Freedom Line Blog

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Earlier this month, I noted that our economy continues to sputter at stalling speed, some four long years after the last recession officially ended:

The U.S. Commerce Department announced second-quarter gross domestic product (GDP) growth of just 1.7%.  That follows first-quarter 2013 growth of just 1.1%, and fourth-quarter 2012 growth of just 0.1%.  Together, that means our economy has grown less than 1% over the past nine months. That obviously provides additional confirmation that Obama’s economic agenda has failed, even as he barnstorms the country demanding more of the same.”  

Yesterday, Macroeconomic Advisers lowered its third-quarter GDP projection to just 1.8%, which would make four consecutive quarters below 2%.  The fourth quarter of 2012 came in at 0.1%, the first quarter of 2013 was 1.1% and growth for the recently-completed second quarter of 2013 was 1.7%.  That’s significant, because growth below 2% on a year-over-year basis has been followed by a recession some 70% of the time according to a Federal Reserve study.  Keep in mind that the average quarterly GDP growth since 1929 has been 3.3%.

Meanwhile, American workers’ wages continue to stagnate, according to the Labor Department.  Since the recession ended all the way back in June 2009, average hourly pay for non-supervisory employees outside of the government sector has declined 0.9%.  It’s one thing for wages to decline during a recession, but another thing entirely for them to fall during a supposed “recovery.”  Obviously, record trillion-dollar deficits aren’t the only unfortunate novelties of the Obama presidency.

Beware of financial bureaucrats posing as economists. That’s my main takeaway from some pre-analysis of Friday’s unemployment numbers by Gallup’s lead economist, Dennis Jacobe.

As is sometimes the case when using metrics to understand reality, it looks like the federal government isn’t counting the right economic event if it truly wants to understand the employment market.

According to Jacobe, “The current government job measures leave a lot to be desired in terms of face-validity. For example, [Federal Reserve Chairman Ben] Bernanke noted in his testimony to Congress that the Fed’s unemployment target may need to be adjusted, depending on the labor participation rate. A declining participation rate can artificially lower the unemployment rate as job seekers give up looking for work, while an increasing participation rate can do the reverse.”

The problem is particularly acute when one considers how the feds count part-time jobs.

“Similarly, the establishment survey can be distorted by a surge in part-time jobs – a factor that may need to be considered when one evaluates Friday’s report,” writes Jacobe. “Part-time jobs not only count as new jobs for this survey, but if an American having one part-time job adds an additional part-time job, it counts the same as the creation of a new full-time job.”

This kind of counting completely misrepresents the rise in multiple part-time jobs. By treating two-part time jobs as the equivalent of one full-time job, the metric leaves out the fact that unlike just about every full-time job, almost no part-time job provides health or retirement benefits. Thus, while the hours worked my be roughly the same, the overall compensation is not.

What makes this an especially pernicious way to describe today’s employment market is the well-documented impact ObamaCare is having on the decline of full-time employment. If the federal unemployment survey continues to equate workers with multiple part-time jobs and those with full-time employment, a huge net loss in millions of workers’ standard of living will be lost because the official formula simply doesn’t account for it.

That’s a point worth remembering if Friday’s unemployment numbers come back better than expected.

Texas Republican Governor Rick Perry is once again visiting Democratic strongholds in an attempt to lure businesses to relocate to the Lone Star State.

Perry is set to meet with business groups in New York and Connecticut, reports National Public Radio. Previously, Perry extolled his state’s low-tax, light-regulation approach in California and Illinois.

But Perry’s initiative is more than just a series of speeches and photo-ops. His moves are coordinated with the work of TexasOne, a coalition of chambers of commerce and corporations funding a $1 million advertising campaign in the targeted states.

YouTube ads like “Texas is Calling” tout the state’s nine consecutive years ranked #1 for business, hosting the world’s largest medical center and welcoming 1,400 new residents a day.

With states like California, Illinois, New York and Connecticut ranking near the bottom in business-friendly taxes and regulations, it’s no wonder Perry sees an opportunity to let wealth creators in those states know there is an alternative.

A new Gallup poll provides more proof that the liberal fixation on gun control and immigration reform isn’t even on the Top Ten list of the most important issues for Americans:

This suggests to me that one way to inject issues 1-10 into the deliberations about gun control and immigration is for Republicans in Congress to ask rhetorically, “Why are we discussing restricting guns and legalizing illegal immigrants when 1) 86 percent of Americans want us help create jobs and help the economy grow, 2) 81 percent want us to make the government work more efficiently and fix our schools, and 3) 77 percent want us to address the financial problems with Social Security and Medicare?”

