to buy them (you and I are hosed already, we’ll never see prices return to save us).

Stop propping up any sector of the economy, just let everyone sort it out themselves.  Could it truly be any worse than what we have now?

Joe Doakes

That which can’t be sustained, won’t. That which can’t be sustained but is by brute government force, will – until the money runs out.

And it’s gonna run out.

Perfect Safety

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Joe Doakes from Como Park emails:

The federal government has rules on who gets a pilot’s license. Most pilots think the rules set the standards too high, especially for little planes used in recreational flight.

Minimum 40 hours behind-the-wheel lessons, a medical exam, written exam, oral exam, and a flying test to demonstrate not just ordinary flying, but also emergency maneuvers and navigation over unfamiliar territory, all for a private pilot’s license to fly a little Cessna. The requirements for lessons and testing get harder the bigger your airplane, or what purpose you’re flying for.

If we applied the same standards to other recreational vehicles such as boats, motorcycles and 4-wheelers, nobody would ever use one.

The feds claim they only want to ensure safety. Setting the standard so high nobody can meet it means nobody takes off, so nobody crashes, so perfect safety is achieved.

I guess that’s how they’ll pay for Obama-care . . . nobody will ever get hurt again so it won’t cost anything to heal them.

And all we’ve lost is . . . our freedom.

Joe Doakes

Obama is betting long on the idea that the only “freedom” anyone really cares about anymore is “from want”.

The New, Slacker Normal

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Joe Doakes from Como Park emails:

If you voluntarily reduce your income to avoid paying full price for child support, you are a deadbeat Dad.  We want people to work so they can afford things like medical care for their kids.

If you hide your income to avoid paying full state income taxes, you are a tax cheat.  We want people to work, on-book, and pay their fair share.

If you give away your income to qualify for nursing home care, you are disqualified from receiving it.  We want people to pay for their own medical care, if they can.

If you cut your hours, reduce your income, move it off-book, and make yourself poor on paper . . . you get Obama-care subsidies.

We don’t want people to work?  Who’s going to pay for all the free unicorns and rainbows?

Joe Doakes

The Obama administration’s whole “reducing the need to work” schtick reminds me of a joke from the nineties; “Q:  How many Microsoft developers does it take to change a light bulb?  A:  None; Bill Gates will declare Darkness ™ the new standard”.

Chanting Points Memo: “It’s The Retirees, Stupid!”

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Every month for the past couple of years, I’ve been pointing out the nearly constant decline in the Labor Force participation numbers.

With unemployment taken out of the participation numbers, the actual share of people actually working in the economy today is as low as it’s been since they’ve been tracking the numbers.

The left has a brisk retort; “People are retiring!”   Supposedly, enough baby boomers are leaving the workforce to cause the participation rate to drop.

As if that’s good news.  Someone has to be working to pay into Social Security to pay for all those aging ex-hippies, after all!  Having historically low labor force participation rates means more debt incurred to pay for statutory entitlements that we just can’t control.

So even if that were true – the slide in labor force participation is entirely due to baby boomer retirements – then that’s still bad news.

But it’s not true.

According to Mercatus, oldsters are faring much better in the workforce than younger workers.

No - much better:

Retirees aren’t retiring – and youngsters aren’t working.

At this rate, we’re going to have a nation of 50+ workers paying both for their parents and their kids.

 

Oh, We’re In The Very Best Of Hands

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Joe Doakes from Como Park emails:

In 2012, St. Paul teen unemployment was 32%.   One-third of our young people could not find work, even at the state minimum wage of $5.25 per hour.

On Friday, St. Paul Mayor demanded the minimum wage be nearly doubled, to $9.50.

No employer could afford to hire you because you weren’t worth $5.25 per hour, but surely he’ll jump at the chance to hire you at $9.50, maybe several of you.  What could go wrong?

Joe Doakes

They can be interns for the Democrats.

Unpaid, naturally.

Democrats: This Is Your Mess

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Obamacare is going to eliminate 2.5 million jobs over the next decade, according to the Congressional Budget Office:

It said the equivalent of 2.3 million workers would be lost by 2021, compared to its previous estimate of 800,000, and that 2.5 million workers would be lost by 2024. It also projected that labor force compensation would be reduced by 1 percent from 2017 to 2024 — twice its previous estimate.

Although the CBO projects that total employment and compensation will increase over the coming decade, that increase will be smaller than it would have been in the absence of the healthcare law.

The findings immediately roiled the debate over the healthcare law on Capitol Hill ahead of this year’s midterm elections.

The CBO’s director was pretty blunt:

“All our analysis led us to conclude the effects of the [healthcare law] on labor force participation would be a good deal larger than we had thought originally,” CBO Director Doug Elmendorf said. “Fundamentally, the Affordable Care Act provides subsidies to lower income people and those subsidies phase out … that will have some effects on discouraging labor supply.”

