Robert Reich Should Be A Motivational Speaker For The Unemployed

Posted by Jason | Posted in Economics | Posted on 12-04-2010


After all the stimulus, bailing out Wall Street to save Main Street, devaluing the dollar with the printing press, and TARP, Robert Reich tells us we are looking at a horrible job market for the foreseeable future.

The U.S. economy added 162,000 jobs in March. That sounds impressive until you look more closely. At least a third of them were temporary government hires to take the census—better than no job but hardly worth writing home about.

Reich doesn’t tell you that almost every month previously was basically all government jobs. What do those jobs produce? They produce absolutely nothing, which means all they are doing is consuming what would have otherwise went towards other economic activities that would have produced something, and when there is production, there are real jobs. Every dollar spent by the government is taken out of the real job creating private sector. Considering the current regime, it’s no wonder Reich is so bleak.

Since the start of the Great Recession in December 2007, the economy has shed 8.4 million jobs and failed to create another 2.7 million required by an ever-larger pool of potential workers. That leaves us more than 11 million jobs behind. (The number is worse if you include everyone working part-time who’d rather it be full-time, those working full-time at fewer hours, and people who are overqualified for the jobs they’re in.) This means even if we enjoy a vigorous recovery that produces, say, 300,000 net new jobs a month, we could be looking at five to eight years before catching up to where we were before the recession began.

Lovely. Add ObamaCare on top of that, and what will we be looking at? Maybe Reich’s five to eight years is taking into account how long it will take for companies to adapt to the new costs of doing business. Of course, that ignores the countless businesses that will never form and jobs never created because of the cost of ObamaCare. No worries though! They’ll have free health care!

Given how many Americans are unemployed or underemployed, it’s hard to see where we get sufficient demand to support a vigorous recovery. Outlays from the federal stimulus have already passed their peak (Did I miss the peak? Man I wanted to see the peak. I bet it was amazing considering how much it cost.) , and the Federal Reserve won’t keep interest rates near zero for very long (let’s hope not). Although consumers are beginning to come out of their holes, it will be many years before they can return to their pre-recession levels of spending. Most households rely on two wage earners, of whom at least one is now likely to be unemployed, underemployed or in danger of losing a job. And even households whose incomes have returned are likely to be residing in houses whose values haven’t—which means they can’t turn their homes into cash machines as they did before the recession.

This to me sounds like an admission that Keynesian economics and it’s economic manipulating tools have lost effect. In the past, they would create a false boom that would eventually bust. This is what happened in the DotCom bubble and then the housing bubble. While the Keynesians probably stood around in delight to the boom they manufactured, eventually they came crashing down on us in progressively worse busts. Now it seems the bust is so big, that their tools can’t create the false booms they once did. While I’m glad the tools aren’t working, because maybe we can get back to real growth, I’m sure they’ll keep trying and we’ll keep paying.

What’s likely to slow the jobs recovery most, however, is the indubitable reality that many of the jobs that have been lost will never return.

The Great Recession has accelerated a structural shift in the economy that had been slowly building for years. Companies have used the downturn to aggressively trim payrolls, making cuts they’ve been reluctant to make before. Outsourcing abroad has increased dramatically. Companies have discovered that new software and computer technologies have made many workers in Asia and Latin America almost as productive as Americans, and that the Internet allows far more work to be efficiently moved to another country without loss of control.

Companies have also cut costs by substituting more computerized equipment for labor. They’ve made greater use of numerically controlled machine tools, robotics and a wide range of office software.

Where have I heard this before? Maybe we should just throw all the technologies out. Then maybe we can pay some people to dig holes, while others are paid to fill them. It’s amazing that such a famous economist is so ignorant about technology. Technology doesn’t cost us jobs and drive business overseas. Technology increases productivity, which leads to more wealth and a better standard of living. We’ve had increasing technology throughout mankind, and it has always led to a higher standard of living. There are always going to be people harmed by the changes though, but then they will adjust, and their standard of living will be better as well. Just think of those poor horse carriage builders who were put out of work with the introduction of the automobile.

The problem with driving business overseas is a self inflicted wound. Our government continually piles burdens on business and citizens, which ultimately drives up the cost of each US based employee to the point where the foreign employee is much more competitive.

