Source: Republican Study Committee

Obamanomics: High Taxation/Regulation+Subsidization = Long-Term Unemployment + Dependency

Friday, March 21st, 2014 and is filed under Blog, Economy

Next week, Senate Democrats will restart their effort to create a de facto permanent unemployment entitlement for those out of work for up to 73 weeks.  Unfortunately, instead of uprooting the entire premise of the Unemployment Insurance (UI) extension, many Senate Republicans are prepared to go along with this scheme as long as the 5 month cost is offset through some notional promises of more revenue in year 2024.

This represents a lost opportunity.  The Democrat request for a UI extension in light of their Obamacare, Dodd-Frank, labor and environmental regulations on the economy is akin to someone injecting a painful disease into a patient while simultaneously demanding a constant flow of morphine.  It’s time for Republicans to stand firm and pin the tail of long-term unemployment on the donkey.  The message should be resoundingly clear: stop creating a permanent part-time economy with Obamacare and there won’t be a need to create dependency with fiscal morphine.

The Hill reports today on the findings of a Brookings Institute study detailing the state of the long-term unemployed:

A new study released Thursday finds that only about 11 percent of the long-term unemployed returned to full-time steady work a year later.

The study found that people out of work for at least six months are having an increasingly hard time reconnecting with the labor force.

It concludes that even if the unemployment rate returns to normal levels long-term unemployment will remain a problem in the economy and that “the long-term unemployed are an unlucky subset of the short-term unemployed.” […]

Between 2009 – 2013, the authors found that a sharp decline in job openings coupled with a decrease in labor force withdrawal rates accounts for the sharp rise in the number of long-term unemployed workers and the overall rise in the unemployment rate.

So what is the answer?  What is the panacea?  Do we subsidize even more individuals to stay unemployed or do we address the factors that have created the shortage of jobs?

That’s the choice Republicans need to communicate to the American people instead of getting mired in a dispute of which phony offsets to use in paying for the wrongheaded policy.

Republican leadership should block any UI bill unless Senator Harry Reid agrees to hold a debate on the real issues that cause unemployment. They should push full repeal of Obamacare, Dodd-Frank, and Obama’s new labor and environmental regulations.  They should push Senator Ted Cruz’s new energy bill that will unshackle the private economy to create jobs.  They should demand votes on lowering the corporate tax and repatriating foreign income – policies that Democrats claim to support.

Alternatively, they can agree to give amnesty to millions of illegal immigrants and double our record-high level of immigration and guest workers.  After all, isn’t there a labor shortage in virtually every sector of the economy – both high-skilled and low-skilled?

Obamanomics provides Republicans with an opportunity to create a bold contrast.  Will they actually bite?

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Democrats and their Pathetic Unemployment Decoy

Wednesday, January 8th, 2014 and is filed under Blog, News

It’s understandable why Democrats would feel embarrassed about unemployment.  Employers are cutting jobs, reducing hours, and lowering wages as a direct result of the Obamacare mandates and taxes.  Instead of putting out the fire that they set, Democrats have decided to distract our attention by offering band aids for the economic burns in the form of unprecedented long-term unemployment benefits.

Typically, the Unemployment Insurance program lasts for 26 weeks of unemployment with an additional 13 weeks during recessions.  Most of the cost is purveyed by employer payroll taxes.   Since 2008, however, Congress has funded Unemployment Insurance (UI) benefits for up to 99 weeks of unemployment.

As part of the fiscal cliff deal, they extended benefits for up to 73 weeks. In total, extended unemployment benefits have been renewed 11 times since 2008.  Over the past 5 years, the federal government has collected roughly $240 billion in federal unemployment payroll taxes, while paying out about $600 billion in benefits.  We are already in uncharted waters and dangerously close to creating another permanent entitlement program.

Yesterday, the Senate voted for cloture on a bill that will extend the 73-week maximum UI extension for another three months.  Although the recovery in the job market is historically slow and lethargic, it is improving.  Why in the world would we push another extension post-recession?  Moreover, although the job market is improving relative to the nadir of the recession, are a record number of people have given up looking for work.  Now is the worst time to offer incentives for disgruntled unemployed to remain outside the labor force.

And if we don’t stop the endless counterintuitive cycle of UI benefits five years after the recession, unemployment will become another permanent entitlement.

Then again, that is exactly what the Democrats want.  They obviously have no intention to end this charade in three months.  They want UI to become permanently enshrined into the welfare state, but are aiming for perpetual short-term extensions in order to use the issue as a convenient life boat amidst the tumultuous political waters created by Obamacare.

Republicans have an opportunity to speak with moral clarity and show a bold contrast: the conservative plan of cutting government red tape on job creators vs. the Democrat plan of engendering job losses and then offering permanent dependency – subsidized by future generations of taxpayers – as a panacea for their man-made disaster.