This is on top of the fact that the “job growth” we have (or that the Administration said we had up until December; it’s actually gotten worse) wouldn’t get us back to 2006 levels until the 2020s.  Sometime.  Maybe.  Barring any other problems. 

Like Obamacare. 

By all means, Democrats – keep changing the subject.

“…And I’m Here To Help”

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Joe Doakes from Como Park emails:

When I studied abroad in college, the best deal was to ride a school bus to Winnipeg then fly to Amsterdam and on to Paris.  The trip took 24 hours and cost $460 in 1979 dollars which is worth $1,500 in 2014 dollars.  Canadian air fares were cheaper than American because our government regulated air carrier routes, creating mini-monopolies that kept prices high.

Today, I can fly Minneapolis to Paris direct in 9 hours for $1,200.

The one thing that Jimmy Carter did right was de-regulated airlines and made air fare affordable for ordinary Americans.

Of course, letting airlines decide which routes are profitable means some people lose air service.  Liberals are still arguing we ought to start subsidizing small airports again so people don’t have to drive to hub terminals to catch a flight.  It’s all about fairness, you see, and equality.  People who live in Minneapolis can jump right on the airplane.  People from Thief River Falls, Granite Falls or Cannon Falls must drive to the Minneapolis hub airport.

Yeah, it’s not fair.  But it’s cheap.  And that covers a multitude of other sins.

Deregulation worked for airlines.  Wonder how it’d work for other industries such as, say, health insurance?

Clearly Joe hates womyn.

Value

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(SCENE:  Mitch BERG sits down at a small Vietnamese cafe on University Avenue.  He unwraps a Bahn Mi Dac Biet and is sitting down to read the newspaper when Avery LIBRELLE sits down in Mitch’s booth). 

LIBRELLE:  Hah, Merg!  The President sure pwn3d you wingnuts at his State of the Union the other night!

BERG:  Huh.  You thought so?  I thought it was a lot of pretty vapor.

LIBRELLE:  Hah!  He showed you wingnuts what was what!  Especially on issues of equality!  How women still make 77 cents to a man’s dollar…

BERG:  …yeah, that was bullshirt 20 years ago, when it was a matter of women taking more years off from their careers to have kids than men did.  And it still is.  Women with equal experience and records and credentials make about the same as men – within the bounds of statistical noise.

LIBRELLE:  Oh, he sure beat you up on the subject of the minimum wage!  Costco and Punch Pizza both start workers at $10 an hour!  If they can do it, anyone can!

BERG:  We talked about that yesterday.  Neither Costco nor Punch are representative of all, or even many, small businesses that employ low-skill workers…

LIBRELLE: Stop right there,you one percenter!  There is no such thing as a “low skill worker”!   Every worker’s skills have value, and every worker’s hard work is vital – indeed, more vital than the bosses!

BERG: Um, what now?

LIBRELLE:  That’s right!  Mitt Romney was frequently not at his desk at Bain Capital – but the janitors had to be there picking up the trash!  No janitors, no major deals!

BERG:  And, uh, we’ve been through that before too.  You think that if a janitor just started picking up stuff at random out on the street, it’d generate value?

LIBRELLE:  Don’t you value clean streets?

BERG:  Er, I already pay a bunch of public union workers with better pensions and insurance than I’ll ever have to do exactly that.  But let’s make sure we’re clear on this – all work is equally valuable?  So if a receptionist and a bunch of janitors sit down outside the bus station and start answering calls and cleaning things, a multi-billion dollar venture capital firm will spontaneously form around it?  Drawing billions in capital and the people who know how to negotiate its use?

LIBRELLE:  Happens all the time!

BERG:   Right.  But let’s look at the other half of your statement – the idea that all skills are useful, provided one works hard.

LIBRELLE:  They are!  All hard work must be rewarded!

BERG: All hard work?

LIBRELLE:  Yep.  The harder the work, the  more valuable it is!

BERG:  So someone who works sixty hour weeks for six months and spends half of his life on the road closing the financing for a deal that opens a factory that provides hundreds of jobs is worth the same as someone who, hypothetically, hammers rocks into smaller rocks as a form of artistic statement for sixty hours a week?

LIBRELLE:  Same?  The rock-breaker should make more!  He…

BERG: …or she…

LIBRELLE:  …of course, works very hard!  Have you ever operated a hammer?

BERG:  Sure I have.  Have you?

LIBRELLE:  The union would break my knees if I did – and I may file a grievance against you, for that matter – but I know the basic theory.  It’s hard work.  Much harder than computing spreadsheets and talking with banksters and sitting on airplanes.

BERG:  But it generates no value!

LIBRELLE:  Says you!

BERG:  Er, yeah.  Sez me!  The act of breaking rocks into smaller rocks for twelve hours a day is of no value to anyone!  It’s even a terribly inefficient way to make gravel!

LIBRELLE:  Perhaps to your bougeouis, one-percenter sensibilities!

