Category Archives: jobs

A Market Parallel

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Amity Shlaes has noted some interesting parallels between today’s economic situation and that of 1937, post reelection of another Progressive President (she’s politer than I am).

In this case, “1937” means a market drop similar to the one after the re-election of another Democratic president, Franklin D. Roosevelt, in 1936.

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[T]he parallels are visible enough to be worth tracing.  They have to do with the danger of big government, and can be captured in a few categories.

Here are those parallels [emphasis added]:

Pre-election spree that sets records.  In the old days, federal spending amounted to about 19 percent or 19.5 percent of gross domestic product. …[from that] federal spending would have dropped back once the worst of the 2008 economic crisis passed.

…even in 2012, when the crisis was long past, the government went on a spree, spending the equivalent of 24.3 percent of the economy, more than the 24.1 percent for the year earlier.

Up until 1936, federal spending flowed at smaller levels than the spending by states and towns combined, with wartime being the exception.  Roosevelt slowly ratcheted up the outlays, and in 1936, Washington spent more than the states and towns.  This shift was dizzying for a country based on the principle of federalism, of strong states.

 

Fearsome attack on the status quo.  In his first news conference on Nov 14, Obama went out of his way to make clear his tax increases would fall on the rich: “What I’m concerned about is not finding ourselves in a situation where the wealthy aren’t paying more or aren’t paying as much as they should.”

Roosevelt was also ferocious, telling the old guard: “I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second administration that in it these forces met their master.”

When Roosevelt followed through in 1937, both with high taxes and his effort to pack the Supreme Court with more progressives, markets shivered.

Shlaes concludes with

The obvious question is why an announcement by Obama or Roosevelt to cut back just after the election doesn’t reassure those who dislike government expansion.

The answer is that the markets, which observe a giant march forward and then a step backward, don’t believe the step back is permanent.  Giants are giants.  Expansionists tend to revert to expanding government….

In the end, FDR’s Treasury Secretary, Henry Morgenthau, learned that lesson:

We have tried spending money.  We are spending more than we have ever spent before and it does not work.  I want to see this country prosper.  I want to see people get a job.  I want to see people get enough to eat.  We have never made good on our promises.  I say after eight years of this administration, we have just as much unemployment as when we started.  And enormous debt to boot.

The Obama administration, unfortunately, has no Treasury Secretary, or anyone else, capable of (re)learning that lesson.

Why should we care about the stock market, though?  The problem with significant drop in overall market stock prices isn’t just one of hammering rich investors and any workaday American with an IRA, a 401(k), or a 403(b) retirement account.  It’s that selling shares in a company is one of two ways in which businesses raise money (the other being borrowing) for product development or business expansion, either of which means prosperity for the company and, oh by the way, more jobs.  A significant market drop, then, closes off one more avenue for business expansion, jobs, and economic recovery.

Union Above Public Welfare

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The Daily Caller, in a weekend article, reported [emphasis added]

In a two-page Oct 29 contract, the International Brotherhood of Electrical Workers (IBEW) local 1049 demanded union dues, pay hikes and benefit contributions from Florida electric utilities before its workers would be permitted to help reconnect power to Long Island communities.  The demand came as Hurricane Sandy was bearing down on the Northeastern United States, stranding tens of millions without electricity.

That…contract…was sent to Florida’s nonunion power companies; it can be found at the above link and here.  Below are some of the eleven different financial “demands” the local required as a precondition to allowing these volunteer, and non-union, workers to help the Long Islanders devastated by Sandy.  Never mind the welfare of those residents.  They’re just useful hostages for the collection of the union’s vig.

  • UTILITY shall contribute 22 ½ % of each employee’s gross salary into the “IBEW Local 1049 Craft Annuity Fund”
  • UTILITY shall contribute 3% of each employee’s gross salary into the “IBEW Local 1049 Craft Division Skill Improvement Fund”
  • UTILITY shall contribute 3% of each employee’s gross salary to the local collection agent for the “National Electrical Benefit Fund”
  • UTILITY shall contribute 0.5% of each employee’s gross salary to the “National Electrical Industry Fund.”
  • UTILITY shall contribute 1% of each employee’s gross salary to the “Northeastern Joint Apprenticeship and Training Trust.”

Notice that—just these money grabs alone would have forced the UTILITY(s) to pay into union coffers nearly 30% of these volunteers’ (post-raise) pay, beyond that pay itself.  Taking into account all the money demands,

TheDC calculated that for a nonunion crew foreman normally earning $40 per hour in Florida, the mandated higher wages [also demanded in the “contract”] plus union contributions and dues would force a utility to pay $67.74 per hour for each worker completing power restoration tasks in New York.

For work performed on weekends or after 4:00 pm on weekdays, that overall rate would jump to $70.38.

All so these Florida volunteers could have the privilege of being Good Samaritans and trying to help out fellow Americans in their hour of need.

Florida Municipal Electric Association Executive Director Brent Moline said

The word we were getting all week was that New York was short by hundreds of [electric] linemen.  Well, okay.  We’ve got them.  Florida is two days away, so you need a head start.

No thanks, said the IBEW.  Only union workers are needed.

Moline added,

[I]t was only in New York where the union had to give their blessing.  It just made me sick that you’ve got people who have no power and you hear about a lot of people dying.

Finally, one of thirteen clauses in the “contract” specified its overall period of effect—29 Oct to 29 Nov.  Eleven of the clauses dealt with money for the union.  There wasn’t even anything in document about work conditions, worker safety, and so on.  Just that money for the union.