These cost-cutting moves have allowed many companies to show profits notwithstanding relatively poor sales. Alcoa, for example, had $1.5 billion in cash at the end of last year, double what it had on hand at the end of 2008. It managed this largely by cutting 28,000 jobs, 32% of its work force. But for workers, there’s no return. Those who have lost their jobs to foreign outsourcing or labor-replacing technologies are unlikely ever to get them back. And they have little hope of finding new jobs that pay as well. More than 40% of today’s unemployed have been without work for over six months, a higher proportion than at any time in 60 years.

And guess what, we are all better off for it. Would we be better off if Alcoa didn’t layoff employees, and 80,000 employees lost their jobs when the company went bust? As crappy as layoffs are, they are in the economic interests of the company and the society as a whole. They allow companies to stay in business, to keep the remaining workers employed, and to fight another day.

I guess to a statist like Reich companies should run themselves into the ground, so they can then stand around telling us how the free market has failed and the government needs to take over.

The only way many of today’s jobless are likely to retain their jobs or get new ones is by settling for much lower wages and benefits. The official unemployment numbers hide the extent to which American workers are already on this downward path. But if you look at income data you’ll see the drop.

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less. Or new hires are paid far lower wages than the old. (In January, Ford Motor Co. announced that it would add 1,200 jobs at its Chicago assembly plant but didn’t trumpet that the new workers will be paid half of what current workers were paid when they began.) Or they have become consultants or temporary workers whose pay is unsteady and benefits nonexistent.

Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

Robert Reich: The Jobs Picture Still Looks Bleak –

So Americans can look forward to declining pay with devalued dollars. Man, Reich is making me feel positive today. The reason you have declining pay in recessions is because the rise in pay during the previous boom wasn’t based on real productivity increases. It was based on false booms created by the Federal Reserve. People need to wake up and see the game that is played here. The government creates false booms and claims credit for it. It creates new government programs, because “In a wealthy nation, no one should go without ….”. Then when it all comes crashing down, government tells us the free market failed and we must implement  “insert deceiving name here”, because the “the government must save the free market from itself”

What Reich doesn’t tell you is Keynesian economics promotes declining wages in order to stimulate a recovery. It wants to devalue the currency, so that employees don’t realize they have taken a pay cut. While this might have worked in the past to trick workers, no one seems to be playing along anymore. Pay is still being devalued in real dollars, but companies are still cutting pay in nominal dollars.

With all this pessimism by Reich, can we at least get him to admit that the government can’t fix it, that is has made things worse, that the Fed needs to quit creating false booms, and finally that the government needs to stay the hell out of the economy? Ah, probably not.

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Borrowing our way to wealth, jobs bill passes Senate

Posted by Jason | Posted in Economics | Posted on 23-02-2010


When will we learn that government cannot create jobs? All that needs to happen is for the government to go home and leave us alone. We’ll create jobs. Now, the Senate passes another jobs bill that we have to borrow money to pay for. How idiotic is this? When has borrowing money ever made a nation or a person richer?

The Senate voted to advance a $15 billion job-creation package Monday, showing a rare hint of bipartisanship as five Republicans voted to end debate on the Democratic bill, including newly elected Sen. Scott Brown of Massachusetts.

via Senate Advances Jobs Bill –

Thanks Scott Brown! Some conservative, although who didn’t see that coming. Are Republicans still going to talk about this idiot as a Presidential candidate?

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Free People or Serfs?

Posted by Jason | Posted in Government | Posted on 13-02-2010


Previously I posted about government created unemployment and gave an example of how they create unemployment by impeding two free people from free exchange. Well, today the Wall Street Journal has some real world examples from people who are running businesses out of their houses….well trying to anyway. Many of these people were either laid off or had a business else where, but could not afford to keep a rented space. All of them though should be commended for taking responsibility for themselves and engaging in the free market to support themselves instead of becoming government welfare recipients. Instead they are faced with harassment by busy body government officials.

The recession is causing a growing number of people to venture into home businesses, a boost for the economy but a nuisance for neighbors.

As jobless people trade their desks for kitchen tables, or as businesses reduce costs by giving up commercial storefronts, cities and states are grappling with problems caused by a rise in home businesses such as traffic and noise.