BERG: Any rational person’s sensibilities!  I mean, here’s a test for you:  How much are you willing to pay, from your own pocket, for someone to break rocks into smaller rocks as a form of artistic statement?

LIBRELLE:  Well, Merg, that just shows how ignorant you are about economics!

BERG:  You don’t have an answer, then?

LIBRELLE:  The real question is this:  how long do you really think girls should sit in jail for having an abortion?

(Dish of pho arrives at table)

LIBRELLE:  Excuse me – I ordered pho.  What is this?  You charge $5 for a bowl of noodles with crud in it?

(And SCENE)

Doakes Sunday: Downmarket Abbey

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Joe Doakes from Como Park emails:

Politicians in the United Kingdom are doing the math.

Britons without jobs: 413,000.

Immigrants who have jobs: 736,000

Plainly, some immigrants have taken jobs from Britons while other immigrants are sitting on welfare.  In response, the government is tightening up the rules.  Immigrants will find it harder to get on welfare and won’t be able to stay on welfare as long as before.

Meanwhile, President Obama assures us Republicans are just as eager as he to open the immigration floodgates.

Joe Doakes

The parallels between the US in the Obama era and Britain from 1965-1978 are unmistakeable.

Creative Destruction

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Joe Doakes from Como Park emails:

Sears is closing stores.  This is seen as a crisis.  It’s not, it’s a rational and inevitable response to the crappy economy and changes in urban development and business management.

The Administration has been manipulating the economic statistics and the media have been hiding the decline for seven years with no end in sight, but actual businesses can’t operate on wisps and whispers, they need cash in hand and it’s not coming in the door because the economy is crap and everybody knows it.  Empty stores generate no profit so close them and rely on internet sales.  The Sears Roebuck catalogue pioneered mail-order sales, they’re simply going back to their roots.

Urban planners want more outdoor pedestrian malls and are willing to use tax dollars to get them.  Developers stop building indoor malls in favor of outdoor pedestrian walking areas, not because consumers prefer to slog through slush but because hogs feed at the deepest trough.  When the development is complete and the developer paid in full, the stores will sit empty until filled by nail parlors, cell phone shops, e-cigarette kiosks, Subways and taxpayer-supported non-profits while customers drive to the nearest Wal-Mart or Target Super Stores.
Yes, stores are closing but other stores are opening.  Walgreens closed a store on Lexington in my neighborhood.  Is that the end of the world?  No, they opened one across the street.  Best Buy is trying the smaller store model.  It’s an industry response to the market.  Grand Avenue type shopping boutique areas, extremely expensive inner city land prices, etc. are driving them to put smaller stores in tighter spaces.  Coupled with that is the continued improvement in “just-in-time inventory” which allows smaller stores with very little backroom stock.  Smaller depth in inventory means smaller space needed to house it on the showroom floor and therefore lower prices for customers.  That’s a good thing, in my book.  That also means market opportunity for shippers, ware-housers, etc.  Except of course that Minnesota has decided to tax those businesses out of the game.

Joe Doakes

The market is adapting to, well, the market.

The notion that any business’ survival is in and of itself vital – or worse, that any business is “too big to fail” – is the most toxic idea possible in a free society.

Of course, the obvious corollary is that government is the same way.

More on that next week. Or maybe the week after.

Deleted Extras

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Minnesota’s Film & Television Board faces a legislative re-write.

Like Hollywood, Minnesota’s relationship with the entertainment industry has seen a tumultuous career trajectory.  From being the ingenue of Midwestern locations in the 1990s, resulting in a bevy of films such as Fargo, Grumpy Old Men, The Mighty Ducks, to a discarded destination left in favor of Canada, Minnesota’s greatest entertainment legacy seemed to come more from the state’s exports (the Coen brothers; Diablo Cody) than production imports.

Left in Hollywood’s wake, two institutions survived – a small, but dedicated core of film and television technical professionals and the bureaucratic Minnesota Film and Television Board.  One group has created jobs; the other has lobbyists and now $10 million in tax incentives:

Six months after receiving a record $10 million to lure films to the state, the Minnesota Film & TV Board is under fire, with some legislators and industry insiders questioning whether it should exist at all.

Legislative Auditor Jim Nobles’ concerns about the board have escalated to a point where he plans to seek a formal examination of it next month, when the legislative session begins. If the evaluation is unfavorable, funding for the program known as “Snowbate,” and even the board’s future, could be in jeopardy….

“In addition to an audit, an evaluation is really needed to address broad policy questions,” Nobles said. “Should the state be involved in supporting the film industry? If yes, what would be the most effective approach, and who should be in charge of that effort?”