Republican leaders should directly challenge Democrats on the premise of their stratagem. If they really believe in the prudence of indefinite UI extensions, why not make the extension permanent law?  Why not raise the dollar amount of the benefits?  Why not expand coverage to 100 weeks or for the entire duration for which any individual is unemployed?

Sadly, in yet another manifestation of the impervious Democrat super-majority, six Republican Senators gave Democrats the requisite votes to break the filibuster.  Other Republicans are taking the pale-pastel route, suggesting they would play the UI game as long as the three month expenditure is “offset,” presumably, over 10 years.

A lack of unified opposition from Republicans is another example of the vacuum of leadership from the top.  Leadership has failed to rally the conference against any Democrat legislation until Harry Reid restores the rules of the Senate.  Indeed they are getting ready to pass a new 5-year farm bill next week.  Nor have they unified opposition against the UI extension until and unless Democrats agree to pass a relief on the very regulations that cause joblessness, such as Obamacare, Dodd-Frank, Sarbanes-Oxley, and sundry EPA anti-energy restrictions.

As tens of millions of Americans begin receiving smaller paychecks due to the increase in withholdings for health insurance, joining the more than 5 million who already lost their coverage in the individual market, Democrats have an arduous task in shifting the public’s attention to unemployment benefits.  But as Republicans equivocate and negotiate over their preposterous scheme, Democrats might succeed in deploying their latest political decoy.

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The Hidden Tax of the Regulatory State

Thursday, May 30th, 2013 and is filed under Blog, Economy, Taxes

Many of us in the Tea Party have focused intensely on the cost of big government to the federal budget.  Undoubtedly, this cost will be born directly by future taxpayers in the form of more taxes, higher interest payments on debt, and less economic growth.  While we must continue hammering home this point, we must also understand that many Americans still fail to connect the dots between government spending and their own wellbeing.  They still fail to realize how more government spending affects their lives.

What we need to focus on in the coming months is the cost of big government to the broader economy in the form of less jobs, lower income, and more expensive products and services.  As an example, I like to point out that although the EPA only costs us about $8 billion in operational costs, the regulations that are promulgated by this agency cost the economy untold hundreds of billions per year.  Hence, while advocating for less spending in general we must punctuate that message with specific proposals to reduce the burden of large government in a way that will resonate with the public.

The Competitive Enterprise Institute amplified this point when they published their annual report, Ten Thousand Commandments, which unpacks the size, scope, and cost of the federal regulatory behemoth.  Here are some of the key takeaways:

  • Total costs for Americans to comply with federal regulations reached $1.806 trillion in 2012. For the first time, this amounts to more than half of total federal spending. It is more than the GDPs of Canada or Mexico. […]
  • Regulatory costs amount to $14,678 per family – 23 percent of the average household income of $63,685 and 30 percent of the expenditure budget of $49,705 and more than receipts from corporate and personal income taxes combined.
  • Combined with $3.53 trillion in federal spending, Washington’s share of the economy now reaches 34.4 percent. […]
  • The five most active rule-producing agencies—the Departments of the Treasury, Commerce, the Interior, Agriculture, and Transportation—account for1,730 rules, or 43 percent of all rules in the Unified Agenda pipeline.
  • The Environmental Protection Agency (EPA), formerly consistently in the top five, is now sixth, but adding its 223rules brings the total from the top six rule making agencies to 1,953 rules, or48 percent of all federal rules.
  • Finalized EPA regulations were up by 44percent in Obama’s first term.

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Immigration, Wages, and Free Markets

Tuesday, May 14th, 2013 and is filed under Blog, Economy, Immigration, News

All conservatives and libertarians agree that government should not set wage requirements on private enterprise.  That would violate the foundation of a free market economy.  But should industries and special interest groups get to use the power of government to tilt our immigration system in a way that will actively depress wages?  Is that free market doctrine?

I’ve been looking to find someone to come out to my house and do an assortment of outdoor work on gutters, downspouts, and siding.  I can do most of the work myself, but some of the repairs need to be done in precarious positions that would require me to place a ladder on steep ground.  The problem is that nobody will come out for a half days’ work for less than a few hundred dollars.  In light of this “labor shortage” I plan to petition the government to flood the country with poor people from rough areas in the world.  They will do any job for 10 bucks.  Why shouldn’t we solve the “labor shortage” in this manner?

The free market is dictated by the ‘natural order of things.’  Obviously, the natural order of things as it relates to our immigration policy is not so easy to define.  But it would be safe to say that for special interests to demand that we double our already record levels of immigration – to the detriment of the country at large and patriotic assimilation – is a manifestation of an anti-free market intervention into the natural order of things.  No country will naturally implement an immigration system that makes assimilation impossible and burdens the broader tax base with too many low-wage earners in too short a period of time.

