Category Archives: Economy

The Continued Assault On Undereducated And The Underskilled

On Tuesday night, Barack Obama announced a continued assault on the prosperity of America’s most vulnerable; the undereducated and the underskilled.  He did this in his annual State of the Union Address when he announced a desire to raise the federal minimum wage to $9.00 an hour.

While the president may very well feel that he can slow the rise of the oceans:

Yes, while he may slow the rise of the oceans, he is not able to defy the laws of economics.

Now don’t get me wrong, the intentions are noble and honorable, if you are to believe politicians are capable of such things.  We all would like to see the folks who make the least be able to earn more and enjoy a better life.  We want to see a steady rise n the incomes of the poorest among us so that they too may avoid the constant worry of bills past due and the need to feed hungry children.

But that isn’t what Obama is doing.  In fact, what Obama is doing is sacrificing the very people that he claims to be helping in order to make a catchy and effective sound bit during his speech.  See, raising the minimum wage doesn’t help the people who are the ones making the least amount of money; it hurts them.

The minimum wage prevents business from hiring them in the first place.  It raises the barrier to entry past the meager skills that they posses.  At a time in their life when they should be willing to take a job, any job, to learn new skills, become proficient in new trades and crafts, during a time when they need to begin to understand the expectations of employers as it relates to employees, they are being priced out of the market.

The market is very effective at setting the value of scare resources.  And labor is nothing more than a scare resource; we all want more of it as cheaply as we can get it.  And so, in the course of voluntary trade, we set the rate at which we are willing to pay for it.  And most labor, believe it or not, is set at rates already ABOVE the minimum wage.

But for those entering the job market, such as high school kids, they are finding that they lack the skills required to demand such a wage.  And as a result, they are being left behind and find themselves unemployed.  This at a time when we need these young people working.  The years lost at the beginning of the working career are very difficult to make up.  And the longer they are out of the work force, the further and further they fall behind those in it.

If you wanted to target the poor an the undereducated, many of which are minorities, you would be hard pressed to contrive a more malicious program that would guarantee to make life worse for those folks than the impacts of minimum wage laws that Obama supports.

But who benefits?


Barack Obama has made a decision.  He has placed a bet that he can secure the Union vote by selling out the poor, the undereducated and the underskilled all the while using words and rhetoric that would cause that group of people to support him.

It is depravity at its worst.

Money Can’t Buy Happiness

It may not buy you love either, but it sure makes it easier to drink good beer.  I don’t know exactly what this means, but I think it’s a combination of the ability to earn money and then the measure of the power of that income via the  availability of inexpensive goods that makes that salary more valuable.

North Carolina GOP – Unemployment Benefits

Another legislative agenda for the state’s republican dominated state government:

 Tens of thousands of unemployed workers receiving federal emergency unemployment will likely lose their benefits starting July 1 as legislators overhaul the program.

Legislative leaders said this week that they will push ahead with a July 1 start to cuts in weekly benefits for unemployed workers. The measure would put the state in violation of the recently passed federal relief package that would have provided benefits to laid-off workers through December 2013. The federal legislation specifically forbid the states from altering the weekly benefit amount, which the General Assembly is poised to do as it returns to session Wednesday.

The reason for the change?  Well, it turns out that the federal government funded the North Carolina’s unemployment payments.  Funded to the tune of nearly $2.5 billion.  And until that debt is paid, North Carolina businesses are required to higher federal unemployment taxes, or FUTA.  In fact, each year that there is an outstanding balance, businesses in NC have to shell out an additional $21 per employee per year, cumulative.

As a response to this ever growing tax burden faced by employers, the idea is to reduce the scope of the state’s UI payout to reduce the normal tax payed.

Is it popular?

Worker advocates called the measure unnecessary and shortsighted.

“This will push thousands and thousands of North Carolinians off an artificial cliff and deny hundreds of millions in dollars to businesses and communities. That money adds nothing to our debt and had already been appropriated,” said Harry Payne, former labor commissioner and worker advocate for the North Carolina Justice Center.