The fate of the “Snowbate” and the Film Board itself seems to be a movie stuck on an infinite loop.  In the mid 2000s, and as recently as 2010, the necessity and/or effectiveness of the Film Board was constantly being called into question, as few films chose Minnesota as their location – even those scripted as taking place in the state.  Leatherheads, New in Town, Juno, Jennifer’s Body, Contagion and Young Adult all take place in Minnesota and with the modest exception of a few scenes of Young Adult, none shot a second of footage in the state.  Other films, like Homefront or Gran Torino were rewritten to reflect moving the location to outside Minnesota.

The Film Board has countered that they do create jobs, suggesting numbers as high as 338 full-time positions in return for $3.3 million in subsidies.  But film and television work, by its nature, is not “full-time” but merely temporary.  And considering the increasingly broad definitions of the Snowbate guidelines to include advertising campaigns and web-based content, it would appear that all the Snowbate is accomplishing is subsidizing temporary Minnesota-based work, not bringing in funds or employment from out of state.

Minnesota isn’t the only state that’s reexamining whether or not film tax credits actually bring in revenue.  Indeed, the trend-line seems to be going the other direction:

…It’s hard to get a good handle on the exact impact of an in-state movie production. In most places, the only reports on movie-production revenue and jobs come from the state film office–or the movie industry itself. Objective studies are relatively hard to come by. And even where independent studies of film incentives do exist, the data can easily be interpreted in myriad ways.

Take Massachusetts, which has offered a 25 percent film incentive since 2006 and already has attracted numerous big-name projects and stars, including Tom Cruise, Cameron Diaz, Leonardo DiCaprio and Mel Gibson. The Bay State is one of only a couple that require an annual, independent report on how the incentives are performing. When the most recent report was released by the Department of Revenue in July 2009, tax-incentive opponents said it unequivocally showed the credits weren’t working. According to the report, the state paid out $113 million in movie tax credits in 2008, while filming in the state generated $17.5 million in new tax revenue and created about 1,100 full-time-equivalent jobs for state residents.

Lost in the discussion is why so many films were attracted to Minnesota in the first place – the filmmakers were from here.  Mighty Ducks‘ director Mark Steven Johnson is a Hastings native.  Joe Somebody‘s writer John Scott Shepherd worked in the Twin Cities.  Thin Ice‘s director Jill Sprecher is a Wisconsin/Minnesota native.  And the list of below-the-line production people from Minnesota in Hollywood – the casting directors, the location scouts – is extensive.  Relatively few economic incentives were required (or even existed) in the 1990s to encourage filmmakers.  The same appears true today.  The limits of the Snowbate didn’t seem to stop the Coen brothers from shooting 2009′s A Serious Man in their hometown of St. Louis Park.

Minnesota isn’t going to win a contest of who can subsidize more Hollywood fare for little (or no) economic return.  And if even a navy-blue political state like Massachusetts can realize that film tax credits only result in a state being taken advantage of like a young actress on a casting couch, Minnesota might be able to come to a similar conclusion.

An Entire Economy Of (Ahem) Shots In The Dark

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Our labor force participation rate is such that employment, for all the jabbering about the current ~7% rate, is scarcely better than it was in 2009.  Investment is still glacial (except in the stock market – which is not the same as “investing in the economy”. 

Kevin Williamson at the National Review may be the single best writer in America on the subject of government and its effect on the nation, the economy, and The People.  He combines off-handed humor with blistering, airtight analysis. 

And as such, I highly recommend you read his New Years’ wrapup, “A Year of Fear“.  The whole thing is worth reading.  But I’m pulling out the conclusion, about the effect  uncertainty has in crippling an economy. 

“But wait”, lefties say; “my pension fund is going great guns!  The Dow is over 15,000!”

Yeah, it is.  And that’s a little like seeing your car idling at 10,000 RPM and assuming that’s because it’s raring to go. 

The conclusion is the big beef, here; I’m adding emphasis:

The Obama administration has achieved a special distinction here: Investors are faced with considerable uncertainty vis-à-vis how it might interpret rules as compared with the Bush or Clinton administrations — and also about how it might interpret rules as compared with the Obama administration the day before yesterday. Now you see a mandate, now you don’t. And as bad as it is in 2013, the seething hostility of Elizabeth Warren is ascendant on the left, a fact that offers very little encouragement to entrepreneurs and investors considering illiquid, long-term positions — things like factories, stores, and buildings, as opposed to easily liquidated investments in financial instruments.

Another common lefty complaint?  “Companies are too focused on profits!”

Many on the left complain about the “financialization” of the U.S. economy, while unwittingly helping to encourage that very phenomenon. Given a choice between dividing up his investments between a couple of hedge funds and financial firms or locking it up for ten years in an assembly line in Indiana, a sane man will consider the question of uncertainty and predictability. And under current conditions, the assembly line is a risky bet.

Perhaps 2014 will be the year in which we learn the value of predictability. Who can say?

Read the whole thing. 

Better yet, get an Obama supporter to read it.

