Tag Archives: jobs

There is Hope

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Yesterday, the US Court of Appeals for the District of Columbia (the court of jurisdiction, for those who are interested in such things, because this is the appellate court for matters pertaining to the NLRB orders) ruled unanimously that President Barack Obama’s “recess” appointments to the National Labor Relations Board of Richard Griffin, Sharon Block, and Terence Flynn (the latter of whom resigned from the NLRB shortly after) were “constitutionally invalid” because the Senate was not in recess at the time of the appointments.

Writing for the court, Judge David Sentelle had this to say, according to Bloomberg at the above link:

Considering the text, history and structure of the Constitution, these appointments were invalid from their inception[.]

The court expanded on that point in equally clear terms:

…the inescapable conclusion that the Framers intended something specific by the term “the Recess,” and that it was something different than a generic break in proceedings [an adjournment].

…

The natural interpretation of the [Recess Appointments] Clause is that the Constitution is noting a difference between “the Recess” and the “Session.”  Either the Senate is in session, or it is in the recess.  If it has broken for three days within an ongoing session, it is not in “the Recess.”

The court noted further that the Senate was in session at the time of these…appointments.

…the President made his three appointments to the Board on January 4, 2012, after Congress began a new session on January 3 and while that new session continued.

This also has implications for Richard Cordray and the Consumer Financial Protection Bureau he was “appointed” to chair, since he was put up in that same now known to be illegal batch of “appointments” as those NLRB folks.  The thousands of pages of regulations that board has already written now are of only questionable validity; although the question here isn’t so cut and dried: the CFPB had a quorum, and the matter here is the necessity of a formally seated chairman.  It also lends color to his nomination, for the current Senate’s consideration, to that same post.

Apparently, though, there are limits to Obama’s fiat governance.

Americans, Deadbeats, and Bills

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President Barack Obama, the other day, announced that we’re a not a nation of deadbeats; we pay our bills.  What are the facts?

Brett Arends, in a recent Wall Street Journal Market Watch article offers some.

Far from paying our bills, the current generation of Americans—or some of them—have set records for default which probably have no parallel in the history of the human race.  During the last five years, US individuals have walked away from a staggering $585 billion in mortgages, credit card debts and other personal loans.  That works out at about $6,000 per household.

And if the numbers are to be believed, there is probably a lot more to come.

For instance,

According to the Federal Reserve, US household debts peaked five years ago at a gigantic $13.8 trillion.  Since then it has declined to $12.9 trillion—a decline of about 7%.  To put that in context, household debts today still exceed those seen at the end of 2006, near the peak of the bubble.  They are three times what they were in 1998.

The outcome includes

The total debt reduction from the peak, says the Fed, is $954 billion.  Loan write-offs [from those “walk aways”], at $585 billion, account for 60% of that.  In other words…in the last five years Americans have walked away from $3 in debt for every $2 they’ve paid off.

Does all of this make us a nation of deadbeats, though?  Let’s look at some more facts.  Arends notes

[T]his has occurred even while the federal government has bailed out bankrupt financial institutions, and flooded the economy with massive deficits, low interest rates and free money to make it all easier.

The policies have altered the incentives to make it easier to walk away from our debts.  But that’s not all there is to it.

Richard Vetter, in a same-day WSJ op-ed, offers some more facts.

From the mid-17th century to the late 20th century, the American economy grew roughly 3.5% a year.  That growth rate has since declined significantly.  When the final figures are in for 2012, the annual rate of real output growth for the first dozen years of this century is likely to be about 1.81%.

What accounts for the slowdown?  An important part of the answer is simple: Americans aren’t working as much today.  And this trend reflects more than the recession and sluggish economy of the past few years.

This chart, covering the last 65 years, illustrates the matter starkly.

Before continuing, a digression is in order.  Recall a couple of the dates Arends mentioned above.  Today’s household debt is greater than it was during the housing bubble peak in 2006.  At that time, we were already well on the way down in workforce participation, yet the Panic was still two years off.  Today’s household debt is three times what it was in 1998.  1998 is the 65-year peak in Americans’ workforce participation.  Fewer people are working today, relatively, than then, and that has nothing to do with our present economic malaise.

