Freedom Line Blog

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.

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.

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.

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.

I don’t know of a major journalist other than Byron York continually highlighting the plight of the under- and unemployed in Barack Obama’s America.

Summarizing the findings of a new Rutgers study, York excerpted this cautionary stat:

The researchers asked people — unemployed and employed alike — about the “major causes” of joblessness. Seventy percent named “competition and cheap labor from other countries.” The next-highest number, 40 percent, blamed “illegal immigrants taking jobs from Americans.” That 40 percent is more than blame Wall Street bankers (35 percent), the policies of George W. Bush (23 percent) or the policies of Barack Obama (30 percent).

“These strong and enduring concerns about globalization and fears that illegal immigrants hurt job prospects for Americans citizens are likely to make it more difficult for policymakers in Washington, DC to negotiate free-trade agreements and reform immigration laws,” the report concludes, in what is probably a serious understatement.

Whether this perception is correct or not, Republicans in Congress need to take care how they handle immigration reform.  As I wrote last week, conservatives like Mark Krikorian of the Center for Immigration Studies make a strong case that increasing the legal labor supply when jobs are scarce hurts native workers.  If Republicans are seen as complicit in increasing the Democrats voting base and hurting job prospects for working class citizens, the party will have no one to blame but its leadership for its dwindling popularity.

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.

So far, a busy half week on Capitol Hill saw Senator John Kerry (D-MA) become Secretary of State after the U.S. Senate confirmed him 94-3; gun-control politicians getting righteous blowback from the NRA and an advocate for young mothers; and another round of immigration reform heating up.

On this last point, it’s helpful to remember that a big part of what’s missing from the illegal immigration debate is how to fix the problems with the legal immigration system.  For an idea of how byzantine is the process of getting into America the right way, check out these charts prepared the libertarian Reason Foundation and the liberal Immigration Road.  (Each is a pdf.)

The worst lowlight: Waiting up to 28 years to become a citizen.

But before policy wonks and political advocates jump to conclusions and start proposing ways to fix immigration by reducing wait times and streamlining the process, it’s worth having a serious national discussion about what principle should drive our immigration policy.

If it’s about the national interest, in this case defined as what’s best for Americans already here, then it’s far from clear how importing any foreign workers, skilled or unskilled, improves the economic lot of domestic skilled and unskilled workers.  If anything, basic economics suggests that importing more labor reduces the value of the labor already here, which, while a boon for employers, translates into a pay cut for workers.  (For more on this, see Mark Krikorian’s thought-provoking book, “The New Case Against Immigration.”)

On the other hand, if immigration policy is about ensuring that America is the preeminent land of opportunity within the world community, then a small but clear set of filters (e.g. screening out convicted criminals, terrorists, and those fleeing tax problems) need to be put in place to allow the greatest number of opportunity-seeking immigrants to come, live, and hopefully contribute to the nation’s growth.

Personally, I’m conflicted about which route to take.  With Americas suffering from 7.8 percent unemployment – which is really 14.4 percent when underemployed and those too discouraged  to look for work are counted – it’s hard to justify adding to the labor market.  And yet an immigration policy focused on opportunity for those seeking it is an attractive extension of Ronald Reagan’s city on a hill, of which he said “And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here.”

This much I do know: Finding a solution to the illegal immigration problem can’t be done until Americans decide on legal immigration’s foundational principle.

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.

Peter Cove writes in City Journal about the success of America Works, his for-profit company that specializes in getting jobs for long-term welfare recipients:

In the past 27 years, America Works has placed more than 250,000 poor people, with an average of five to six years on the rolls, in private-sector jobs, with an average starting wage of $10 per hour plus benefits. In our New York program, to take one example, more than half of these new workers were still on the job after 180 days. The employers that we have worked with include prestigious companies, such as Time Warner, Cablevision, Aramark, J. C. Penney, and American Building Maintenance Industries. Most of these employers keep coming back, asking for more of our referrals.