Open Letter To Minimum Wage Strikers

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To:  All you folks “striking” for a $15/hour minimum wage
From:  Mitch Berg, uppity peasant
Re:  Money from nothing

“Protesters”,

Today, you’ll be out and about around dozens of McDonalds, Taco Bells, WalMart and other low-wage employers.

I saw one of you on “Today” this morning; a cute, blonde, twenty-something single mother (what else?) and front-counter worker who notes for the camera that sometimes she has to choose between work clothes and bus fare.

I feel for you.  I do.  Twenty-odd years ago, I was in my twenties, had a couple of kids and a $7/hour job.  It was hard making ends meet.  Really, really hard. 

Of course, it was hard because of choices I’d made, not my diabolical employers.  I’d devoted myself to my first career – radio, which paid really badly, too - with a monastic intensity.  That career crashed – and it took me a few years to realize it. 

And after a year of floundering, I got the aforementioned $7/hour crummy job. 

Where I learned a couple of things; how to work in an office.  How to use a computer (that wasn’t something people were born doing back then).  How to work days instead of nights. 

I had made a few good choices, of course; when I was a teenager, I’d stayed in school and learned a few useful things, and kept it in my pants long enough to get through college (with a BA in English, which was no more a ticket to wealth then than it is today). 

Point being, that lousy $7/hour job was how I found my next job for $9/hour.  And thence got into technical writing.  And then into the career I have. 

And if that $7/hour job had gone away because legal document coders had decided to strike for $12 an hour, causing most of the crummy entry level jobs to be eliminated, where would I be today? 

The same place you’ll  be if they double the minimum wage for working the counter.

By the way, the woman on “Today” also parroted the same thing I’ve heard from ostensibly smarter liberals: without workers, there’d be no business.

That’s 180 degrees wrong, of course; without the business, there’d be no jobs. Don’t believe me?  Let’s try a quick thought experiment.  Find a vacant lot somewhere.  Put on a fast food uniform, and stand there saying “May I help you?”   Wait – where’s the burgers?  Where are the customers?  Where’s the counter and the till?  Where’s the building? 

What?  The SEIU goons behind the “strikes” never mentioned this?

Huh.

Goalposts

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Joe Doakes from Como Park emails:

The number of Americans filing for unemployment dropped.  The headline makes this sound good but it’s actually not.

Look at it this way: suppose there are 100 people in the economy and 7 get laid off.  That’s an unemployment rate of 7%.

Now there are 93 people working.  If 7% get laid off again, that’s 6 more people out of work.  True – fewer people are getting laid off (only 6 instead of 7) but that’s because there are fewer people working to GET laid off.  The measure of a healthy economy is not how many people are out of work, it’s how many people who want to work, can find work.

The Labor Force Participation Rate has dropped so low that fewer than 63 people are working out of every 100 living in America.  The other 38 are out of work, out of unemployment benefits and have quit looking for work.  That’s the lowest percentage of working Americans since Jimmy Carter was in office.  That’s the tax base we’re expecting to pay for Social Security, Medicaid, Medicare, Obama-care, student financial aid, foreign aid, farm aid, light rail and oh, yes, fighting wars in a dozen countries.

Joe Doakes

It is not necessary for people to return to work. It is necessary that the media make people think people are returning to work.

Thus racism.

The Left Hand Doesn’t Know What The Farther-Left Hand Is Doing

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It was one of the stories that got no play last session, in spite of the fact because it highlights the bizarre schizophrenia of using politics to allocate human capital, but while on the one hand AFSCME was working to unionize home-child-care providers – who are independent contractors and don’t have “management” – it was instituting full-day kindergarten, reducing the number of kids who’d be in daycare at all.

Which wasn’t entirely incongruous, if you think about it; to the DFL, racket money from daycare providers and union dues from a doubling of Kindergarten teachers are both just revenue streams.

But this?

The final rule, for the most part, confirmed a proposed rule, issued in July, which will cut the Medicare home health benefit by $22 billion over the next four years.

“Congress asked [Center for Medicaid Services],” Halamandaris said, “to do a comprehensive evaluation of the home health benefit, to isolate what works and what needs improvement, how to increase access and efficiency, and how to reduce costs while improving the quality of care. CMS did none of this. Instead, all they did was look to impose the largest possible cut —3.5 percent a year — on the Medicare home health benefit. This adds up to 14 percent over the next four years, or a total of $22 billion.”

The National Association for Home Care & Hospice has produced studies showing that the Medicare home health benefit has already endured more than its fair share of cuts. The benefit has been cut a disproportionate $78 billion since 2009. Add in the newly imposed cut and $100 billion in cuts will have been taken from the most popular and most-needed Medicare program. And as a result of these cuts by the end of 2017, 75 percent of Medicare-certified agencies will be forced under water with profit margins of zero or less.

“The clear conclusion is that saving money is more important to CMS than serving those who are so sick they cannot leave home without assistance,” Halamandaris pointed out. “It is obvious that they turned a deaf ear to our pleas on behalf of aged, infirm, disabled, and dying Americans.”

