Daily Archives: May 8, 2012

05.08.12
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We’re number 20!

One year ago, Chief Executive magazine surveyed the state’s business climate, and jumped its ranking of the state from 41st best to 24th best among the states.

That 17-place jump was best of any state in the country — and was a bigger jump than any state in Chief Executive’s 2012 comparison — which prompted a logical question: How in the name of Darwin Smith did that happen?

This year, almost 1½ years into the Walker administration, Chief Executive‘s survey of 650 business leaders (up from  550 a year ago) jumped Wisconsin another four spots, from 24th to 20th.

Chief Executive’s CEOs give Wisconsin three stars for taxes and regulation, and four stars each for workforce quality and living environment. I’m surprised we did as well as three stars for our (too high) taxes and (too much) regulation, but evidently CEOs believe things are going in the right direction.

The magazine quotes two anonymous CEOs:

“We only do business in Wisconsin. Since Gov. Walker was elected we have seen a significant improvement in taxes and business conditions.”

“In our home state of Wisconsin there is a palatable enthusiasm amongst business executives that we are roaring back due to a clear vision of job creation (e.g. mining in the north) and stable state budgets (allowing us to take more risks).”

(The survey took place before Democrats and Sen. Dale Schultz (RINO–Richland Center) killed mining in the north.)

Texas leads the survey, and California ranks dead last. Chief Executive passed on CEO comments about the (formerly) Golden State:

  • California is the worst! They are doing everything possible to drive a business out of their state. If it were not for the climate, they would have lost half their population.
  • California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable. If you aren’t an elitist, no room here for the middle or working classes.
  • California treats business owners like criminals. California has different overtime policies for its own employees vs. private sector.
  • California’s labor regulation is a job killer. We will be moving our business out of the state, which will lose hundreds of jobs simply due to the poor regulatory environment.
  • California should secede from the union—it is like doing business in a foreign country, it has its own exchange rate, and its regulation is crazy.

As for Texas, Chief Executive listed the businesses that chose to move there:

  • Allstate, builds $12 million customer center in San Antonio. Reasons: Weather and lifestyle, plus Spanish-language capabilities.
  • Caterpillar, building plants in Seguin and Victoria. Reasons: Access to cheaper, non-union labor; proximity to ports for exporting.
  • eBay/Pay Pal, hiring more than 1,000 and expanding support facilities in Austin. Reasons: Access to tech talent, $2.8 million from the Texas Enterprise Fund.
  • Facebook opens first U.S. operation outside of California, in Austin. Reasons: Access to creative and technical talent.
  • GE Transportation, announces $96 million locomotive plant in Fort Worth. Reason: Cheaper, non-union labor
  • Grifols USA, California-based subsidiary of Spanish parent, opens blood plasma testing facility San Marcos. Reason: Right skills sets, languages
  • PETCO, in San Diego, opened its first customer support center outside of California in San Antonio in 2011. Reason: Access to cheaper space, skilled workers, funding from the Texas Enterprise Fund.

CEOs are the people who sign off on hiring decisions and expansion and location decisions. So if legislators and would-be governors (this means you, Tom Barrett and Kathleen Falk!) are serious about improving this state as a place to do business, that means they had better listen to business people.

Speaking of BarrettFalk, Chief Executive noted the Recallarama drama, which is culminating in Walker’s illegitimate recall June 5:

Governor Scott Walker’s battle with the unions in Wisconsin (See “Will Wisconsin Rise Again?”), a state that edged into the top 20 this year for this first time, demonstrates that the struggle for a pro-growth agenda can be contentious. As one Badger State business leader remarked, “Finally, Wisconsin is headed in the right direction.”

Chief Executive adds stats that serve to condemn Walker’s predecessor, Gov. James Doyle, and the previous party in charge in the Legislature. Wisconsin’s gross state product dropped 1.45 percent between 2007 and 2010, which is a 33-percent worse drop than the equivalent drop in Gross Domestic Product. During the 2000s, nearly 12,000 more people moved out of Wisconsin than moved into Wisconsin. And to use a fact that condemns both Doyle and Walker, state and local taxes are 18 percent higher than the national average.