Thanks for the Wall Street Journal framing the issue to make it seem like government is trying to prevent the complete chaos working people make at home. I work at home and know many people that do, and guess what? I don’t know anyone who creates traffic and noise. Cities and states aren’t grappling with these issues. They are grappling with not being able to milk higher taxes out of commercial properties and not being able to force people to run businesses where they want them to run businesses. It goes against their “master plan”.

Officials in Nashville, Tenn., are discussing ways to loosen restrictions governing the operation of home businesses as high unemployment prods a growing number of entrepreneurs into offering everything from hair perms to piano lessons out of their living rooms. (Oh the horror. The traffic and noise from piano lessons and hair perms must be horrendous!)

Nashville’s planning code allows home-based businesses as long as no customers come to the house—a rule that is causing problems for front-porch barbers and others. City officials are now drafting less-stringent zoning to bring before the planning commission this month.

Oh my world. The government is telling people who can come to their house, that you supposedly own and have property rights to. How does the government know if its a customer or a friend? I guess that just means they need more code enforcers to find out. This must be one of the ways government looks out for the little guy. Obviously, these people must be rich and greedy. Who do they think they are trying to earn money giving haircuts out of their house. Damn “Big Business”. They are evil.

Unemployment in the Greater Nashville area hit 9.4% in December, compared with 6.5% a year earlier. Mr. Bernhardt estimates there are now 14,000 business with licenses that are operating illegally because they are located in residential areas, in violation of zoning codes.

Sounds like we have at least 14,000 criminals on the loose. Better hire more cops and build more prisons. Nah, they can just fine them out of their profits. Like the mob, if they want protection, they have to pay. More proof that chances are you break some law everyday, and the only real role of government now is to make everyone law breakers. These people must be a threat to society for the crime of trying to put food on the table. The moral decay of our society is shocking. Don’t you know if there is a law, it means you are immoral if you break it?

Along with the rising number of home shops come complaints. Code-enforcement officers in Gilbert, Ariz., 20 miles outside Phoenix, received a complaint in October about a fishy smell and flies around a town garage.

The “guy had 50 40-gallon fish tanks full of live fish that he delivered to pet stores,” recalled Michael Milillo, the town’s senior planner. The resident said he previously had a warehouse for his fish, but that to reduce costs in the downturn, he moved them to his garage, according to Mr. Milillo.

While Gilbert does allow home-based businesses, code officers thought the fish entrepreneur was running a home-based warehouse, which isn’t permitted. They moved to close it, but a town zoning board narrowly agreed—over Mr. Milillo’s objections—to allow the business, partly based on the resident’s claims that the storage was a temporary solution in a rough economic climate, Mr. Milillo said.

The resident’s employer, Tropaquatics Inc., declined to make him available for an interview.

Not only are municipalities becoming sympathetic to home-business owners, but many neighbors are, too. While one neighbor spoke at the Gilbert zoning meeting against the fish operation, 10 others said it wasn’t causing any problems and should be allowed to remain given the tough times.

“Seeing everything they’ve gone through with having to move from a big warehouse because of the economy and bring their business back into their garage—that’s the only thing that’s kept them alive. If that’s what they need to do to keep the business thriving, and it’s not endangering my family or causing any unwanted stress on our house, than I am all for it,” said neighbor Matthew Tidwell, a 34-year-old corporate-relations representative.

Go figure, one busy body stirring up trouble. The surprising thing was 10 people coming to stick up for the guy. Usually only the busy body has time to go to the zoning meetings. Other people actually have work to do. I guess the busy body couldn’t just go over to the guys garage and talk to him, ask him if there is a way to minimize the smell, or how long he plans on being in the garage. Maybe he did, but considering how busy bodies operate, I doubt it. Instead he figured, he’d use the gun of government to point it as his neighbor, who is just trying to get by. Apparently, it would be better for the guy to go out of business and live off the state.

Ok, time for the most horrendous case of a home owner causing such chaos with her evil business.

In Nashville, the lightning rod was a beauty parlor. Code-enforcement officers paid a visit to Dot Moon, a 61-year-old woman who, with her daughter, runs a shop with one chair and a tanning bed out of her detached garage. A small sign with a pair of scissors and a comb and the name “Crystal’s Hair and Tans” hangs from her mailbox.

