Category: US business

You shouldn’t need 37 signs that we are in a Recovery in Name Only. If you do, Michael Snyder has all of them, including …

On Friday, it was announced that the unemployment rate had fallen to “7 percent”, and the mainstream media responded with a mix of euphoria and jubilation.  For example, one USA Today article declared that “with today’s jobs report, one really can say that our long national post-financial crisis nightmare is over.”  But is that actually the truth?  As you will see below, if you assume that the labor force participation rate in the U.S. is at the long-term average, the unemployment rate in the United States would actually be 11.5 percent instead of 7 percent.  There has been absolutely no employment recovery.  The percentage of Americans that are actually working has stayed between 58 and 59 percent for 51 months in a row.  But most Americans don’t understand these things and they just take whatever the mainstream media tells them as the truth. …

The percentage of Americans that have a job has stayed remarkably flat since the end of 2009, median household income has fallen for five years in a row, and the rate of homeownership in the United States has fallen for eight years in a row.  Anyone that claims that the U.S. economy is experiencing a “recovery” is simply not telling the truth.  The following are 37 reasons why “the economic recovery of 2013” is a giant lie…

#1 The only reason that the official unemployment rate has been declining over the past couple of years is that the federal government has been pretending that millions upon millions of unemployed Americans no longer want a job and have “left the labor force”.  As Zero Hedge recently demonstrated, if the labor force participation rate returned to the long-term average of 65.8 percent, the official unemployment rate in the United States would actually be 11.5 percent instead of 7 percent.

#2 The percentage of Americans that are actually working is much lower than it used to be.  In November 2000, 64.3 percent of all working age Americans had a job.  When Barack Obama first entered the White House, 60.6 percent of all working age Americans had a job.  Today, only 58.6 percent of all working age Americans have a job.  In fact, as you can see from the chart posted below, there has been absolutely no “employment recovery” since the depths of the last recession…

#3 The employment-population ratio has now been under 59 percent for 51 months in a row.

#4 There are 1,148,000 fewer Americans working today than there was in November 2006.  Meanwhile, our population has grown by more than 16 million people during that time frame.

#5 The “inactivity rate” for men in their prime working years (25 to 54) has just hit a brand new all-time record high.  Does this look like an “economic recovery” to you?…

…

#8 Middle-wage jobs accounted for 60 percent of the jobs lost during the last recession, but they have accounted for only 22 percent of the jobs created since then.

#9 Only about 47 percent of all adults in America have a full-time job at this point. …

#15 When Barack Obama took office, the average duration of unemployment in this country was 19.8 weeks.  Today, it is 37.2 weeks.

#16 According to the New York Times, long-term unemployment in America is up by 213 percent since 2007.

#17 Thanks to Obama administration policies which are systematically killing off small businesses in the United States, the percentage of self-employed Americans is at an all-time low today.

#18 According to economist Tim Kane, the following is how the number of startup jobs per 1000 Americans breaks down by presidential administration…

Bush Sr.: 11.3

Clinton: 11.2

Bush Jr.: 10.8

Obama: 7.8

#19 According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row. …

#22 As 2003 began, the average price of a gallon of regular gasoline was about $1.30.  When Barack Obama took office, the average price of a gallon of regular gasoline was $1.85.  Today, it is $3.26. …

#29 When Barack Obama first entered the White House, there were about 32 million Americans on food stamps.  Today, there are more than 47 million Americans on food stamps.

#30 Right now, approximately one out of every five households in the United States is on food stamps.

#31 According to the Survey of Income and Program Participation conducted by the U.S. Census, well over 100 million Americans are enrolled in at least one welfare program run by the federal government. …

#36 When Barack Obama was first elected, the U.S. debt to GDP ratio was under 70 percent.  Today, it is up to 101 percent.

#37 The U.S. national debt is on pace to more than double during the eight years of the Obama administration.  In other words, under Barack Obama the U.S. government will accumulate more debt than it did under all of the other presidents in U.S. history combined.

Apparently a number of workers greater than zero held strikes at fast food restaurants Thursday demanding to be paid $15 per hour for their minimum-wage-skill work.

There’s a term for them. The Skeptical Libertarian reports:

McDonald’s just added 7,000 touch-screen kiosks to handle ordering and cashier duties in its European stores.

The move is designed to boost efficiency and make ordering more convenient for customers. In an interview with the Financial Times, McDonald’s Europe President Steve Easterbrook notes that the new system will also open up a goldmine of data.

As technology advances, more and more tasks can be mechanized and automated. Think of ATMs, automated gas pumps, and kiosks at airports and movie theaters. Is it inevitable that machines will replaced human labor, simply because it is possible? Not necessarily. The switch only happens when businesses decide that machines are a more cost-effective way to do a specific job than labor. (Think of using a food-processor instead of chopping vegetables by hand.)