In other words, while the SEIU was working calling in markers with the DFL to unionize home-care workers, President Obama was working to shut the industry down completely.

Good job, guys.

Occupy Vatican

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Lighten up, Francis.

Most observers, Catholic or not, recognized the sea-change brought about by Pope Francis I.  An Argentinian Cardinal, Francis supposed a move left for the Catholic Church from the days of Pope Benedict XVI and John Paul II.  While Francis hasn’t shocked many with his bending on social issues, his most boisterous attacks have been on economic issues – a move leftward he restated by declaring “unfettered capitalism” a “new tyranny.”

The move isn’t exactly unprecedented.  Pope Benedict XVI voiced deep reservations about modern capitalism. In his encyclical Caritas in Veritate, Benedict reiterated “progressive” stances in areas of public unions and economic redistribution; areas often overshadowed within the media by Benedict’s undoubted commitment to baroque liturgies and traditional moral norms.  The election of Pope Francis caused everyone from full-time Vaticanologists to the average Catholic in the pew to recognize a shift, a change of emphasis and style, and a laser-like focus on poverty from the new pope.  Continue reading →

Today’s News, Seven Years Ago

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When I left  North Dakota in the eighties, it seemed like rural America was on the verge of drying up and blowing away.

Of course, it was a historically lousy time for farmers and farming – and a time when there just wasn’t much more than that to draw people to a small town, unless one specifically sought out the small-town life.

Which I, for one, certainly did not.

Anyway – times have changed.  Not just in NoDak – perhaps you’ve heard, they found oil – but also in rural Minnesota:

Amid what has been described as a new “golden age” for farm profits and land wealth, the list of the 50 Minnesota counties with the fastest-growing incomes since 2005 includes only one big Twin Cities county. The state’s net farm income has nearly doubled, from $4.5 billion in 2010 to $8.2 billion in 2012.

The town of Jackson, in southwest Minnesota, was one of only four rural cities over 2,500 to suffer significant losses in numbers during this century’s first decade — then it landed a new employer from Europe offering 1,400 jobs.

Studying trends in retail, Craig and a colleague uncovered what they called “astounding” growth in consumer sales in regional centers such as Mankato and Brainerd, and “remarkable” increases in economic activity in many smaller communities — stiff reproofs to the “myth of rural decline and ghost towns.”

The spread of technology helps, of course. One of the worst things about small-town life, if you weren’t wired to appreciate it or didn’t live to spend your days in deer stands or on fishing boats, was the stultifying isolation. That’s much less a factor these days.

Oh, yeah – and I wrote about this almost seven years ago. Joel Kotkin’s been predicting this for a long time; as technology makes small towns, especially the exurbs, less isolated, growth will shift there.  Cities will become playgrounds of the wealthy and warehouses for the poor; everyone else will be living in Watertown.

Worse Than The Problem

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Minnesota – the state of 10,000 “progressive” advocacy groups.

And some of those advocacy groups run some very slick, polished, professional PR efforts.  Or - like the Alliance for a “Better” Minnesota, or “Protect” Minnesota –  at least loud and well-funded ones.

And then there’s the Douglas County DFL. 

The DugCo DFL runs a twitter feed that’s always a useful barometer for whatever the left end of the DFL’s intellectual bell curve is “thinking” has been told by the people paid to do their thinking for them. . 

This went out on Twitter the other day:

@dc4DFL: Australia has a Minimum Wage of $16.88 per hour. Minnesota needs to seriously raise ours. #mnleg #stribpol

Wow.  “Seriously”.  That sounds like quite the imperative.

So let’s compare and contrast.

The unemployment rate for Minnesotans aged 16-24 is 11 percent.  Note that in Minnesota (and most of the US), full-time students aren’t considered “in the labor market” in the same sense as someone working for a full-time living. 

And in Australia?   It’s 19% “not fully engaged” (neither working nor studying full-time).  And if you compare apples to apples – drop full-time students from the “work force” – then close to a third of Australians between the ages of 15-24 are neither working nor studying full time. It’s a little under a third if you count only Australians from 20-24. 

Bear in mind (and I say this more for the benefit of people who’d read what the DugCo DFL says seriously than for most of this blog’s audience) Australia’s economy isn’t currently mired in one of the most dismal recessions in their history.  Their growth was hit by the global financial crisis over the past six years – but not like ours. 

So – even in a relatively healthy economy, Australia’s unemployment and underemployment among younger, lower-skilled workers is much higher than in Minnesota. 

Of course, Australia’s high minimum wage is one of the products of the Labour government…

…that was just tossed at the polls two months ago.  While I saw no evidence that the minimum wage was a pivotal issue, an artificially high minimum wage is part and parcel of the whole raft of “progressive” policies that stagnate economies. 