Ms. Moon said she was told a few months ago that she was in violation of city codes because customers came to the house. “We don’t understand why they are picking on us,” she said.

Mr. Bernhardt, the city planning director, said that under current city rules, “it’s impossible to have a hair salon” in a home in a residential neighborhood. He said cases such as Ms. Moon’s are being considered as city officials look at loosening the rules.

Nashville Councilman Bruce Stanley proposed a narrow expansion of the city code to allow for home beauty parlors. Nashville’s Planning Commission rejected that idea in January as being unfair to other businesses. But realizing that more and more of these living-room operations are cropping up, the City Council has since begun work on broader rules for home-based businesses in residential areas.

Oh the traffic and noise must have been overbearing. I can only imagine who much traffic and noise was generated by this gigantic 1 chair and 1 tanning bed salon. Oh and the blight of the neighborhood must have been horrible with the small sign hanging on the mailbox.

Sara Marie Jenkins, who is 26 and designs bridal gowns in her home studio in Nashville, says “financially it helps a lot to work at home in this economy—not having to pay rent for a space or pay a second electric bill.”

Sara… Sara….Sara, but who are you to decide what is financially in your best interest. You are just a serf, and should do what your overlords tell you to do. Your family’s well being is not of concern to their master plan for the community. If you have to live off the state, that is better than you having a business that provides for you financially and provides value through your products and services to your community. Oh Sara, so naive you are.

via States Revisit Home-Businesses Rules –

Ok, I probably tried putting too much sarcasm into text, which usually doesn’t come across right when I do it. Anyway, when are people going to wake up and realize we do not need government telling us how to live every aspect of our lives. Not only does it create unemployment, but it creates a community of adversaries. Do you think communities were closer when we had less government, and they worked problems out themselves; or do you think they are closer and more involved with each other, now that the government gun is laying around for everyone to try and get a hold of to impose their wishes on their neighbors?

We also need to wake up to realize most government rules are idiotic. They should be ignored by the masses. Saying you cannot have a business in your house goes against all three components mentioned by Jefferson in the Declaration of Independence,  as well as the edited out part of “right to property”.  Liberty is taken away by every government rule and action. Pursuit of happiness is taken away if you cannot pursue commerce to put food on the table, and life is hard to have a right to when you can’t provide for yourself. Oh sure, the state can take care of you, but do you then have control of you life? Do you have a right to your life or does the state?

Last is “right to property”. This has been taken long ago with local property taxes and zoning codes. Like I said, you are a renter of your land and you will agree to pay on time or pay a late fee, and you will only use “your” property based on your lease agreement, which unlike a regular leases changes at the whim of local zoning boards and the like.

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Man(government) Made Unemployment

Posted by Jason | Posted in Economics | Posted on 30-01-2010


I found this article by Llewellyn H. Rockwell, Jr. by way of the EconomicPolicyJournal. It explains that our unemployment issues are not just a matter of animal spirits. It comes from government intervention in the free decisions of employers and those looking for jobs.

All this talk of unemployment is preposterous. Think of it. We live in a world with lots of imperfections, things that need to be done. It has always been so and always will be so. That means that there is work to be done, and therefore, always jobs. The problem of unemployment is a problem of disconnect between those who would work and those who would hire.

What is the disconnect? It comes down to affordability. Businesses right now can’t afford to hire new workers. They keep letting them go. Therefore, unemployment is high, in the double-digits, approaching 17% or more. Among black men, it is 25%. Among youth, it is 30% or higher. And the problem is spreading and will continue to spread so long as there are barriers to deal-making between hirers and workers.

Again, it is not a lack of work to be done. It is too expensive to pay for the work to be done. So ask yourself, what are those things that prevent deals from being made?

Let me list a few barriers:

  • The high minimum wage that knocks out the first several rungs from the bottom of the ladder;
  • The high payroll tax that robs employees and employers of resources;
  • The laws that threaten firms with lawsuits should the employee be fired;
  • The laws that established myriad conditions for hiring beyond the market-based condition that matters: can he or she get the job done?;
  • The unemployment subsidy in the form of phony insurance that pays people not to work;
  • The high cost of business start-ups in the form of taxes and mandates;
  • The mandated benefits that employers are forced to cough up for every new employee under certain conditions;
  • The withholding tax that prevents employers and employees from making their own deals;
  • The age restrictions that treat everyone under the age of 16 as useless;
  • The social security and income taxes that together devour nearly half of contract income;
  • The labor union laws that permit thugs to loot a firm and keep out workers who would love a chance to offer their wares for less.