Rather than letting Democrats pick the two issues that most divide Republicans, GOP members of Congress should be picking issues that divide the opposition. Any of Gallup’s Top Ten are natural strong points for Republicans, and especially conservatives. All they need to do is pick one and start reframing the debate.

Now.

With the first half of President Barack Obama’s regulatory legacy behind us, the folks at Heritage tallied up the cost thus far – 131 new major regulations totaling $70 billion.

Major regulations are those imposing a cost on the economy of at least $100 million or more each year.

In 2012, the two biggest profit-killers were (1) a joint EPA-Dept. of Transportation rule to boost fuel-economy standards that will result in an average new price increase of $1,800.00, and (2) an EPA Utility MACT regulation designed to shut down coal plants by making it cost prohibitive to meet new emissions standards.

On deck are the literally hundreds of regulations spawned by ObamaCare and the Dodd-Frank financial reform law. Since those are still working their way through the bureaucracy, it’s too early to estimate what their financial impact will be. One this is certain, though; they won’t be cheap.

Get a copy of the entire report, Red Tape Rising, here.

Now that the Gang of Eight’s immigration reform bill has been slowed down a bit, it’s worth pausing for a moment to consider what economic trade-offs might occur if millions of illegal immigrants become eligible to enter the job market. Since many of these newly eligible workers are low-skilled, they’ll be competing with low-skilled, low-wage native workers in an economy with 7.6 percent unemployment.

Members of the U.S. Commission on Civil Rights are taking notice, says Byron York:

Last week, three members of the U.S. Commission on Civil Rights wrote to Ohio Democratic Rep. Marcia Fudge, chairman of the Congressional Black Caucus, arguing that legalizing currently illegal immigrants will have far-reaching effects on African-Americans.

“Such grant of legal status will likely disproportionately harm lower-skilled African-Americans by making it more difficult for them to obtain employment and depressing their wages when they do obtain employment,” the commissioners wrote. “The increased employment difficulties will likely have negative consequences that extend far beyond economics.” Among those consequences, according to the commissioners: increased crime, incarceration, family breakdown, and more.

A recent review of the academic literature by Harvard economist George Borjas confirms the negative impact mass legalization will have on low-skilled native wages:

For American workers, immigration is primarily a redistributive policy. Economic theory predicts that immigration will redistribute income by lowering the wages of competing American workers and increasing the wages of complementary American workers as well as profits for business owners and other “users” of immigrant labor. Although the overall net impact on the native-born is small, the loss or gain for particular groups of the population can be substantial.

The best empirical research that tries to examine what has actually happened in the U.S. labor market aligns well with economy theory: An increase in the number of workers leads to lower wages.

If you increase the supply of something, you lower its value. If they want a way to frame opposition in positive terms, expect to see Republican opponents of the Gang of Eight’s reform bill to become the champions of the forgotten working class.

Matthew Continetti of the Washington Free Beacon has a must-read opinion piece today explaining why President Barack Obama’s policy agenda ignores the economic and employment concerns of millions of Americans to focus on much less salient issues like gun control and amnesty.

In short, to understand Obama’s refusal to concentrate like a laser beam on improving the nation’s economic outlook, one has to remember that the President cares more about wealthy liberal pet projects from the likes of New York’s billionaire mayor Mike Bloomberg than about anyone on Main Street.

The Bloomberg style has several distinctive features. The first is a complete indifference to or dismissal of middle class concerns. In this view, it matters less that the middle class is enjoying full employment or economic independence or a modicum of social mobility or even action on issues it finds important, and more that it has access to government benefits generous enough to shut it up.

Recall that in the aftermath of Hurricane Sandy Bloomberg was far more interested in seeing the Yuppie-filled New York City Marathon take place, and in linking the storm to apocalyptic climate change, than in mobilizing the combined forces of municipal and state and federal government to take care of the white working class on Staten Island and in the Rockaways. Similarly, Barack Obama has nothing new to say on the economy or deficit, but delivers speech after speech on gun regulations that would not have stopped the Sandy Hook massacre, while his allies in the Senate work to import low-wage labor on the one hand and high-end Silicon Valley labor on the other. Meanwhile, the vast majority of the nation hopes for better days.

Another hallmark of the Bloomberg style is its insufferable condescension. One need only have heard the tiniest whine of a Bloomberg speech to know what I’m talking about. The preening attitude of superiority manifests itself in a form of moral blackmail. Adversaries of the Bloomberg-Obama agenda are not simply mistaken. There is, it is implied, something wrong with them personally.

Sound familiar? You can read the entire piece here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez. 

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez. 

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Earlier this month, we at CFIF lamented the fact that the U.S. now claims the developed world’s highest corporate tax rate.  Fortunately, as we noted, a bipartisan consensus is emerging in favor of reducing and reforming that rate.