When the cost of labor goes up, the tradeoff between labor and capital changes. This can happen for a number of reasons, but one way to make machines more attractive is to raise the minimum wage. When you raise the price of something, people buy less of it–this is as true for labor as it is for hamburgers. When you force up the cost of low-skilled labor, employers will use less of it, either by hiring more experienced workers or by investing more in machines. …

The case of McDonald’s kiosks (and all the other common tasks that are now automated) merely shows that such jobs don’t have to be done by people. Businesses are not sitting targets, and they will respond to incentives.

Worst of all, the people most hurt by policies like the minimum wage the very people they are designed to help: the less educated, the less skilled, and the less experienced. By removing a rung on the job ladder, minimum wage laws take away job opportunities from the young, poor, and uneducated. They reward those who already have jobs and protect experienced workers from competition. This is something to keep in mind as President Obama continues his grandstanding about hiking the minimum wage from $7.25 to $9 an hour. There is no such thing as a free lunch, and the people who will pay for this one are the most vulnerable and disadvantaged in our society.

Just like the old Automat days:

Consumers are not going to buy value meals that are double in price. Restaurant owners know that.

Last Resistance proves that any choice Barack Obama makes can indeed be the wrong choice:

With all of the problems associated with Obamacare and the failed rollout of the online signup program, President Obama has left small business owners in a paradox that could be very costly to them.

In a move that Obama says will help small business owners; he delayed the launch of an online healthcare exchange for them for a year.  But like many private individuals, many small business owners are finding that their policies are being cancelled due to the requirements imposed by Obamacare.  This is leaving small business owners with no insurance for them or their employees and no access to an exchange program for a year. …

At a time when the economy is still struggling and many small business owners are barely keeping their businesses running, this insurance nightmare may be more than some can bear.  Obama has repeatedly promised to help small businesses, but his actions say otherwise.

Earlier this year, small business owners were facing a number of tax increases that Obama instituted.  If a small business owner makes $250,000 or more a year, they faced combined tax increases of 6%-10%.

Obama has also been pushing to increase the minimum wage from $7.25 per hour to $9 per hour.  In August, Barbara Boxer (D-CA) wanted the minimum wage pushed up to $10 per hour.  Fast food workers belonging to unions, most of which are Democrats and followers of Obama were pushing for minimum wages of $15 per hour.

Between increased taxes, possible increase in minimum wage and decreased retail sales, the healthcare insurance nightmare of having policies cancelled and no way to sign up for new coverage for a year can and probably will be the breaking point for some small business owners.

I heard recently from someone who invested her entire retirement savings into her business. Sometimes you have to do things like that. (During the 1990s one way to find startup capital was to fill out every credit card application you got in the mail, and max out the cards immediately to buy whatever your businesses needed to start.)

One comment on the story disagreed with the term “cancelled.” The commenter, who claimed to have worked in insurance, said that policies can generally canceled only for two reasons — nonpayment of premiums, and fraud on the application. However, health insurance companies can decline to renew policies — if, for instance, the policy no doesn’t meet the requirements of the Affordable Care Act, such as required maternity care for anyone of any age — and that is what’s happening. To the business owner who suddenly loses his or her employees’ insurance, the result is the same.

Daniel Mitchell talks about, of all things, a Swiss national referendum:

Switzerland’s left-wing party has instigated a referendum for November 24 that asks voters to limit pay ranges so that a company wouldn’t be able to pay top employees more than 12 times what they’re paying their lowest-level employees. …

Since Swiss voters already have demonstrated considerable wisdom (rejecting a class-warfare tax proposal in 2010 and imposing a cap on government spending in 2001), I predicted they will reject the plan. And I pointed out that Switzerland’s comparatively successful system is a result of not letting government have too much power over the economy. …

But I don’t want to focus today on the Swiss referendum. Instead, I want to expand on my final point, which deals with the misguided belief by some on the left that the economy is a fixed pie and that you have to penalize the rich in order to help the poor.

I’ve covered this issue before, and I even tried to educate a PBS audience that economic growth is key.

But maybe this chart is the most persuasive bit of evidence. It shows per-capita GDP in France and Hong Kong over the past 50 or so years. France is a nation that prides itself of redistribution to “help” the poor while Hong Kong is famous for having the most economic freedom of any jurisdiction.

Now look at this data and ask yourself whether you’d rather be a poor person in France or Hong Kong?

Since Hong Kong is richer and is growing faster, the obvious answer is that poor people in France almost surely face a bleaker outlook.

In other words, the welfare state can give you the basic necessities and allow you to survive (at least until the house of cards collapses), but it comes at a very high cost of lower growth and diminished opportunity.

The moral of the story is that prosperity is best achieved by a policy of free markets and small government.