Now, that’s just a few of the interventions. But if they were eliminated today, and it would only take one act of Congress to do so, the unemployment rate would collapse very quickly. Everyone who wanted a job would get one.

Read the Full Article at

Definitely click on the full article above. The rest of the article is as good as what’s above.

Think about it just on a very small scale. You don’t even have to take it to the extent of long term employment. Imagine if you are cutting your lawn. You look over, and you see your neighbor is replacing his roof. You yell over “Hey Jim. What are you doing home today?” He replies, “I got laid off last week.” You, “I didn’t know you knew how to replace a roof. Where does a computer engineer learn how to work on roofs?’ Jim replies, “I used to work on roofs during summers while in school. Speaking of, it looks like your roof is about due.” You, “Yeah, I’ve been meaning to get it done, but since they cut back my hours I haven’t been able to afford it. I can’t believe how much they charge for roofing.” Jim, “Yeah, there is a lot of money in roofing. I’d probably be better off it I stuck with roofing instead of computers. It’s been a bumpy ride.” You, “Jim, maybe we can help each other. Since I can’t afford to hire a roofing company, and you just got laid off, maybe I could hire you to do my roof. What do you say?” Jim, “Sorry bud. Have you seen all the laws and regulations in the construction trade now. You need a contractor’s license. You have to buy all kinds of special equipment for OSHA. Trying to meet all those requirements for one job would make me more expensive than the guys you already can’t afford. It’s almost like they errected these barriers to prevent competition from guys like me.” You, “Well maybe no one needs to know. It’s not like we’re selling crack here. Maybe we just say you are helping me with my roof, and no one needs to know I’m paying you.” Jim, “Six months ago, I would have done that, but I personally know a guy who almost went to jail because he paid people cash to work on his house. The IRS, damn gustapo, and the problem is you’d have to pay me cash if no one was going to know about it. It’s not worth the risk. I’ll just keep collecting my unemployment check, and hopefully I’ll find another job.”

So here you are. You need work done, which  you can’t afford because your hours have been cut back. Your neighbor needs work, but the two of you can’t come to an agreement because the tyrannical government we have puts a road block between every avenue of negotiation you attempt. Still think this is a Free Market?

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Keynesianism Delivers a Decade of Zero by Ron Paul

Posted by Jason | Posted in Economics | Posted on 05-01-2010


Here’s a great piece by Ron Paul.

This past week we celebrated the end of what most people agree was a decade best forgotten. New York Times columnist and leading Keynesian economist Paul Krugman called it the Big Zero in a recent column. He wrote that “there was a whole lot of nothing going on in measures of economic progress or success” which is true. However, Krugman continues to misleadingly blame the free market and supposed lack of regulation for the economic chaos.

It was encouraging that he admitted that blowing economic bubbles is a mistake, especially considering he himself advocated creating a housing bubble as a way to alleviate the hangover from the dotcom bust. But we can no longer afford to give prominent economists like Krugman a pass when they completely ignore the burden of taxation, monetary policy, and excessive regulation.

After all, Krugman is still scratching his head as to why “no” economists saw the housing bust coming. How in the world did they miss it? Actually many economists saw it coming a mile away, understood it perfectly, and explained it many times. Policy makers would have been wise to heed the warnings of the Austrian economists, and must start listening to their teachings if they want solid progress in the future. If not, the necessary correction is going to take a very long time.

The Austrian free-market economists use common sense principles. You cannot spend your way out of a recession. You cannot regulate the economy into oblivion and expect it to function. You cannot tax people and businesses to the point of near slavery and expect them to keep producing. You cannot create an abundance of money out of thin air without making all that paper worthless. The government cannot make up for rising unemployment by just hiring all the out-of-work people to be bureaucrats or send them unemployment checks forever. You cannot live beyond your means indefinitely. The economy must actually produce something others are willing to buy. Government growth is the opposite of all these things.