Now, in a letter published by The Economist, twenty leading economists from both academia and the private sector called for a lower rate and illustrated how our current rate discourages employment and thwarts domestic investment:

A high corporate tax rate impairs our ability to attract domestic and foreign investment. Because capital and information flows more freely across borders in the Internet age, disparities in the corporate income tax rate can now have a greater impact on location decisions than in the past. The number of Fortune Global 500 headquarters in the United States decreased from 179 to 133 from 2000 to 2011, while China (25.0 percent tax rate), Switzerland (21.2 percent tax rate), and Korea (24.3 percent tax rate) experienced sizable increases over the same period. De Mooij and Ederveen (2005) found that a one percentage point reduction in a host country’s tax rate increased foreign direct investment by 2.9 percent. The OECD (2011) found that corporate income taxes, of all the different types of taxes, are most harmful to economic growth and capital accumulation.

A high corporate tax rate undermines job creation and reduces wages. According to the Commerce Department, foreign investment supported five million U.S. jobs in 2010. To the extent that our relatively high corporate tax rate discourages foreign investment, it discourages job formation. Moreover, several academic studies have found that much of the burden of the corporate income tax is borne not by capital but by domestic labor, in the form of lower wages. For example, Mathur and Hassett (2010) analyze the relationship between corporate tax rates and the average manufacturing wage for 65 countries over a period spanning 1981–2005; they estimate that a one percent increase in the corporate income tax leads to a one half of one percent decrease in hourly wages. The U.S. Treasury Department assumes that 25 percent of the incidence of corporate tax is borne by workers. Moreover, policies that increase the cost of capital will result in less capital being invested.”

As summarized by former Clinton Administration adviser Elaine Kamark and former Reagan adviser James Pinkerton, “This is another confirmation of the growing consensus among experts and political leaders that the U.S. corporate tax rate is too high and the code too complex.”  They added, “As the experts have established, the current U.S. tax code is an impediment to investment, growth and job creation.”

The intellectual consensus thus continues to coalesce.  Now it’s time for the White House and Congress to act before more harm is done.

Get a load of this economic reasoning from Peter Orszag, Obama’s first Director of the Office of Management and Budget and current vice chairman at megabank Citigroup:

More graduates would mean lower inequality, because the wage premium for a college degree would be reduced by the additional supply. And it would mean higher national income, because better-educated workers are, on average, more productive.

So, lowering the “wage premium” means that income for college graduates will go down with more of them in the job market.  This is a good thing according to Orszag because reducing the value of a college degree will have a leveling effect on incomes (in a downward direction, of course).

On the bright side, it’s a remarkably honest admission about everything that’s wrong with the analysis of people who obsess over economic inequality.  In this worldview, government policies that devalue education and distort the labor market should be praised if it means less people have an opportunity to be rewarded for superior ability.

Thus, while Orszag’s analysis doesn’t square with the diminished aspirations of millions of under- and unemployed college graduates in the Age of Obama, it does help explain why his former boss isn’t putting any muscle behind addressing the depressed job market.  In Obama World, so long as more people make the same – even if it’s less – everything is just fine.

Earlier this week, the federal government reported that our economy contracted for the first time since the last recession.

Today it reported that unemployment rose to 7.9% last month, up from 7.8% the month before.

Analysts had expected the rate to remain at 7.8%, already a terrible number nearly four years after the last recession ended.  Moreover, the 157,000 new jobs added fell below analysts’ expectations of approximately 170,000, which itself is significantly below the 200,000 per month necessary to keep pace with population growth and substantively reduce the festering unemployment rate.  So Obama II inherits a higher unemployment rate from himself than Obama I inherited from Bush, but with the added burden of $6 trillion wasted deficit spending.

This has ominous broader implications, as noted by The Wall Street Journal:

The labor market looks anemic 3½ years into an economic recovery.  At last count, there are 134 million employed Americans, or four million less than the month before the recession began.  At the same point after the prior recession in the early 2000s, despite what was then called a jobless recovery, there were 5.3 million more workers…  Whether it is retirees, the unemployed, “discouraged” workers or people claiming disability that explain the difference, though, the ratio of “makers” to “takers” in society has dropped.  That has implications for tax revenue and spending and helps explain why, following weak growth data on Wednesday, this is the slowest economic recovery in modern times.”

Hardly the “Forward” that Obama promised.

The unemployment rate when Barack Obama became President was 7.8%.  Four years, four trillion wasted deficit dollars and thousands of federal regulatory pages later, the unemployment rate remains… 7.8%.