P.S. If you want more evidence on the superiority of markets over statism, check out the comparison of South Korea and North Korea and the difference between Chile, Argentina, and Venezuela. Heck, even the data comparing America and Europe show similar results.

P.P.S. As you might expect, Margaret Thatcher addressed this issue in a brilliant fashion.

Broback’s Blog:

The RAND Health Insurance Experiment is referenced in the academic literature as a “gold standard” study, and the main conclusion it reached aligned perfectly with what Econ 101 teaches us — when people have to pay for stuff, they buy (significantly) less of it. It also confirmed that “outcomes” were not worse for those poor devils that are forced to participate fully in a market system (meaning having to pay for things.)

This conclusion was reached again when the results of a two-year Oregon Health Study were announced. Free health care did not result in clear improvements in physical health for the participants.

Another Econ 101 principle shown to be highly applicable in other markets is that when things are free, demand increases. And when demand increases, prices tend to go up. The paradox is that while places like France and the U.K. are regarded as highly socialized in the delivery of health care, their costs are well controlled compared to the “free market” of the U.S.

The question is, how do you define a market as “free” vs socialized? Many would say that you’d be hard pressed to come up with a better metric than the percentage of health costs paid directly to health care providers out of patient’s own pockets.

Luckily The World Bank has calculated that for us. I found the numbers surprising — that is until I realized they aligned perfectly with what Econ 101 tells us.

We all know that many in the U.K. bypass the NHS (with good reason) to go private with their care. I just did not realize the size of those numbers.

According to World Bank, over 50 percent of costs are paid out of pocket in the U.K. France? 32 percent. Canada? 49 percent. The free market “wild west” that is the U.S.A.? A measly 21 percent. That’s right. Thanks to the collectivization we call insurance, the vast majority of services are delivered to people who don’t care about the bill.

The Examiner reports:

In the aftermath of a paralyzing congressional budget fight that this month shut down the government and threatened financial default, the business community has been left fuming.

“We think many of the issues that many of these folks have raised are really important issues,” U.S. Chamber of Commerce President and CEO Tom Donohue said of the Republican conservatives whose fight over Obamacare shuttered the government for 16 days. “But we do believe to advance those interests by putting the country’s whole financial system at risk is not a good idea.”

The fight — and conservatives’ rejection of business community warnings about the economic chaos it could create — now has the Chamber and other business groups long aligned with the Republican Party weighing whether to fight back. The groups are considering taking a page from conservatives’ own playbook by recruiting and funding business-friendly candidates against Tea Party incumbents in next year’s Republican congressional primaries. …

Business and financial interests have been reluctant to challenge conservative Republicans because they share the lawmakers’ views on other major issues, like taxation and spending. That dynamic makes the current state of play, and business groups’ likely engagement during the midterm elections, much less dramatic than it would seem.

“In some ways this is nothing more than the traditional blocking and tackling of what a PAC or political operation would be doing anyway, which is [identifying] what candidates would be most aligned with the viewpoint of the PAC or the political operation,” said David French, lead lobbyist for the National Retail Federation.

Moreover, the business community, long aligned with the Republican Party, was not displeased by the outcome of the recent budget fight, which raised the debt ceiling until February 2014 and ultimately funded the government, nor surprised by the legislative waffling preceding it. Looking ahead to future fiscal debates, the business community anticipates conservative Republicans will protect its pet policies.

The current split between business interests and conservatives, then, is less philosophical than tactical, with the business community irked at Republicans’ intraparty squabbling.

The recent budget impasse on Capitol Hill was marked by Republican-on-Republican fighting, led by conservative lawmakers like Sen. Ted Cruz, R-Texas, and outside groups like the Senate Conservatives Fund, which targeted Republicans considered too moderate and too willing to compromise.

Conservative groups engage in anti-Republican rhetoric gamely, because they are concerned less with winning congressional majorities than in ensuring that safe Republican seats are held by the most conservative lawmakers.

The business community, meanwhile, has long wielded its influence inside Washington by helping Republicans to win majorities and subsequently leaning on party leaders to protect businesses.

But, as the recent budget fight demonstrated, congressional leaders are less influential than they once were, in part because conservative lawmakers are more beholden to the outside interest groups that helped elect them. That emerging power shift has given Establishment Republicans a new sense of urgency about upcoming primaries, although unlike conservatives, they lack the kind of political infrastructure needed to boost campaigns.

Conservative groups began organizing at the grassroots level much earlier and have become more effective over time at boosting candidates in primary races, advantages conservatives are skeptical that the business community can match in time for the next election.

“They’re upset with the influence conservatives and the Tea Party have had on the way Washington works,” said Dan Holler, spokesman for the conservative group Heritage Action. “But the ability to counter that requires a really coherent and clear message, and that’s going to be a problem for them.”

When you read sentences like “the business community, long aligned with the Republican Party, was not displeased by the outcome of the recent budget fight,” you can conclude there is less here than meets the eye.