Uncle Ryan Winkler might want to find himself some smarter stenographers.

Blight of Day

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Is Detroit’s new-found cause célèbre ignoring the past to cloud the future?

George Clooney had the Sudan.  Bono has Africa.  Anthony Bourdain – and much of the American media - apparently has Detroit.

Michigan’s So Not Grand Central Station: built in 1912 and on the national registry of historic places. It was closed in 1988 and is one of Detroit’s estimated 78,000 abandoned buildings.

In recent months, the city of Detroit has witnessed two narratives arise in Phoenix-like fashion from the economic ashes of the city, often in conjecture with themselves.  One is the purported economic revitalization of the city that gave birth to Motown and the American automotive industry.  It is a narrative fostered by Quicken Loans founder (and Cleveland Cavs owners) Dan Gilbert who, among others, has put millions into Detroit to try and restore its grandeur.  The other narrative, the so-called “ruin porn” seen in picture form below, depicts Detroit as a third-world ghetto.  A Somalia on the St. Clair River.

The former delights the denizens of Detroit with hopes of a better future.  The latter rankles them.  Gilbert himself expressed outrage when 60 Minutes balance their report on the Motor City between Gilbert’s altruism and the destruction of the out-lying portions of the city, comparing it to Dresden after the Allied bombing of World War II.  Gilbert tweeted a defiant message, stating “a city’s soul that will not die was the story & they missed it.”  But even a sympathetic, blue-collar soul as Bourdain, whose CNN show Parts Unknown highlighted the city last night, saw the need to balance Detroit’s attempts to pick itself up off the ground with the stark realities of a city undone.

The Fisher Body Plant: once part of the GM empire

Both narratives ignore the Chrysler in the room – how Detroit got to where it is today.

If the “ruin porn” industry renders pity without judgement, the acts of Dan Gilbert and others, as well-intended as they obviously are, seek a future for Detroit without acknowledging its past or present.  Not once in 60 Minutes‘ coverage did the story’s telejournalism deal with the political causes for Detroit’s decay - a corrupt, one-party institution burrowed like a tick into City Hall.  Equally, if differently, ignorant are the views of Gilbert et al who believe that once their plans to remove all of Detroit’s blight (78,000 buildings), capital will come easily rushing back into the city:

Gilbert is no fan of urban farming, though. When he envisions land cleared of  blight, he sees developers rushing in to build anew…

“When that blight is gone, maybe we don’t have to be talking about shrinking cities because it will be such a rush of people who want to get into low-value housing — when all the utilities are there and the land is pretty much close to free— not exactly free, but close to it — and all the utilities are there, it becomes very cheap for a builder/developer to develop a residential unit, and they are going to develop them and develop them in mass as soon as we get the structures down and maybe we don’t have to worry about raising peas or corn or whatever it is you do in the farm.”

The Highland Park Police Station: even Detroit’s police stations no longer want anything to do with the city

And what will cause developers (yet alone individuals or businesses) to return to a city with the highest property tax rate in the country?  What will encourage retail industries when Michigan’s sales tax is 6% on top of that?  Detroit’s backers can honestly claim that the city ranks no where near the top of the tax chain (Detroit ranks 92nd nationally; Minneapolis is 52nd by comparison).  But the tax climate is far from ideal, especially the dubbed ”most dangerous city in America” with a murder rate 10-times the national average.  Throw in a 58-minute response time for police, to attract businesses back, Detroit may literally need the fictional hero RoboCop (to whom a statue is being built - seriously).

There isn’t much evidence that Detroit is about to change its ways.

The Merrill Fountain at Palmer Park: has sat empty for 50 years since being moved from the Opera House. Vandals have stolen much of it.

The Merrill Fountain at Palmer Park: has sat empty for 50 years since being moved from the Opera House. Vandals have stolen much of it.

Since Governor Rick Snyder’s decision to appoint emergency manager Kevyn Orr last spring, Detroit’s journey to bankruptcy has been managed with minimal (some would say no) input from City Hall.  As the case has headed to court, where Orr has testified about Detroit’s long-term debts of $18 billion, city officials have fought the measure almost every step of the way.  The election of Mike Duggan as mayor, the former head of the Detroit Medical Center, has been advertised as the promotion of a turnaround artist.  But while Duggan had success revitalizing the city’s Medical Center, Duggan also ran on opposing Orr’s decisions and comes as a political protégé of former Wayne County Executive Edward McNamara – an official who backed the cartoonishly corrupt Kwame Kilpatrick and had FBI agents and state police raid his own office in November 2002, over alleged corruption in airport contracts and campaign fundraising.  Meet the new boss.

The American Hotel: built in 1926, the hotel is 11 stories high with over 300 rooms. It has remained vacant since the early 90′s.