In this last paragraph, Ron Paul pretty much captures everything that is wrong with government.

Bureaucrats are loathe to face these unpleasant, but obvious realities. It is much more appealing to wave their magic wand of regulation and public spending and divert blame elsewhere. It is time to be honest about our problems.

The tragic reality is that this fatally flawed, but widely accepted, economic school of thought called Keynesianism has made our country more socialist than capitalist. While the private sector in the last ten years has experienced a roller coaster of booms and busts and ended up, nominally, about where we started in 2000, government has been steadily growing, because Keynesians told politicians they could get away with a tax, spend and inflate policy. They even encouraged it! But we cannot survive much longer if government is our only growth industry.

As for a lack of regulation, the last decade saw the enactment of the Sarbanes-Oxley Act, the largest piece of financial regulatory legislation in years. This act failed to prevent abuses like those perpetrated by Bernie Madoff, and it is widely acknowledged that the new regulations contributed heavily not only to the lack of real growth, but also to many businesses going overseas.

Americans have been working hard, and Krugman rightly points out that they are getting nowhere. Government is expanding steadily and keeping us at less than zero growth when inflation is factored in. Krugman seems pretty disappointed with zero, but if we continue to listen to Keynesians in the next decade instead of those who tell us the truth, zero will start to look pretty good. The end result of destroying the currency is the wiping out of the middle class. Preventing that from happening should be our top economic priority.

via Keynesianism Delivers a Decade of Zero by Ron Paul.

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Peter Schiff hands out an ass whoopin to David Epstein

Posted by Jason | Posted in Economics, Government, Video | Posted on 12-12-2009


I can’t remember how I found this video, but if you have the time, it’s a much watch. You want to know why we are heading for disaster? It’s because the government is filled with David Epsteins, when we need more Peter Schiffs. Hopefully, Schiff will defeat Dodd next year, and we’ll at least have one. Add Rand Paul into the equation, and we are heading into the right direction.

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Obama Pushes New Job Stimulus –

Posted by Jason | Posted in Government | Posted on 09-12-2009


When will this nightmare called the Obama administration end? They never question that fact that they got it wrong. They always believe they just didn’t do enough yet. We have close to a 1$1.5 trillion deficit this year, and these idiots can’t stop thinking of ways to spend more money.

In a speech at the Brookings Institution, Mr. Obama avoided calling his jobs push a new stimulus plan. But White House officials acknowledged that the president was taking stimulus components that he believed worked best and extending or amplifying them.

Has anyone seen any part of the stimulus that worked and continues to work? Cash for Clunkers might have give a blip on the GDP chart, but it’s obvious it was not sustainable. Government stimulus in the form of spending never is.

These include putting an additional $50 billion toward infrastructure spending, ramping up Treasury Department lending to small businesses through the Troubled Asset Relief Program, extending tax credits for business investment and offering state and local governments a fresh lifeline.

Other ideas that weren’t in the February stimulus legislation include a tax credit that rewards companies for hiring workers and tax rebates for individuals who make their homes more energy efficient.

Additional wealth must be created in our country for hiring to take place. Infrastructure does not create wealth. Are you wealthier when you trade in an older car for a newer one? No, you still have a car, just like you did before.

Increased lending to small business isn’t going to help either if the economy remains in shambles. Who will want to borrow money when the future is so uncertain?

Tax credits don’t work in the long term. Only long term tax cuts work for ongoing growth. Are you going to change your long term habits for a one time handout? Neither is business. They will change habits if it’s a lasting change such as reduced taxes, just as you would change your habits with a pay increase.

Don’t even get me started on more state bailouts. It’s stealing money from responsible states and giving it to irresponsible states such as California. The responsible states have to pay for the over-the-top government benefits in other states. Would Texas please secede already.

Mr. Obama’s push comes as a partisan debate over the stimulus plan’s effectiveness heats up and Democrats grow increasingly worried about the political price of a stagnant job market. With a midterm election looming in 2010, Friday’s relatively hopeful employment reports didn’t much relieve the pressure, senior Democrats said.

And we wonder why our country is going bankrupt. Politicians try buying their re-elections. It’s all politics, and has nothing to do with what is best for the country.