The extended benefits was being funded entirely by the federal government. Each week, that program funnels $25 million in benefits to about 85,000 laid-off workers.

“If anyone wants an example of thoughtlessness, I’ll hold this piece up high,” Payne said. “This is about not understanding what people are going through.”

Certainly not.

However, as the tax per job increases, more and more NC businesses will look to get out of the way of those taxes.  And the only way to do that is to constrain jobs.  Something we certainly don’t wanna do.  Further, by reducing the size of the UI check, the incentive to look for work increases, driving more and more people into the labor force.

North Carolina GOP – Tax Reform

The GOP didn’t do so well at the national level in the 2012 elections.  However, here in North Carolina, the GOP cleaned house.  Not only did North Carolina break for Romney, the only battle ground state to do so, but they elected a republican governor  for the first time in 20 years.  In fact, including this current governor, there have been only 3 republicans in the mansion since 1901, well over 100 years.

Further, the GOP extended their majority in both the state house and senate.  Those majorities are now so wide that the republicans can propose and send to the ballot box amendments to the constitution without a single democrat voting with them.

I don’t think that such dominance is healthy, either way – democrat or republican.  So it isn’t a surprise that one of the first things on the agenda is tax reform:

RALEIGH — Republican lawmakers outlined a proposal Wednesday to revamp the state’s tax system, offering a slew of reforms that would radically shift the tax burden in North Carolina.

The proposal would eliminate personal and corporate income taxes in exchange for higher state sales taxes levied against groceries, medical expenses and other currently tax-free services.

I suspect that this is going to go over like a lead balloon.  So it shouldn’t be a surprise that opposition is already forming:

The N.C. Budget Center, a liberal think tank, conducted a simulation analysis that suggested more than half of taxpayers, particularly the middle and lower class, would see their overall tax burden rise, while the most wealthy would get a significant cut.

Now, I’m not as familiar with the state numbers as I am the familiar national numbers as they pertain to who pays and who doesn’t pay state income tax.  And while I am sympathetic to the argument that an increased sales tax would hit the lower and middle class harder, I am not as sympathetic to an argument that takes a citizen from paying no tax to having some burden to the state.

With that said, I do agree with “Friend of Tarheel” Dave Ribar when he claims:

But critics caution that the proposals represent a fundamental change in who pays the state’s tax burden, and economists said that low-income people would feel the brunt. “For this particular proposal, the responsibility would shift from rich households and prosperous corporations to poor households and smaller businesses,” Dave Ribar, a professor at UNC-Greensboro, concluded in his analysis of the proposal.

North Carolina funds its budget through various taxes working in balance.  While we have high income taxes and corporate taxes, we have a lower sales tax combined with a very inexpensive tax on housing.  Further, our gasoline tax is high compared to our region.

So, while I get the republican’s desire to change the income tax and corporate tax scheme, I’m afraid that they aren’t going to take the whole picture into account and maybe, just maybe, make the whole thing worse.

Here are the details released so far:

It costs roughly $12 billion to eliminate the corporate and personal income taxes and business franchise taxes, as the GOP proposes. The money accounts for more than half the state’s $20 billion annual budget.

Proposed tax hikes

To offset the cuts, Senate Republicans are considering:

• Eliminating all 318 existing tax breaks in the state’s tax code, which account for $9 billion in revenue. The breaks cover everything from motor vehicle taxes to prescription drugs and insulin to sales taxes paid by nonprofits.

• Generating $12.9 billion in new revenue by increasing the 6.75 percent combined sales tax rate levied in most of the state to an 8.05 percent combined state and local tax rate.

The higher rate would apply to all goods and services – including those currently exempt from taxes, such as lottery tickets, haircuts, dentist visits, housekeeping and lawyers’ fees.

One major increase would be the sales tax on groceries. It currently sits at 2 percent but would increase to 8 percent.

Together, the sale tax changes would provide $12.9 billion.

• Levying a 1.05 percent tax on businesses, indexed to either net worth or gross receipts. Republicans are calling this a “license fee” that would produce $4 billion.