Breitbart sounds a bit more hysterical:

On November 5, Defending Main Street, one of the most prominent Republican establishment groups formed with the intent of destroying the Tea Party, will meet with wealthy Wall Street donors to begin building up its war chest before the 2014 midterm elections.

As the Associated Press notes, these Republicans believe the Tea Party has “overstayed their welcome in Washington and should be shown the door in next year’s congressional elections.” Now they are taking action to start raising the money they think will be needed to make that a reality.

“Hopefully we’ll go into eight to 10 races and beat the snot out of them,” former Rep. Steve LaTourette (R-OH), who is running the group aiming “to raise $8 million to fend off tea party challenges,” recently told National Journal. “We’re going to be very aggressive and we’re going to get in their faces.”

Defending Main Street “plans to spend that money on center-right Republicans who face a triumvirate of deep-pocketed conservative groups–Heritage Action, Club for Growth and Freedom Works.”

LaTourette expressed his frustrations to the Associated Press, saying that “40, 42 House members have effectively denied the Republican Party the power of the majority” that it won in the 2010 election. He did not acknowledge that Republicans only won that majority on the strength of Tea Party voters who have now accused some of those elected officials of abandoning the intrests of those who elected them.

Yet, groups like Defending Main Street will seek to rid the party of the candidates whom Tea Party voters enthusiastically support for not being co-opted by the Washington establishment once they were elected. …

The Conservative Victory Project, “an arm of the Karl Rove’s Crossroads super PAC” that formed with the intention of declaring war on conservative and Tea Party candidates, will play a role.

Jonathan Collegio, of the Rove-affiliated American Crossroads, said they will “make every effort to make sure they’re known to every group that spends money long before the primary” if candidates have “skeletons in their closet.” He said they did not want to nominate candidates like Christine O’Donnell in Delaware.

These groups are also working together and reportedly discussing tactics such as “running attack ads against tea party candidates for Congress; overthrowing Ron Paul’s libertarian acolytes dominating the Iowa and Minnesota state parties; promoting open primaries over nominating conventions”; and “countering political juggernauts Heritage Action, the Club for Growth, and FreedomWorks.” …

Groups like Defending Main Street have been courting big-money interests for donations. It remains to be seen whether they will try to fundraise off of small-dollar donations with tactics employed by the National Republican Senatorial Committee this week, which started harnessing the anger of the grassroots with Obamacare by selling “404 Error” stickers for $25 donations. Should groups like LaTourette’s employ similar fundraising tactics, they would effectively be using those small-dollar donations to harm candidates whom the “Main Street” conservative base supports.

For all the talk of ridding the GOP of the Tea Party, though, even the establishment Republicans who are organizing to try to make that happen concede it will be more than a tall order.

To generalize, business interests tend to be pragmatists. The pragmatic politician realizes that politics is the art of the possible — an imperfect deal is better than no deal at all. Regulations on business affect big businesses much less than small businesses, because big businesses have compliance departments and can spread out the costs of regulation on more customers. Banking interests have favored Democrats, not Republicans, for many years. That subset of business called the health insurance industry favors ObamaCare, though it will make doing business in every other line of work more expensive and will take money out of consumers’ pockets.

The tea party (notice I don’t capitalize the term, because there is no single tea party movement organized like a political party) was supposed to be about smaller government. Business should be about smaller government, since taxes and regulation negatively affect business. The business community as a whole doesn’t get involved with social issues; they are economic conservatives, not social conservatives, except personally. (No business person who wants to stay in business goes out of his or her way to offend potential customers.) Where the tea party wanders off into social issues, the tea party loses the support of those who believe the political focus needs to be on the (poor) economy.

This item also does not mention the next big issue that will divide business and some conservatives — immigration. Breitbart adds:

National Journal quotes establishment figures like John Feehery and Rob Jesmer, the former executive director of the National Republican Senatorial Committee who is now a part of Mark Zuckerberg’s FWD.us group that is spending millions to enact comprehensive immigration reform that the Congressional Budget Office determined would depress the wages of working class Americans. Feehery told National Journal, “This is a battle we have to fight. We can’t just lie down and let this happen.”

The business community is not only more pragmatic about immigration. Businesses have been saying for years that this country needs more H1-B visas, for immigrants of particular skills. Why this country would turn away people with the initiative to leave their home to improve their lives is something difficult to  understand. Would they compete against Americans for jobs? Yes, but competition in the country includes the labor market. And were the economy in better shape (see Obama, Barack), labor-market competition would be less of an issue. Recall the 1990s, when businesses competed for employees, instead of workers competing for jobs.

The tea party has taken a more populist position, and therefore a position opposed to more immigration. Stances of exclusion do not grow a political movement. Taking a reflexive anti-immigration and anti-immigrant stance invites immigrants to vote Democratic.