Category Archives: Economics

Miscellaneous economy stuff

Too Typical

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The Wall Street Journal‘s editors had it down pat in their editorial of last Wednesday. The opening sentence of their lede laid it out:

As federal pandemic largesse ebbs, Democratic-run states are eyeing higher taxes rather than reform spending programs.

The rest of their piece expanded on that theme.

Nor does it get any clearer than this bit. In a nation overrun with Federal debt and with Progressive-Democrat-run States joining in on climbing the forest of trees in their world on which money grows, Progressive-Democratic Party politicians still cannot even conceive of cutting spending. Nor do they feel the need to; it’s not like they’re spending their own money. It’s all OPM.

Now it’s Rhode Island that’s fixing to get up into one of those trees. Rhode Island is another of those Progressive-Democrat-run States, this one with a Progressive-Democrat governor, a 38-seat Senate containing 33 Progressive-Democrats, and a 75-seat House filled with 65 Progressive-Democrats.

This is what we can expect nationwide if Party wins control of the House and Senate this fall, and it’ll get far worse if Pary wins the White House in the 2028 election cycle.

AI and Entry-Level Jobs

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Richard Smith, Johns Hopkins University’s Human Capital Development Lab Professor of Practice, and Arafat Kabir, writer about AI, in their The Wall Street Journal op-ed think that AI is spelling the death knell of entry-level jobs.

When AI automates routine tasks, organizations often find they need experienced employees who can combine AI capabilities with years of business knowledge. What those organizations don’t need is entry-level employees learning the basics. Data shows rising unemployment since 2022 among 22- to 25-year-olds in AI-affected sectors—even while employment for older workers remains stable.

Not so much. The transition from hand-spinning thread from cotton balls—an entry-level job for making cloth—changed with spinning jennies, powered looms, and the like. Entry-level work didn’t disappear, it transitioned to requiring different, and better, skills and the knowledge required to understand the more complex work. Hand spinners and weavers had to upgrade their skill sets and knowledge or go unemployed. New basic employees learned those new skills and gained that new knowledge. Employers who invested in the requisite training prospered, those that didn’t, didn’t.

Similarly, the transition from hand-fabricating and assembling automobiles to the assembly line changed the nature of entry-level work. Henry Ford blew away his competitors when he invested in training his new employees, which along with a small pay raise increased worker retention with its associated reduced labor costs from worker turnover and needing constantly to get new ones trained. OJT of hand crafters no longer could cut it, but the entry-level work, while changed in nature, remained in fact.

So it is with AI when it’s properly put to use. The scut work and grunt work of interns as gophers along with the routine most basic work that will be done by AI applications also does not replace entry-level work; it merely changes the nature of that basic work and, as before, requires a bit more knowledge of how to do it. The existing work force—those older workers—will retire sometime between sooner and later. Their loss will require companies to train their replacements in this new entry-level work, and those that do will move ahead, while those that do not will fall behind.

Smith and Kabir acknowledge as much without, apparently, recognizing so.

[R]ecogniz[e] that AI represents a fundamental shift rather than merely another tool. One example could be focusing on “AI native” tracks in which, instead of starting new employees with routine tasks that AI can handle, they begin with AI oversight and optimization roles. They learn to train, monitor, and improve AI systems while simultaneously building domain expertise—combining technical fluency with business acumen.

Yet, that’s precisely what a tool does. The steam-power was a fundamental shift for industry and industry-related work. It powered mining drills, heavy transportation, forges, and on and on. That fundamental shift, though, was just a means of getting new tools for more efficient work with an associated change in what constituted entry-level work. That basic work ranged from running those new tools to maintaining them to manufacturing them.

As technology evolves, so too does the nature of “entry-level.”

Right Idea, Bad Plan

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Progressive-Democrat New York City Mayor-elect Zohran Mamdani wants to send $6 billion of city taxpayer money to a fancy, glittering new infrastructure of child care centers that he wants to build so mothers of small children—6 weeks old to 5 years old—can get back to work. (As if mothering children isn’t work in its own right, but that’s beyond the scope of this article). Erica Komisar, a psychoanalyst, wants that money sent, instead, directly to the parents for their use in raising their children their way.