Democratic aides expect two bills. The first would top $100 billion and would extend unemployment insurance, temporary food-stamp payment increases and subsidies for health-care purchases by the unemployed. That would likely be attached to a spending bill in coming weeks. The second, a jobs bill estimated at about $70 billion, would contain many of Mr. Obama’s initiatives and likely wouldn’t reach his desk until early next year.

Get ready for all the job creating from incentivizing unemployment. It seems like we extend unemployment almost every week now. What’s it up to, half your life?

The hiring tax credit may generate the most controversy. Mr. Obama campaigned on the idea last year, but Democrats abandoned it amid the stimulus debate. Employers, they worried, could fire workers and rehire them to claim the credit, or divide a full-time job into two part-time jobs, cut the wages and hours of one worker, then hire a new, part-time worker to claim the credit.

Ralph Braun, chief executive of Braun Corp. in Winamac, Ind., said a tax credit is meaningless for a producer like him. “If you’re just going out to hire someone just for a tax credit, what kind of job will you put them in that has any longevity to it?” said Mr. Braun, whose 730-employee company produces wheelchair lifts and other equipment. “You have to have a customer for that employee to serve — so I’m confused how a tax credit would stimulate anything.”

Still, there are executives who see merit to the idea. Ronald DeFeo, chief executive of Terex Corp. in Westport, Conn., would like to see such a credit targeted at recent college graduates. “If we had a tax incentive that paid for a third of [a recent college graduate's] wage for two years, then 10% for the next two years, it would be a way to encourage companies like mine to hire,” he said.

via Obama Pushes New Job Stimulus –

I bet Ralph Braun’s company is much better ran than Ronald Defeo’s. Ralph is completely right. If there is no customer to serve, then there is no need for a new position. Ronald on the other hand thinks it makes good sense for the public to pay 1/3rd of two years wages and 10% for the third and forth year for new hires. Is he smoking crack? This is what he thinks is good for our country? I know he gets to save money for himself, but meanwhile that money has to come from somewhere. If that position doesn’t warrant paying the employee, then the position should not be created. It’s a sham, and only results in a lower standard of living for everyone else, well except for Ronald Defeo.

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Bye Bye Stimulus Jobs

Posted by Jason | Posted in Economics, Government | Posted on 01-12-2009


The Wall Street Journal had an article about how construction companies are going to be laying people off as the stimulus money projects run out.

WASHINGTON—Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation’s weak employment picture.

Tim Word, vice president of Dean Word Co., a heavy-construction company in New Braunfels, Texas, said his income is now coming mostly from projects that are winding up. He said that in normal times he has about $100 million of signed contracts in hand. But that number has fallen to $30 million, and the pipeline is empty.

via Job Cuts Loom As Stimulus Fades –

This is why stimulus does not create jobs. It does not create permanent jobs, because it does not create wealth. Where does the government get the money? It must take it from one area of the economy whether through taxes or borrowing, and it gives it temporarily to another area of the economy. This is temporary, and businesses aren’t stupid enough to fall for it. Yeah, the businesses who receive the money love it. They aren’t going to turn it down. But the other businesses that don’t receive it are either laying off or not hiring because of it. They either don’t have the money to hire because it was taxed away, or they are competing with the government to borrow money. The more money the government is borrowing, the harder it is for small businesses to borrow. After all, who is considered the safest bet when lending, and if the government keeps demanding more money in a slow economy, wouldn’t it be best to lend them the money?

This whole story highlights several things. The government cannot create jobs, create wealth, control the economy, fix economic problems, or help you in anyway that doesn’t hurt you more in other ways.

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The Minimum Wage and Quinn’s First Law

Posted by Jason | Posted in Economics | Posted on 26-11-2009


Price fixing in any form only harms those people they are supposed to help. On his Nightly Business Report blog, Steven Horwitz, calls on Obama to heed the economic science of the minimum wage.

Economic theory predicts that raising the minimum wage will cause those employees who are least productive to lose their jobs. If we raise the minimum wage from, say, $6 to $7, it’s the same thing as saying “any worker who cannot produce $7 worth of value each hour is not worth hiring.” Younger workers are, of course, among the least skilled in the economy. In addition, thanks to poor schools and historical discrimination, young workers of color are over-represented in this category. Higher minimum wages should disproportionately affect young workers and especially ones of color.