In his article, Cove recounts his transformation from welfare-state-liberal to work-first reformer.  The theme throughout is that long job training programs are colossal wastes of time and money compared to the America Works model:

…clients with shaky self-confidence are best served by early success in getting a job, not by long periods of preparation. Our weeklong training sessions are narrowly focused on the attributes and skills needed to land an entry-level job. Our trainers work with clients on the basics, such as maintaining a businesslike personal appearance, speaking properly, preparing a résumé, and showing up on time. Clients quickly learn that success depends on self-discipline and their own motivation and effort.

According to a report by U.S. Senator Tom Coburn (R-OK), as of February 2011, “Nine federal agencies spent approximately $18 billion annually to administer 47 separate employment and job training programs.”  Unfortunately, the Government Accountability Office says that “little is known about the effectiveness of most programs.”

Which do you prefer?  A for-profit company with 27 years of experience getting people into jobs they keep, or 47 cross-cutting initiatives that can’t prove whether or not they are effective?

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

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.

A new study confirms something we’ve highlighted here at CFIF in recent weeks:   The environmental activist campaign to grant the Forestry Stewardship Council (FSC) a monopoly over forestry certification standards in the United States would (1) substantially raise costs for American consumers, (2) threaten domestic jobs, (3) disproportionately punish American producers, (4) increase importation of foreign wood and (5) paradoxically incentivize use of less environmentally-friendly materials.

A little background: The clear majority of certified timber in North America is not certified by FSC.  Instead, it is certified by credible certification programs, such as the Sustainable Forestry Initiative (SFI) and American Tree Farm System (ATFS).   Some environmentalist groups, however, have commenced a campaign to strongarm U.S.  businesses into only using wood and paper products that satisfy the FSC’s preferred standard.

The problem?  As confirmed by the new study, an FSC certification monopoly would threaten domestic industry, cost American jobs and raise prices for consumers.  Entitled The Monopolization of Forest Certification:  Do Disparate Standards Increase Consumer Costs and Undermine Sustainability?, the study vividly and alarmingly summarizes its findings:

• The FSC certification seems to be significantly more costly than other standards, thereby raising producer costs and consumer prices in the range of 15% to 20%, as well as upsetting the balance between sustainability and economic viability;
• The FSC standard in the US appears to be stricter, and therefore more costly, than standards applied overseas, thereby disadvantaging US producers and raising retail prices for American consumers; and
• If a FSC standard becomes a regulatory requirement for US forests (through edict or non-market pressures from outside groups), consumer welfare losses would occur in a number of markets, including an estimated loss of $10 billion per year for wood products and $24 billion per year for paper products markets.”

Rather than subject ourselves to a foreign monopoly with such destructive consequences, the preferable alternative is to continue competition between certification programs – which will spur economic and consumer benefits.

This new study substantiates that and comes at an opportune time as the U.S. Green Building Council (USGBC) has just opened up their discriminatory LEED process for public comment.

“Employer voices are all in opposition to this bill.”

That was Kathy Wylde, President of the Partnership for New York City, on a proposed regulation that would force city employers to offer up to nine days each year of paid sick leave.

Almost all employers already offer sick leave, with Ernst & Young reporting that only 12% of all city employees lack it.  Further illustrating the unnecessary nature of the proposed law, the E&Y study reports that small businesses (defined as those with fewer than 20 employees) already offer an average of 7.7 days of paid sick days per year, with larger businesses already offering 8.7. The study further concludes that the proposed new burden would cost private-sector employers an astounding $789 million annually, with nonprofits and small businesses carrying $189 million of that burden.  Providing another metric, the report calculates that implementing the regulation would cost businesses 48 cents per hour, per employee.  The struggling construction, utility, hospitality and restaurant sectors would be particularly hard-hit by the proposed rule.

Proponents of the entitlement offer their own study, but their report sampled only 1,200 people in comparison to the 414,000 sampled by E&Y.  The analysis concludes, “There is a growing sentiment among employers that paid sick leave is the ‘straw’ that will break their will to continue to grow or even to operate here.”  In an economy and job market that continue to struggle, how does that serve the interests of employers, employees or city residents generally?