• Increasing the tax on all commercial and residential real estate sales, from the current 0.2 percent rate to 1 percent, generating $400 million.

Expect much hand wringing to take place.

Stagnant Middle Class

Perhaps this is simply a myth.

Don Boudreaux and Mark Perry weigh in over at the Wall Street Journal:

A favorite “progressive” trope is that America’s middle class has stagnated economically since the 1970s. One version of this claim, made by Robert Reich, President Clinton’s labor secretary, is typical: “After three decades of flat wages during which almost all the gains of growth have gone to the very top,” he wrote in 2010, “the middle class no longer has the buying power to keep the economy going.”

This trope is spectacularly wrong.

Don and Mark touch on a point that I often make:

…this wage figure ignores the rise over the past few decades in the portion of worker pay taken as (nontaxable) fringe benefits. This is no small matter—health benefits, pensions, paid leave and the rest now amount to an average of almost 31% of total compensation for all civilian workers according to the BLS.

That’s not an insignificant amount.  I often hear that compensation for health care shouldn’t count, after all, why should the worker have to accept ever increasing costs of fixing a broken leg?  A response to which I ask, “Would you be willing to give up that health insurance?”

Always the answer is no.

However, they point out a concept that I often miss:

One underappreciated result of the dramatic fall in the cost (and rise in the quality) of modern “basics” is that, while income inequality might be rising when measured in dollars, it is falling when reckoned in what’s most important—our ability to consume.

I absolutely think it’s critical to include in these conversations what we are able to consume today as opposed to 30 years ago.


Despite assertions by progressives who complain about stagnant wages, inequality and the (always) disappearing middle class, middle-class Americans have more buying power than ever before. They live longer lives and have much greater access to the services and consumer products bought by billionaires.

The Decline of the Union Worker

If the decline of the union means that American companies begin hiring more people, I’m all for the decline of the American union:

Last July was a good month for factory workers in Anderson, Ind., where a Honda parts supplier announced plans to build a new plant and create up to 325 jobs. But it was a grim month in the Cleveland suburbs, where an industrial plastics firm told the state of Ohio it was closing a plant and laying off 150 people.

Nearly all of the Ohio workers belonged to a labor union. Workers at the Indiana plant don’t. Their fates fit a post-recession pattern: American factories are hiring again, but they’re not hiring union members.

But nationally, is there a trend that would suggest that union shops are doing better than or worse than non-union shops?

U.S. manufacturers have added a half-million new workers since the end of 2009, making the sector one of the few bright spots in an otherwise weak recovery. And yet there were 4 percent fewer union factory workers in 2012 than there were in 2010, according to federal survey data. On balance, all of the job gains in manufacturing have been non-union.

This isn’t rocket surgery.  It’s been a fact for a long time now that unions are nothing more than modern day racketeer outfits.  While they may provide better compensation for their members, they restrict the number of jobs that otherwise might have been available.  Further, and perhaps more insidious, is the fact that the monies generated from their members goes straight into the hands of politicians.

Good riddance.

The State of States

If only federal republicans could govern in the way and manner of state republicans:

Thanks to a Republican governor committed to developing its natural resources, not punishing entrepreneurs who do, Texas legislators are facing an $8.8 billion surplus over the next two years. To the east, Republican governors Bill Haslam of Tennessee and Rick Scott of Florida have also turned recession deficits into budget surpluses. Moving north, Michigan’s Gov. Rick Snyder, Iowa’s Gov. Terry Brandstad, and Indiana’s out-going-Gov. Mitch Daniels, also can now all boast surpluses in the hundreds of millions of dollars. All of these governors managed to turn their state’s fiscal situation around through spending cuts, not tax hikes. Now their budgets are in the black and their economies are growing.

I think it’s important to focus on the second to last sentence in that quote:

All of these governors managed to turn their state’s fiscal situation around through spending cuts, not tax hikes.

And lest we think that this is just a series of circumstances related to an overall nation economic rebound:

Things do not look as good in Democrat-controlled states. Illinois, who massively raised taxes on the rich, still has a $5.9 billion stack of unpaid bills. California, who also raised taxes on the rich, was supposed to post a small surplus this year. But tax collections are coming in at 10.8 percent below budget projections. As a result, the state is now projected to be $1.9 billion in the red by the end of this fiscal year.