Oh, there have been the requisite platitudes.  Duggan and Orr have broken bread in what was described as a “very good first meeting.”  And Duggan has said all the right things that a reformer would state, such as being “a huge believer in lean processing. If you are not excellent at making systems work, you cannot survive…”

But the inertia of the status quo has been apparent even after only one week from the election.  The Michigan House Appropriations Committee ranking Democrat Rep. Fred Durhal, Jr. is angry that Duggan hasn’t called him yet.  Metro Detroit AFL-CIO President Chris Michalakis essentially threw down a polite ultimatum that Duggan must “honor” his commitment to working families, while suggesting the labor doesn’t trust the new mayor.  Duggan claims he just wants a seat at the table as Detroit’s debts are solved, and if Synder and Orr are smart, they’ll allow it.

Wilbur Wright High School: closed in 2005, this building actually is among the few on this list that has been demolished. 10,000 buildings have been torn down in Detroit since 2010.

The decision to abrogate Detroit’s city government in the bankruptcy process may have been politically necessary (Detroit certainly hasn’t come to grips with its position despite many, many, many opportunities), but doing so has allowed Snyder and Orr to play the villain while the usual suspects who caused this economic disaster play the victim.  However, it’s also allowed Snyder to take all the credit too.  67% of Michigan voters approved the move back in March (including 41% of Detroit), and the decision has given Snyder a welcome bump in his approval rating.  That’s a short term political fix to a long-term structural problem.

Mike Duggan may be a product of the system that failed Detroit, but he’s viewed warily by both it.  Orr’s contract expires in the fall of 2014; Duggan and the City Council can vote whether or not to renew it – almost literally the only voice they have in the process.  If that’s the first time Duggan has to impact the process, he’ll have likely caved by then to labor, vote to end Orr’s tenure and – more importantly – work to undo reforms set in place.  Should Rick Snyder not return in 2015, an opportunity to address Detroit’s deeper fundamental problems will have passed and a new administration will slap a band-aid bailout on the city, and hope more journalists write about Dan Gilbert than urban hunters who live off of raccoon to supplement their meals.

Boing

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Joe Doakes from Como Park writes:

“College Enrollment Falls As Economy Recovers.”

Sounds as if young people are opting to skip college to go straight into the workforce, snapping up all those outstanding jobs at great pay and benefits.

Except the article doesn’t say that.  The article talks about sky-high tuition and student loans, it talks about demographics, it talks about colleges that overbuilt, but the notion people are working instead of studying is handled with this line:

“But the number of Americans turning 18 hit its recent peak in 2009, and will continue to decline through 2016. High school graduation rates appear to have leveled off, and job prospects have improved, making school a less attractive option.”

Really?  Where are all these great jobs?  Why isn’t Obama getting more credit for creating them?

Joe Doakes

I think it qualifies as a “Dead Skunk Bounce”.

Chanting Points Memo: We’re Number Eight!

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The DFL chanting-point bots were out in force yesterday; a Forbes survey put Minnesota at number eight nationwide in terms of “Best States for Business“.

So look at the rankings.  And read Forbes‘ blurb:

Minnesota’s overall rank jumped 12 spots on the strength of an improved economic outlook. The Minneapolis-St. Paul metro area is home to 62% of the state’s population. It also serves as the state’s economic hub, with companies such as Target, U.S. Bancorp, General Mills, 3M and Medtronic headquartered there. Minnesota has the second highest percentage of adults with a high school degree at 92.5%. With its good schools, low poverty rate and healthy populous, the state also scores well on quality of life measurements.

We’re reminded that the state jumped from #20 in last years’ rankings.

Two things to say about this article.

For starters:  everything the article measures about state business climate is directly related to changes made under GOP control of the legislature.  Everything.  What – you think Minnesota’s business climate is going to have a radical jump in business climate in the eight months since the DFL got the keys to the car?

Business climate changes slowly.  It improved under GOP control – for two years.  It was imperfect, but it was an improvement over 2006-2010.

And what’s the other thing this study tells you?

Look at the factors it measures:

  • Business Costs (Minnesota is 34th)
  • Labor Supply (18th)
  • Regulatory Environment (22nd)
  • Economic Climate (9th)
  • Growth Prospects (13th)
  • Quality Of Life (5th)

What do these factors tell you?

Labor Supply and “Quality of Life” are primarily issues for big businesses – the Targets and Best Buys and Medtronics, the big Fortune list titles that have their headquarters in Minnesota.  And we know – it’s a great place to be a CEO!

But how about small business?  What are the important measures?  A good economic climate is useful – but business costs and regulation are life and death.

And they were merely adequate over the past year – and have gotten much, much worse.

But we know that, since Minnesota has become the worst state in the nation for entrepreneurship measured in small business starts per capita since the DFL took control.

Which is not something the Forbes study visibly measures (or at least gives much weight to), and has little effect on the big Fortune 1000 companies that the DFL is most concerned with.

The big test will be how the state ranks next year and the following year.

Any bets?

http://onforb.es/1dM1Fz3