Undoubtedly, there might be a need for some guest workers in specific industries to replace, not augment, low-skilled immigration.  But the assertion that there is a widespread labor shortage is greatly exaggerated by those who desire to use our immigration system to artificially depress wages.  That is just as anti-free-market as using government to artificially inflate wages.

Case in point?  San Joaquin Valley growers.

Fears of a potential farm labor shortage have caused San Joaquin Valley growers to boost wages to as much as $10 an hour this year to attract and keep workers for the harvest season.

With the farm-labor pool already tight and crops ready to be picked, growers are scrambling to secure their supply of workers.

“It is getting very competitive out there and employers are having to offer incentives to find the labor they need,” said Oscar Ramos, a grape farmer and Kingsburg-based farm-labor contractor. “And one of those incentives is higher wages.”

Farmers and agriculture industry leaders say wages have risen $1 to a $1.50 an hour this year compared to last year, or as much as 12%. Among Valley farmers, hourly wages are hovering between $9 and $10 an hour, which is higher than California’s minimum wage of $8.

Wages could go even higher. In September 2012, the average hourly earnings for San Joaquin Valley farm workers rose to $12.09 during the peak of the harvest season.

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The Obamacare Job Market

Monday, May 6th, 2013 and is filed under Blog, Economy, News, Obamacare

On Friday, the BLS released a better-than-usual jobs report for the month of April.  The number of jobs created increased by 168,000, and there were some positive revisions for the past two months.  However, when you dig a little deeper into the details, you will find a permanently lethargic job market, endemic of the massive distortions created by Obamacare.

The total increase in jobs was almost completely countermanded by this staggering note:  “involuntary part-time workers”  increased by 278,000 to a whopping 7.9 million.  This means that a number of employers are cutting back their workers to part time (defined as less than 30 hours), so they can avoid the steep costs of paying for their healthcare under Obamacare.

The Obamacare job market reality is also born out in two other statistics.  The average weekly hours  fell to 34.4 from 34.6, and the average weekly earnings fell to $821.13 from $824.52.  Hence, when a jobs report like the one released for April is considered the best report in a while, we are is serious trouble.

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The Familiar Picture of Joblessness

Friday, April 5th, 2013 and is filed under Blog, Economy, News

In what’s become a familiar tradition every first Friday of the month, the BLS published its employment report, which shows the unemployment rate dropping even though the jobs numbers were dismal.  According to the BLS Establishment Survey of various industries, only 88,000 non-farm payroll jobs were created in March, even though the employment-age population grew by 167,000 over the same time.

So why did the U3 unemployment rate tick down a point to 7.6%?

You guessed it – the labor force shrunk.  And it shrunk dramatically.

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Red States Win in Job Creation

Tuesday, November 20th, 2012 and is filed under Blog, Economy

Amidst all the fighting over the two approaches to governing, it would be prudent to compare the results of red states vs. blue states.  Take a look at today’s unemployment numbers from the states.  Compare the states with the highest unemployment vs. those with the lowest unemployment.  See a pattern?

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Joblessness Rises; Inflation Ticks Up; Manufacturing Slows

Thursday, November 15th, 2012 and is filed under Economy, News

Now that the election is over, we will see many more reports like this.  Here’s a snapshot of the latest economic news from CNBC.

Jobless Claims

The Labor Department said Thursday that weekly applications increased by 78,000 mostly because a large number of applications were filed in states damaged by the storm. People can claim unemployment benefits if their workplaces close and they don’t get paid.

Inflation

Meanwhile, rising food costs and higher rents offset a drop in gas prices last month, leaving consumer prices only slightly higher in October compared with the previous month.

The consumer price index rose a seasonally adjusted 0.1 percent in October, down from sharp gains of 0.6 percent in the previous two months, the Labor Department said Thursday. In the past year, prices increased 2.2 percent. That’s just above the U.S. Federal Reserve’s inflation target of 2 percent.

Remember that interest rates for savings are hovering around .8%.

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Today’s BLS Numbers: Garbage In Garbage Out

Friday, November 2nd, 2012 and is filed under Blog, Economy

If I wanted to be a political hack, I would tell you that this was a terrible jobs report because the unemployment rate rose .1% at a time when we are supposed to be experiencing only growth in the job market.  However, the truth is that just like the past few reports which showed the U3 number declining were not good reports; this one is not a bad report.  The entire “U3 measure” has become irrelevant.