Now, if that same fiscal responsibility could translate to the national level.

Jon Stewart – Pure Platinum

Look, Stewart is funny, wickedly funny.  His timing, expressions and body language are the best. And the fact that his patter is politics only makes it better; I like politics, he makes political humor.

What’s not to love?

But lot’s of people forget that the man is a clown.  He’s an entertainer.  He’s on a stage making people laugh at jokes. Think Abbott and Costello.  Andrew Dice Clay.  Rodney Dangerfield.

Gifted all.

He isn’t a commentator.  He’s isn’t a reporter.  He isn’t a writer.

So I love it when folks use Stewart as a source of news or to make a point.  I especially love it when he turns his schtick back on the liberal establishment that loves him so:


The Daily Show with Jon Stewart Mon – Thurs 11p / 10c
Paul Krugman & the Trillion Dollar Coin
Daily Show Full Episodes Political Humor & Satire Blog The Daily Show on Facebook

Deficits and Debts: Spending and Taxes

Money.  The spending of it.  The making of it.  Revenue and expenditure.

How to manage it all responsibly?

Recently, always[?], there has been a debate regarding the deficit and the debt.  How we as a nation spend vs how much we as a nation bring in.  The most recent event was the fiscal cliff.  The new event is the debt ceiling negotiations.  And yes, there will be negotiations regardless of what the President says or what he wants.

Leave aside the partisan bickering for a second and let’s just look at this in a way that people kinda get; real world.

Typically, a household has an idea on how much money they bring in.  And this amount of money dictates how much they spend, typically.  In college I brought in very little – I spent very little.  Out of college I brought in more and spent more.  And during these times, my spending would, indeed, fluctuate.  I could count on certain bills and expenditures but others would just come up.  A broken muffler, a wedding out of state.  Maybe dental work.

My budget would often shift.  But it was always thought of in relation to how much I could bring in.  I knew that I was taking a short term hit but long term gain by going to college.  Earnings would suffer but the long term outlook was positive.

But my debt was always defined in relation to MY reality.

Earlier this week, the fellas at Poison Your Mind posted on the fact that the United States is a low tax country:

Of course, one can have a political preference that the US maintain extremely low taxes and/or reduce the size of government, but neither political inclination is compelled by The Math.

I assume, with all the risks commensurate, that by referencing “The Math” RR is referring to the fact that republicans claim spending is to blame for our deficit, not taxes.  In fact, the chart accompanying the post shows that the United States is near the bottom in tax revenue indicating that tax revenue, and not necessarily spending, is the problem.

But to me, that doesn’t jive.

Back to younger me.  I existed in my own reality.  I went to school, church and lodge with members of my community that existed on a range of socioeconomic status.  Virtually ALL earned more than I did.  And now, flash forward to today, I exist in that same strata, many peers earn more, many less.  None of which have any bearing on defining the health of my financial status.

I must balance my spending with my revenue.

In some cases I earn less due to sheer ability.  They have it and I don’t.  In other cases it’s based on desire; they have it and I don’t.  In others, I earn more because I am the one with the desire or the ability.  And yet in others, people have decided that compensation takes forms other than money; time off, value to society and personal growth are examples.  Whatever the individual situation is, basing fiscal health on the experience of others is rather short sighted.  And in the end, not at all healthy.

For whatever reason, perhaps because we are an independent colony all grown up.  Maybe it’s because we have access to massive natural resources.  Or education, or – well, whatever.  Whatever the reason, America has decided that it only wants to generate “X” amount of revenue.  We don’t wanna work harder to earn more per hour, or take an second job.  We’re cool where we are.

Given that reality, our spending has to reflect that fiscal reality and adjust.  It just has to.  And if it doesn’t, then spending is the problem.

But back to the chart, it IS rather stark.  After all, we are the United States of America and certainly have reason to expect that we come in better than 4th from the bottom.  Am I missing something?