Moreover, the Labor Department reported this morning that we added a lackluster 155,000 new jobs last month, and the labor participation rate (the percentage of Americans actually in the workforce) showed no improvement and remains at a generational low of 63.6%.  In fact, considering that the number of women working outside the home has increased during the past three decades, workforce participation is in that sense even more depressing.

By way of perspective, through good times and bad since World War II, unemployment has averaged 5%.  And facing an even deeper recession, Ronald Reagan’s agenda of lower taxes and smaller government saw unemployment plummet from 10.4% on the date his tax cuts took effect to 7.0% two short years later, and continued its steady decline to 5% during his administration.

Accordingly, this morning’s unemployment report confirms the “New Normal” under Obama and his wasteful policies.

If you’re a conservative looking for reasons to be thankful this November, don’t read Amity Shlaes’ column at Bloomberg today.  In it, the author of books on Calvin Coolidge and the Great Depression identifies four factors that make 2013 seem like 1937 – a pre-election government spending spree; talks of deficit reduction thereafter; presidential attacks on high-income earners; and the economic fallout from first-term “comprehensive reforms” like Social Security and Obamacare.

According to Shlaes, the combination caused “the depression within the Depression.”  Not something one wants to think about this time of year.

Recently, Quin argued that Obamacare’s medical device tax would be a huge job-killer if implemented.  A story from Fox News about massive layoffs at medical supply giant Stryker confirms his grim prediction:

The company will cut 1,170 jobs, or five percent of its worldwide workforce…

A “medical device excise tax” included in the mandate imposes a 2.3 percent levy on medical device manufacturers and suppliers, which critics say will raise prices on everything from pacemakers to prosthetics to stents. Companies will be required to pay the tax regardless if they have a profit or loss for the year. The tax is estimated to cost the medical device industry $20 billion.
…

“Here we are, one of the greatest industries in the country, and we’re staring down on Jan. 1, 2013 and the addition of a 2.3 percent excise tax, while meanwhile on the other side all the discussion in Washington is about creating jobs,” Stryker President and CEO Stephen McMillian said during a national conference of medical device manufacturers in Washington, D.C. last September.

In my column this week, I note that the Obama Administration refused to meet its legal requirement to publish its upcoming regulatory agenda back in April.  As of today, it failed to do so again in October as required by law. 

We’ve now gone an entire year without the Obama Administration giving Americans – and the businesses that employ them – the information they need to plan for the future.  In response, the job market is frozen and expansion projects are being delayed.  The only reason that makes sense for violating two disclosure requirements is that the White House is waiting until after Election Day to flood the economy with even more regulatory burdens.

If that’s not enough to spur a change, I don’t know what is.

H/T: Daily Caller

Stephen Moore of the Wall Street Journal in an interview with the Daily Caller frames the tax debate in terms both Mitt Romney and Paul Ryan should use when attacking President Barack Obama’s soak-the-rich economic policies:

“Fairness is a good principle but should not be put ahead of growth,” Moore said when discussing his new book, Who’s the Fairest of Them All?: The Truth about Opportunity, Taxes, and Wealth in America.  “There’s nothing fair about making everyone poor.”

A hat tip to my father-in-law and former flight instructor Grady Conner for sending along a link from Flying Magazine that reproduced the National Business Aviation Association’s response to President Barack Obama’s debate night swipe at corporate jets:

In an open letter to Obama, NBAA head Ed Bolen said the remarks show that the president is out of touch with reality.

“Your comments seemed to illustrate a complete lack of understanding about the importance of business aviation in the U.S., and appear to be at odds with your stated interest in promoting job growth, stimulating exports, driving economic recovery and restoring America to its first-place position in manufacturing,” Bolen wrote.

Bolen was referring to Obama’s response to a question from debate moderator Jim Lehrer about tax policy, in which Obama stated: “Why wouldn’t we eliminate tax breaks for corporate jets? My attitude is if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it.”

Bolen first countered those remarks in a statement issued to news organizations before the Wednesday night debate had concluded, which noted that the business aviation industry is responsible for 1.2 million American jobs, and contributes $150 billion annually to the U.S. economy.

For those scoring at home, the 1.2 million American jobs maintained by the business aviation industry dwarf the 300,000 non-farm payroll jobs created since President Obama took office.  (And that’s being charitable.  The CNN fact checkers who determined that number didn’t count government jobs.  If they had, the Obama economy would actually have 400,000 fewer Americans working today than in January 2009.)

As a devotee of stimulus, the President should appreciate that tax breaks for corporate jet purchases help stimulate people to buy such aircraft, which in turn help employ 1.2 million domestic workers and generate $150 billion.

Then again, maybe the President just resents the fact that free people in an open market can do a better job stimulating the economy than government experts.