Back to the main program.  Vetter asked why fewer Americans are working today (after all, we have to earn an income in order to pay our debts.  Don’t we?).  After all,

[i]f today the country had the same proportion of persons of working age employed as it did in 2000 [the end of the peak in work force participation], the US would have almost 14 million more people contributing to the economy.  [Aside: so much for those 3-5 million jobs Obama’s policies have so proudly saved.]

It comes back to incentives.  The Obama administration’s Progressive policies encourage Americans to not work.  Some of those destructive policies are these:

Food stamps. Above all else, people work to eat.  If the government provides food, then the imperative to work is severely reduced.  [Food stamp program use] has grown considerably, but especially so in the 21st century: There are over 30 million more Americans receiving food stamps today than in 2000.
The sharp rise in food-stamp beneficiaries predated the financial crisis of 2008: From 2000 to 2007, the number of beneficiaries rose from 17.1 million to 26.3 million, according to the Department of Agriculture. That number has leaped to 47.5 million in October 2012.  The average benefit per person jumped in 2009 from $102 to $125 per month.
… But more is going on here.
Compare 2010 with October 2012, the last month for which food-stamp data have been reported. The unemployment rate fell to 7.8% from 9.6%, and real GDP was rising steadily if not vigorously.  Food-stamp usage should have peaked and probably even begun to decline.  Yet the number of recipients rose by 7,223,000.  In a period of falling unemployment and rising output, the number of food-stamp recipients grew nearly 10,000 a day.

Social Security disability payments. The health of Americans has improved, and the decline in the number of relatively dangerous industrial production and mining jobs should have led to a smaller proportion of Americans unable to work because of disability.  Yet the opposite is the case.
Barely three million Americans received work-related disability checks from Social Security in 1990, a number that had changed only modestly in the preceding decade or two.  Since then, the number of people drawing disability checks has soared, passing…6.5 million by 2005, and rising to nearly 8.6 million today.  In a series of papers, David Autor of MIT has shown that the disability program is ineffective, inefficient, and growing at an unsustainable rate.

Pell grants. Paying people to go to college instead of to work is traditionally justified on the grounds that higher education builds “human capital” that is vital for the country’s economic future.  But a study Christopher Denhart, Jonathan Robe and I did for the Center for College Affordability and Productivity (that will be released soon) shows that nearly half of four-year college graduates today work in jobs that the Labor Department has determined do not require a college degree.  For example, over one million “retail sales persons” and 115,000 “janitors and cleaners” are college graduates.
In 2000, fewer than 3.9 million young men and women received Pell Grant awards to attend college.  The number rose one-third, to 5.2 million by 2005, and increased a million more [one-fifth] by 2008.  In the next three years, however, the number grew over 50%, to an estimated 9.7 million.  … The result is fewer people in the work force.  Meanwhile the mismatch grows between the number of college graduates and the jobs that require a college education.

Extended unemployment benefits. Since the 1930s, the unemployment-insurance system has been designed to lend a short-term, temporary helping hand to folks losing their jobs, allowing them some breathing room to look for new positions.  Yet the traditional 26-week benefit has been continuously extended over the past four years—many persons out of work a year or more are still receiving benefits.

We don’t pay our bills.  But we’re not deadbeats, either; Progressive policies have simply altered the incentives.  It’s the rational (if not moral) choice to go the cheaper route—the route that welfare programs and Progressive excusals incentivize—the route of not working, and “walking away” from our debts.  Even bankruptcy itself has lost its moral stigma.  (That failure is on us, though, not our government.)  Obama is right—we’re not a nation of deadbeats.  But he’d like us to become a nation of government dependents for whom the rational, if not moral, choice is continued dependency.  And that makes it tough for us to pay our bills—individually or as a nation.

Tax Failures

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The Foundry is offering a list of tax increases that went into effect with the start of the year, the fiscal cliff fiasco notwithstanding.  Here are some of them, and the Obama attack on jobs embodied in them is…interesting.