That’s the right idea, but it’s a decidedly suboptimal plan.

Instead, reduce the city’s taxpayer bill by those $6 billion. Let all of the city’s taxpayers hang onto their money, instead of giving it up to the city’s government for spending on the favorite programs of whomever happens to be sitting in Gracie Mansion. Those parents of toddlers will benefit at least as much, from the increased city economic activity that tax reduction would generate, activity that would include increasing job availability; increasing wages; increasing availability of child care and babysitters at prices those parents actually could afford; increasing availability of employer-provided child care, not from government mandate but from it being a good business practice.

That economic flow-through won’t quickly develop; there’s a lot of economic destruction from prior city administrations’ Big Government impositions that needs to be corrected. That, though, simply puts a premium on getting a $6 billion reduction in city taxes enacted.

Dueling Mischaracterizations

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David Kennedy, Stanford University Emeritus Professor, responded to The Wall Street Journal‘s Holman Jenkins in Kennedy’s Letters letter in Tuesday’s Wall Street Journal. Kennedy said Jenkins mischaracterized his book regarding Franklin Roosevelt’s handling of government during the Great Depression.

Mr Jenkins has me arguing that “Franklin D Roosevelt didn’t end the Depression, he used it to enlarge the federal government.” True enough but too reductive.
Roosevelt didn’t simply “enlarge” the federal government; he right-sized and reformed it for the conditions of modern society. His initiatives rescued and dramatically upgraded capitalism, as witnessed by the unmatched performance of the US economy in the post-World War II decades. The New Deal gave to the exceptionally fortunate “greatest generation” a scaffolding of institutions and practices that reduced risk in sector after sector of American life, brought stability and predictability to millions, nurtured the shared prosperity and consequent trust that ended the Jim Crow era, and positioned the US for world leadership to century’s end and beyond.

Kennedy’s own mischaracterizations begin with his Roosevelt didn’t simply “enlarge” the federal government; he right-sized and reformed it for the conditions of modern society. This is his cynical arrogance of presenting that claim as though it’s received fact rather than the matter of opinion that it so plainly is.

Kennedy’s other serious mischaracterization is his risible claim that Roosevelt’s New Deal created the conditions for US leadership in producing global prosperity and stability. This is a just-as-cynical omission of the simple fact that in the aftermath of WWII and the war’s global destruction of assets and of lives (the latter far beyond the merely killed), during those decades of the Greatest Generation, the US was the only economy in the world that could function. Nearly any “scaffolding” would have put us in the global economic driver seat.

How much better could we and the world have done without Roosevelt’s wage and price controls, still intact today in one form or another (minimum wage laws directly controlling wages, and price controls indirectly in place with Roosevelt-populated Supreme Court rulings like Wickard v Filburn, which made it illegal for farmers to grow for their personal (and so wholly intrastate) consumption without counting it in their interstate commercial production, a ruling that also called a farmer’s strictly intrastate commercial production a part of interstate commerce)?

Roosevelt’s expansion both artificially created jobs for a bloated civil service, it straitjacketed our free market capitalist economics.

No Government Bailout

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Not even by city governments, and not even for this.

The Wall Street Journal‘s editors noted that

The New York Housing Conference, a nonprofit that promotes so-called affordable housing, warns in a new report that landlords will need $1 billion in government aid to avoid default. “A significant number of affordable housing buildings in New York City are experiencing operating deficits, where rents are not covering expenses,” the report says.

The buildings are publicly financed, and their costs are skyrocketing—costs ranging from insurance to maintenance to unpaid rents.

This is the problem with government paying for stuff, no matter how glitteringly wonderful the intent might seem.

The city government, the State government, the Federal government—none of them—should be forking over any more of the taxpayers’ money for this sort of thing. The best way to solve this kind of shortfall does not include throwing ever more money into the ever expanding maw of city resident dependency.

Instead, cut the buildings’ costs: get out of the way of rent collections, greatly reduce insurance regulations, property taxes (even public housing must pay these), zoning requirements. Lower sales taxes that drive up the cost of maintenance supplies. Let the market determine wage rates, not bureaucrats snug in their government job sinecures.