The empirical evidence to support this theoretical claim is abundant. Hundreds of studies of this relationship have been done by economists and they are nearly unanimous that higher minimum wages are associated with some level of increased unemployment among lower-skilled workers. Whatever consensus there might be among climate scientists about global warming, that among economists about minimum wage laws is at least as great (and, as we discovered recently, we don’t need to rig the computer code to make our models reconstruct pre-historic data to come out the way we want). Despite what the science says, the Obama Administration supported a minimum wage increase last July.

The results are as theory predicts: unemployment among whites age 16-19 is at by far the highest rate in 10 years: 25.3% in October, up 28% from 6 months earlier and 36% from a year ago. Among African-Americans of the same age group, the unemployment rate is an intolerable 41.3%, up 19% from April and up 25% from a year earlier. The Hispanic or Latino youth unemployment rates are 35.6% (October), 26.5% (April), and 28.3% (October 2008).

The recent increases in the minimum wage cannot explain all of this increase, as unemployment rates have climbed across the board. However, the overall unemployment rate last April was 8.9% compared to 10.2% today. That’s a 14.6% increase, notably less than the increase in the unemployment rate for young people of any race. So a good chunk of those youth unemployment increases are not just a by-product of the general increase.

If Obama really wants to take science seriously and live up to his promise of being the president for all of America, he could start by asking Congress to repeal the recent increases in the federal minimum wage and thereby give young workers something to really be thankful for this time of year: a much better chance at an entry-level job in an increasingly difficult job market.

via XChange – The NBR Blog.

Again, whether a price ceiling or a price floor, only harm is caused. Also, the harm isn’t felt just by the person who loses the job. The rest of society loses out on the production that would have otherwise been created. Even though it may be a lesser value of production, it is still production. For example, say you have a landscaping company. You pay your student workers, that are off on summer break, $6 an hour. With the rates you are charging, you are able to capture 100 clients. With the revenue from those 100 clients, you have a budget to fund four grass cutters. Now, the minimum wage gets forced up by the government to $7 an hour. Well, now you still have the same rates coming in from 100 clients, but you no longer have the same budget. You have three options. You can layoff one of your guys, you can raise prices or you can cut costs elsewhere. If you lay off one of your guys, how are you going to do the same volume? If you raise prices, demand will go down? If demand goes down, you don’t need the same amount of lawn boys, so you’d end up laying one off anyways. Cutting costs elsewhere only helps if you were  inefficient in the first place. If you were inefficient, you would have been charging too much and not had as many clients to begin with. Also, there typically isn’t tons of overhead in minimum wage jobs, so the chances of cutting your way out of it to save jobs is very slim. This leaves us really two options, both of which results in lost jobs. On top of that, both lead to a reduced amount of customers having their demands met. Only the ones who can afford it will continue to have their lawns attended to. Typically, they are smeared as the rich. So, while the regular Joe might have been able to afford the luxury of having his lawn cut previously, he now cannot, thus hurting the regular Joe and the young worker.

Here in Pittsburgh, our local talk radio personality, Jim Quinn, has what he calls Quinn’s first law. Qinn’s first law is “liberalism creates the exact opposite of it’s stated intent”. I’ve tried finding examples of when this doesn’t hold, but I have yet come up with one.

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Don’t look to close at the improvement in jobless claims

Posted by Jason | Posted in Economics, Government | Posted on 25-11-2009


Robert Wenzel shows how the media is reporting numbers more favorable to the theme of a recovery, but when analyzed closer, things don’t look so good.

The media is reporting that for the week ending Nov. 21, the figure for initial jobless claims was 466,000, a decrease of 35,000 from the previous week’s revised figure of 501,000 that has been released by the Labor Department.

But this is a seasonally adjusted number.

Without the Labor Departments special “seasoning” the number of actual initial claims under state programs totaled 543,926 in the week ending Nov. 21, an increase of 68,080 from the previous week.

Thus, the Labor Department numbers have swung the jobless claims picture by over 100,000 for the last week, from a decrease to an increase.

Which means, if you applied for unemployment last week there is a one in five chance your claim has been seasonally adjusted from the data.

Happy Thanksgiving.

via A Second Look at the Lower Initial Jobless Claims Number.

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