Payroll tax: increase in the Social Security portion of the payroll tax from 4.2% to 6.2% for workers.  This hits all Americans earning a paycheck—not just the “wealthy.”  For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”

I have trouble with this.  Conservatives do themselves no good to tout this as a tax increase.  This is, in fact, merely the expiration of a payroll tax reduction that was purely temporary from the start, and advertised and passed as temporary.  Worse, this tax holiday was nothing but vote pandering while defunding an already failing Social Security System.

Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).

Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.

Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).

Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.

These directly attack jobs and job creation.  With active disincentives on investments, these will, inevitably, fall.  With reduced investing, there is less capital available for business’ R&D, which represents new products in production, which represents new—and more—jobs in the producing.  With reduced investing, there is less capital available for business expansion, and such expansion translates directly into jobs.

Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.

Another payroll tax hike: 0.9% increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).

The increase in the death tax makes it harder for small business owners to pass on to their heirs their businesses.  This hits particularly hard businesses whose value is largely tied up in physical assets, like small manufacturers and small farmers.  These folks will be faced with an increasing likelihood of having to sell their businesses, or major components of them—things they’ve spent a lifetime building up—in order to pay the death vig.  These sales/downsizings represent existing jobs that will go away with the sale/downsize.

That last payroll tax increase also will hit the small business owner especially hard.  It just got more expensive to hire additional labor or to keep existing labor.  Moreover, there’s significant opportunity cost: that 0.9% tax represents money that now cannot be committed to R&D (already expensive for small businesses) in an effort to stay competitive; or committed to improved marketing in an effort to maintain/grow market share; or committed to payroll in the form of a new hire, pay raises, bonuses; or….

 

h/t The Spirit of Enterprise

Some Miscellaneous Tidbits on Our Economy

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Update: And here’s the actual post [sigh]:

The Wall Street Journal a short time ago printed an updated graph that’s been around for a while; here it is:

That same article pointed out that we currently have 4.2 million fewer employed than we had four years ago—that’s the strength of the failed recovery under President Barack Obama’s policies.  Somebody else also talked (here, here, and here) about where we’d be today were this administration’s policies focused more on employment and economic recovery and less on naked redistribution and outcome equalization.

A rule of thumb, as the WSJ also notes, says that unemployment generally falls by a half per centage point for every per centage point of growth above the long-run trend.  Note, though, the graph above.  We’re not even getting back to our trend, much less getting above it.   Which emphasizes the effect of our shrinking labor force as more and more Americans continue to give up hope of changing their situation and finding an actual job.

Now, the Federal Reserve Bank has cut its long-term growth forecasts: in early 2011, they put the long-term US growth rate at 2.5% to 2.8%.  Now they’re expecting a trivial 2.3% to 2.5%–which is not going to get us back to the long-run trend, much less above it so we can start bringing down our true unemployment rate and actually get Americans back into the labor force and back to work.

Excuses

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During the Great Depression, in an effort to help farmers, the FDR administration got legislation passed that put a floor under the prices farmers could collect for their produce.  At roughly the same time, in order to help out the working man in a time of enormous unemployment (ranging from nearly 16% to over 25%), FDR got legislation passed that put a floor under the prices a man could charge for his work.  With this combination of artificially inflated food prices and a unemployment exacerbated by artificially inflated labor prices, it became exceedingly difficult for Americans to buy food for their families.

The FDR administration “cured” this, not by removing their harmful pricing controls, but by inventing and issuing food stamps—subsidies for purchasing food.

Fast forward to the present, and look at Oregon.  In an era of government mandates for fuel efficiency in our cars (not all of which originated in Oregon, to be sure), governments are seeing falling tax revenue from decreasing private sector fuel purchases.  In Oregon, in particular, though, folks are buying fuel-efficient automobiles, with some vehicles getting over 55 mpg.  The Oregon state government is looking at “curing” this, not by stimulating its economy tax and spending reductions, but instead at creating a new tax.

Beaver State lawmakers, in their upcoming session, are expected to consider legislation that would impose a charge on vehicles that get at least 55 miles per gallon of gasoline, in an effort to make up for lost gas-tax revenue[.]

After 2015, owners of these high-efficiency vehicles would either have to pay an undetermined per-mile tax calculated by GPS technology, or some alternative flat rate option.

Hmm….

Any excuse to grow government, it seems, is a good excuse to grow government.