Fortunately, Council Speaker Christine Quinn remains strong against the potential job-killing regulation, despite pressure from labor organizations and activists detached from the everyday realities of hiring workers and keeping a business above water.   New York business owners and residents interested in the city’s economic vitality should call Speaker Quinn and tell her, “keep up the good work.”

Conventional wisdom (pardon the pun) holds that presidential election season doesn’t begin in earnest until the conventions conclude.

If that’s the case, Barack Obama begins his job extension tour with a faceplant.

Economists expected our economy to add 135,000 new jobs in August, but today’s unemployment report shows just 96,000.  Not only is that a steep decline from last month’s already-lackluster 141,000 number, it’s significantly below the 200,000 per month we must see to keep pace with population growth and substantively reduce the festering unemployment rate.  Moreover, another 368,000 Americans simply dropped out of the workforce altogether in August, nearly four times the number of new jobs.  Finally, the unemployment rate remained above the 8% level that the Obama Administration promised in January 2009 we would never reach in the first place, establishing a new record 43rd consecutive month.  In fact, it promised that we would be down to approximately 5% by now.

“Four more years?”  Today’s news makes that an increasingly difficult sell.

No president in modern history has been reelected with unemployment above 7.2%, and even that occurred in 1984 when the rate had plummeted in just a few months from over 10%.  Accordingly, today’s unemployment report makes for an ugly hangover for Obama and his fellow Democratic conventioneers as they board their planes for home.

Tomorrow the latest jobs report will be announced by the Labor Department.  Tonight President Barack Obama will accept his party’s (re)nomination for President of the United States.  The Wall Street Journal says that sometime before he delivers his acceptance speech he will know what the numbers say.

This could prompt a side-game for political junkies:

Assuming the president gets a briefing on Thursday before his speech, what might he do with it? He isn’t exactly getting on stage, for one of the most important speeches of his career, to recite Labor Department data. But he conceivably could tweak his adjectives in describing the economy if the employment report is a surprise in either direction. Good luck trying to figure that out while you’re watching.

But don’t let that stop you from trying!

In an interview with CFIF, Congresswoman Nan Hayworth, M.D. (NY-19), the only female physician serving in Congress, discusses why repealing and replacing ObamaCare will provide immediate relief for millions of Americans who are desperate to find jobs and the need for a flatter, fairer and simpler tax code to relieve burdens on small business owners and employers, strengthen the economy and grow jobs.

Listen to the interview 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.

With a new Gallup poll showing Obama’s unpopularity higher among business owners than any other occupational group, this week we dismantle his desperate “You didn’t build that – somebody else made that happen!” alibis.  Peggy Noonan, in this weekend’s column, believes they’re now his most famous words:

President Obama’s comment – ‘You didn’t build that’ – is the political gift that keeps on giving.  They are now the most famous words he has said in his presidency. And oh, how he wishes they weren’t.”

Now, with this morning’s sour unemployment report, prepare to hear, “I didn’t cause that – somebody else made that happen!” from the White House.  The nation’s unemployment rate rose yet again, to 8.3% from last month’s 8.2%.  That means we’ve now suffered a record 42 consecutive months of unemployment in excess of 8%, a level Obama promised we’d never reach in the first place under his economic plan.  The White House will also attempt to emphasize the 163,000 new jobs created, but keep three things in mind.  First, our economy must add 200,000 jobs each month just to keep up with population growth and substantively reduce the unemployment rate.  Second, nearly as many Americans – 155,000 – dropped out of the labor market altogether, according to this morning’s report.  Third, according to the Labor Department, employment growth has averaged just 151,000 per month in 2012, which is below 2011’s average of 153,000 per month.  Some “recovery.”

Fortunately, there is an alternative.  The early-1980s recession witnessed even worse numbers – higher unemployment, higher inflation and higher interest rates.  But President Reagan’s policy of lower taxes and less regulation slashed unemployment from 10.4% to 6.7% in the three years following the effective date of his tax cuts in January 1983.  In contrast, Obama’s policies of higher spending, higher deficits, higher taxes and more regulation have caused the worst recovery since the Great Depression.

Obama just hopes that enough people fail to notice that he really is making that happen.