The U3 rate measures the percentage of people unemployed relative to those who consider themselves in the workforce.  The problem is that the definition of the labor force is so murky that we are experiencing frenetic and unrealistic swings in the size of the labor force from one month to another.  We are literally seeing an expansion of the labor force by 400k one month, and a contraction of 600k the next month.  It’s an obvious flaw in the methodology; nonetheless, it is the single biggest factor in determining the U3 rate.

To that end, we had a number of months with barely any new jobs added, yet the unemployment rate dropped because of the decrease in the size of the labor force, according to the Household survey.  This month, we actually had modest growth, 171,000 new payroll jobs in the Establishment Survey, yet the unemployment rate ticked up to 7.9% because the labor force supposedly expanded, according to the Household Survey.  Either way, it’s garbage in; garbage out.  The previous reports were not good, and this one is not necessarily bad.

The more important thing here is that the broad, long-term picture is dismal.  The real unemployment rate is the broader U6 number, which includes everyone who would like to work, including those who have given up because of the bad jobs market and those who are underemployed.  As such, the U6 number is not distorted by inaccurate and wild swings in the labor force because it factors in everything.  It’s already baked into the cake.

The U6 number stands at 14.6%, the same as when Obama took office.  It has remained high, and will continue to remain high until the economy grows and businesses begin to invest their capital.  Yet, private investments have actually decreased by 1.3% in the third quarter of this year, most likely a result of Obamacare, Dodd-Frank, and EPA regulations, all of which are forcing companies to sit on their cash.

Even looking at this report in a narrow short-term lens, there is not much good to see.  While 171k jobs would be an adequate number in normal economic times, it still woefully low for a recovery from such a deep recession.  Remember that the working-age population grew by 211,000 in October, according to the Household Survey.  So while 171k is better than most of the previous months, it is still barely keeping up with population growth, much less pulling us out of the nadir of the employment trench.  It would take many more years, possibly more than a decade, of this growth rate on a monthly basis just to return to pre-recession employment levels.  As AEI’s James Pethokoukis notes, all the jobs lost during the recession in the late 70s and early 80s were recovered in just 10 months.

Moreover, two major factoids from this report that remind us of the long-term stagnation are the long-term unemployed and income.  The number of people unemployed for longer than 27 weeks grew by 158k.  Also, income has grown by just 1.6% over the past year.  That is less than inflation.  In other words, income has gone down.

It’s also worth noting that black unemployment ticked up 0.9% to 14.3%.  Black unemployment was 12.7% when Obama took office in Jan. 2009.  How’s that hope and change working out for you?

The Decline of Our Republic in One Chart

Wednesday, October 31st, 2012 and is filed under Blog, Debt, Economy, Taxes

We hear news that 62,600 jobs have been eliminated since Sept. 1, the sharpest two-month drop since the start of 2010.  We hear news that consumer prices are ready to spike over the next year.  We hear news about sharp declines in household income.  Then we wonder why we are on such a protracted path of poverty and decline.  However, when you consider the cost of the hidden tax of the regulatory state, there is no mystery as to why we are on decline.

Take a look at this chart from the Mercatus Institute, which tracks the growth of federal regulations over the past decade:

The amazing thing is that you could chart the growth of regulations with a straight line increase in poverty, welfare, income decline, and spike in consumer prices.  For all the talk of poverty, nothing alleviates the burden of the impoverished like jobs, higher income, and lower prices.  Nothing squeezes the poor and working class more than onerous regulations, which kill jobs, depress wages, and raise the cost of producing vital goods and services.

Regulations are a cancer on our economy, and things will never improve unless the next president stems the tide of the regulatory state.  That is the only potent weapon in the war on poverty.  Take a look at this analysis from CNS news of the latest poverty numbers and welfare spending figures.  Can anyone honestly say that more welfare spending in the answer?

The federal government spent enough money on federal means-tested welfare programs to have sent each impoverished household a check for nearly $60,000, according to figures from the Census Bureau and the Congressional Research Service(CRS).

According to a report from the CRS produced for Sen. Jeff Sessions (R-Ala.), $1 trillion was spent on federal welfare programs during fiscal year 2011 – with $746 billion in federal funds and $254 in state matching funds.

The U.S. Census Bureau reported that there were approximately 16.8 million households living below the federal poverty level of $23,000 per year for a family of four in 2011. ( See:  2011 Households Below Poverty 2011.pdf )

If each of the estimated 16.8 million households with income below the poverty level were to have received an equal share of the total welfare spending for fiscal year 2011, they each would have received $59,523.

So after spending $60,000 per household per year on welfare programs, poverty is at an all-time high!  When will we learn that we can’t tax, regulate, or subsidize our way out of poverty?  Our Republic will never recover unless we restore the free market and place a moratorium on major federal regulations.  We already tried the Great Society; let’s try something that will actually work.