Well maybe.

See, we may only be taxing at a very low rate of GDP, but we are a very VERY rich nation. So, while a person may argue that a policy of higher tax revenue is desirable, the larger question may be ignored.  Namely, is the nation wealthier as a result of such taxation or less wealthy as a result.

There is data:

It turns out that America does well compared to her high tax peers.  For example, Denmark, the nation with the highest revenues, is very poor compared ti the states of the United States.  In fact, if Denmark WERE a states, it would rank only as the 44th richest state in the Union.  Behind Kentucky.  And Belgium, the nation with the 3rd highest tax revenues?  Why, it would rank below even Denmark, poorer even than Idaho.

The EU as a whole, with Spain, Israel, Italy, Greece and Portugal all, ALL, rank lower than the poorest state in our nation; Mississippi.

This might mean that such high tax rates lead to less prosperous nations.  Or it might mean that such high tax rates are really an illusion of mathematics – revenues compared to a paltry GDP may seem higher than they really are.  Whatever the explanation, I doubt anyone would argue that we would wanna live in a nation that would rank among the poorest of our states.

Managing Hours Worked In 2013

A buddy of mine works in IT.  The firm is a medium sized outfit; well over 50 employees.  Heading into the New Year they were pulled into a meeting.  The news?

Hours were going to be cut.  Instead of a 5-day work week the schedule would now be built around a 4-day work week.

Good news indeed if time is more valuable than dollars.  However, at some point, to most people, some number of hours are less important than dollars and so it is that we wake up each morning to go to work.  And apparently the folks at this company are a titch uncomfortable with the new schedule.

My immediate thought was that the employer was trying to dodge the new health care rules coming in 2014.  Further questioning seemed to confirm my suspicion.  And what rules are those?

Many businesses plan to bring on more part-time workers next year, trim the hours of full-time employees or curtail hiring because of the new health care law, human resource firms say.

Under the Affordable Care Act, businesses that employ at least 50 full-time workers — or the equivalent, including part-time workers — must offer health insurance to staffers who work at least 30 hours a week. Employers that don’t provide coverage must pay a $2,000-per-worker penalty, excluding the first 30 employees.

The so-called employer mandate to offer health coverage doesn’t take effect until Jan. 1, 2014. But to determine whether employees work enough hours on average to receive benefits, employers must track their schedules for three to 12 months prior to 2014 — meaning many are restructuring payrolls now or will do so early next year.

About a quarter of businesses surveyed by consulting firm Mercer don’t offer health coverage to employees who work at least 30 hours a week. Half of them plan to make changes so fewer employees work that many hours.

Elections have consequences.  There are no solutions, only trade-offs.  And the trade off for this health care bill?

The health care law will particularly affect companies with 40 to 45 workers that plan to expand and hire. Many are holding off so they don’t cross the 50-employee threshold, says Christine Ippolito, principal at Compass Workforce Solutions, a human resource consulting firm in Melville, N.Y.

Others already over the 50-employee threshold plan to add more part-time workers or cut the hours of full-timers, says Rob Wilson, head of Employco, a human resource outsourcing firm. Many, he says, will hire more temporary workers, whom they won’t have to cover.

Nearly half of retailers, restaurants and hotels will be affected by the law, according to Mercer. They employ large numbers of part-time and seasonal employees, including many who work about 30 hours a week.

Since such low-wage workers are widely available, it often hasn’t been cost-effective or necessary for employers to offer them coverage. Providing them benefits could be costly because employees must pay no more than 9.5% of their wages in insurance premiums, forcing employers to contribute significantly more than they do for higher-wage workers.

“I think you may see employees with fewer hours as a consequence,” says Neil Trautwein, vice president of the National Retail Federation.

Thirty-one percent of franchisees surveyed recently by the International Franchise Association said they plan to pare staff to get under the 50-employee threshold.

This is a direct response to the legislation that was pushed by the President.  This isn’t a long-term consequence to a policy shift.  Rather, the slow down in hiring, the shift to more part time workers is a rational response to an agenda pushed by Obama.