Only after the hue and cry did the union say it had withdrawn the demand letter.

Isn’t this display of union greed, using the citizens of Long Island as hostages for the collection, reason enough to pass a right to work law in New York?  Governor Cuomo (D)?  President of the Senate Duffy (D)?  Speaker of the Assembly Silver (D)?

As and aside, if this is what the IBEW charges its local UTILITYs, no wonder LIPA’s electricity rates are so high (the lowest non-Household Assistance rate Long Islanders pay—water and home heating by other means than electricity and assuming no more than 250 KWh of use in a month—is 51.9¢/KWh, which compares with 10¢/KWh where I live in northern Texas—and I heat, and air condition, my home with electricity, for which LIPA would charge a higher price).

Unemployment

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The last Labor stat on the unemployment rate is out, and as usual, there are some interesting underlying numbers, also, as reported by Jeff Cox of CNBC.

First, the headline number: overall unemployment rose to 7.9% in October.  It’s important to note that due to problems related to the impact of Sandy, New Jersey and DC data are not included in this estimate; BLS says they estimated these missing data.

The underlying numbers:

  • 171,000 new jobs
  • the number of those employed part-time who would rather work full-time and those discouraged and so dropped out decreased to 14.6%
  • labor force participation rate, which consists of those working or looking for jobs (which includes the above underemployed), edged higher to 63.8%

But it wasn’t all even as “good” as those tepid numbers.  From the Bureau of Labor Statistics:

  • black unemployment rose to 14.3%—nearly twice the national average
  • Hispanic unemployment rose to 10%—25% above the national average
  • unemployment duration rose to 40.2 weeks
  • average work week showed no change
  • average hourly earnings for private nonfarm employees dropped by 1¢
  • number of unemployed rose by 170,000

Cox notes this, also:

President Barack Obama has touted the more than 4 million jobs created [sic] since the 2009 economic nadir, though the number is much lower—less than 200,000—when compared to the jobs lost.

As someone once said, this isn’t what a recovery looks like.

A Do-Nothing Senate

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Recall the mandate to move to the right of center that our Congress received in the 2010 elections, when the people transferred 63 seats in the House of Representative and 6 in the Senate from the Democrats to the Republicans—a majority of those transfers to Tea Party Republicans, hence the mandate to move to the right.  Despite that outcome, though, the Senate remained under the control of the Democrats.  What has the Senate done in response to those instructions from its bosses?  The figure below, from The Wall Street Journal, tells the tale of the Progressives’ insubordination.

This illustrates the work the House has done these last two years in response to those instructions and the (not insignificant) numbers of House Democrats who actively supported that work.

On top of this dereliction, the Senate has refused to do its own work:

[T]he Senate failed to pass any budget in 2012. Or 2011. Or 2010. …more than 1,200 days.

And

The Senate also failed in 2010 and 2012 to pass a single appropriations bill.  …that hadn’t happened before in the 150-year history of the current spending process.  This year the Senate even failed to enact a national defense authorization bill, which almost never happens.

Senate Progressives have announced that they’ll continue their refusal to perform in 2013 [emphasis in original]:

Chuck Schumer (D, NY) warned that Democrats will stop any attempt at bipartisan tax reform next year, calling the idea “obsolete.”

We can’t afford even two more years of this Progressive refusal to perform, much less four more years of an incumbent President’s arrogance.

Lies of the Democrats, Part 2

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This is Part 2 of my series on the lies told by Democrats during the present administration’s term in office.  As I said earlier, I’m not concerned with his broken campaign promises so much as I am with the dishonesty while in office.

In this post, I’ll mention a few more economic lies.

The Democrats insist that their “Stimulus” spending and their diversion of part of the TARP funding “saved the American automobile manufacturing industry,” the latter itself of questionable legality, given the legislated purpose of the TARP funding.

This is nonsense.  In fact, only two car companies were at risk out of the seven major car companies that comprised, and still comprise, the American automobile manufacturing industry.  Those seven?  In no particular order, they are Ford, Honda, Hyundai, Toyota, Nissan, GM, and Chrysler.  But wait, you say, Ford, GM, and Chrysler are the only American car manufacturers; the other four are foreign—and two of those three were threatened with bankruptcy.  How is saving those two not saving the American automobile manufacturing industry?

The fact is, none of those seven car manufacturers manufacture anything in the US, including the American three.  All seven of those companies do have major plant complexes in the US whose function is to produce cars for sale in the US.  That production, though, is limited to final assembly.  Every plant, for every car manufacturer, imports all of their cars’ parts—chassis, body panels, engines, batteries, even tires and wheels—from other countries: Mexico, Taiwan, the People’s Republic of China, India, wherever the costs of parts production is lowest.  Thus, every automobile manufacturer in that American industry is on an even footing with every other auto manufacturer: they all do final assembly (and only final assembly), of imported parts, in the US, for sale to American customers.  Those seven, not only the American three, are the American automobile manufacturing industry.

Now, of those two car companies that were saved, what was the nature of the rescue?  Normal bankruptcy procedures were bypassed, and the Obama administration forced senior creditors to the back of the line—the funds went first to the auto manufacturing unions (vis., the United Auto Workers and the Canadian Auto Workers Unions), while those senior creditors wound up getting nothing.  This stood bankruptcy law and order of precedence for creditors on their collective head.

And the bailout of the two American car companies went so well that one of them—Chrysler—is now an Italian car company.