I’ve maintained Wisconsin hasn’t done enough to improve the state’s business climate, and Wisconsin certainly hasn’t cut taxes to any appreciable extent. But apparently the progress Wisconsin has made has gotten notice. The survey lists the state’s Development Trend as “positive,” summarizing, “New conservative statehouse is shaking things up, drawing business favor.”

Whether that continues depends on what happens June 5 and Nov. 6.

05.08.12
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Better than Social Security, mate

Last week, my treatise on the cars General Motors should build included several cars GM does build, but in Australia, not here.

Rear-drive V-8 cars are not the only thing Australia does better than the U.S. Daniel J. Mitchell of the Cato Institute provides visual evidence of Australia’s answer to our Social Security:

Let’s start by looking at some numbers from Australia, where workers set aside 9 percent of their income in personal retirement accounts.

This system, which was made universal by the Labor Party beginning in the 1980s, has turned every Australian worker into a capitalist and generated private wealth of nearly 100 percent of GDP. Here’s a chart, based on data from the Australian Prudential Regulation Authority.

Now let’s look at one of the key numbers generated by America’s tax-and-transfer entitlement system. Here’s a chart showing the projected annual cash-flow deficits for the Social Security system, based on the just-released Trustees’ Report.

By the way, the chart shows inflation-adjusted 2012 dollars. The numbers would look far worse if I used the nominal numbers.

This problem has been getting worse, not better, the past few years for three reasons. When people don’t work, or when incomes drop, that reduces payroll tax revenues. Payroll tax rates have been cut as well, which further reduces revenues for Social Security given our unimpressive economic performance. Even before those two reasons, the deficit has been growing because the ratio of Social Security contributors (that is, the employed) to recipients is heading toward 2:1. No Ponzi scheme like Social Security can stay solvent very long when there are half as many recipients as contributors.

It never ceases to amaze me how few people realize what a ripoff Social Security is. As one of the comments on Mitchell’s post points out:

IF you want to calculate HOW BAD Social Security is it’s easy to do a little chart of your own. Assuming you only eary $40,000 annually for 45 years of your working life and you chip in 7.5% and your employer does the same you would and your employer would contribute $6,000 annually to your retirement. If you look at the Vanguard Fund or Fidelity Fund over the past 45 years even the most modest of their funds have earned at least 5% average return. This would pay double what you would get from Social Security and you could leave about $750K to your kids when you die.

How much Social Security do you get to leave for your kids? Zero. In fact, you have no guarantee of getting 1 cent of Social Security upon your retirement. The U.S. Supreme Court has ruled that no one has a right to Social Security. Whether you get anything at all depends on the whims of Washington, at least until they figure out that, you know, we’re broke.

Notice the two dips in the Australian chart, in the early 2000s and late 2000s. Everyone with money in an investment knows that the value of that investment can go up or down. But, as numerous investment professionals have pointed out since I’ve been bringing this up in the past nearly two decades, the drop in return is off a much larger base than otherwise would be the case.

The collective value of Aussie assets in their retirement system, even after their late 2000s drop, is now more than 90 percent of their gross domestic product. The same size system in this country would be nearly $14 trillion in size. I’m confident that private insurers als0 could come up with a better disability insurance system than Social Security has now.

Notice as well that the Australian Labor Party made this system mandatory. The Labor Party is the most left-wing of Australia’s mainstream political parties, supposedly more left-wing than our Democratic Party. And yet Labor drew the conclusion that Australians were better off in a private account-based system, whereas Democrats lack the courage to make that step.

In fact, it could be argued that with all working Americans having money in investments, that would create pressure to improve corporate governance, because, instead of only an individual company’s investors having an interest in how a company is managed, everyone would be interested in how all companies in which private retirement accounts are invested are run. That would also place pressure on politicians to effectively and appropriately regulate companies, in contrast to corporate regulation today.

We know that a retirement system that involves private accounts works better than Social Security. Ask federal employees. They don’t get Social Security; they have their own retirement system. For that matter, where are union pension funds invested? The stock market.

 

05.08.12
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Presty the DJ for May 8

Today in 1954, the BBC banned Johnny Ray’s “Such a Night” after complaints about its “suggestiveness.”

The Brits had yet to see Elvis Presley or Jerry Lee Lewis.

The number one British single today in 1955:

The number one single today in 1964 was from a group that had had number one with three different songs for 14 consecutive weeks:

Today in 1965, what would now be called a “video” was shot in London:


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