Freedom Line Blog

“The number of jobs requiring medium levels of skill has shrunk, while the number at both ends of the distribution – those requiring high and low skill levels – has expanded,” says a new research report from the Dallas Federal Reserve.

This employment polarization is changing the standard of living for those in the middle class since, “The number of people performing low-skill, low-pay, manual labor has grown along with the number undertaking high-skill, high-pay, non-routine, principally problem-solving jobs.”

Moving to the wealthier pole requires adapting to non-routine cognitive work since computer automation and off-shoring makes jobs such as “brokers, clerks, tellers, cashiers, telemarketers, title examiners, bookkeepers, insurance underwriters, travel agents and technicians” increasingly irrelevant.

This is sobering news for those aspiring to middle class status. There was a time when a college degree qualified a person’s cognitive abilities, and working according to a companywide routine virtually guaranteed a middle class lifestyle. That time is past. Going forward the likelihood that a person will escape the perils of low-income will depend greatly on her ability to be increasingly entrepreneurial in every facet of her work; whether as a full-time employee or independent contractor.

It’s a reality many formerly comfortable middle class workers would like to avoid. But with computing power and automation spreading quickly everywhere, it looks like the only option available.

Welcome to the brave new job market.

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.

Glenn Beck’s The Blaze reports on a highly visible casualty of the economic downturn that is costing Americans’ jobs and now memories: decades-old restaurant chains.

Here’s a list of the Top Ten restaurants that are contracting in today’s tight  economy:

(1)   Bennigan’s Grill and Tavern

(2)   Ground Round Grill & Bar

(3)   Baker’s Square

(4)   Damon’s Grill & Sports Bar

(5)   Don Pablo’s

(6)   Gloria Jean’s Coffees

(7)   Big Boy

(8)   Tony Roma’s

(9)   Country Kitchen

(10) Black Angus Steakhouse

These corporate losses are just another source of lost jobs and opportunities.  Mr. President and the “super” committee, are you listening?

According to a new Gallup poll, a majority of Americans now blame President Obama for the current state of the U.S. economy.  By a 53% to 47% margin, surveyed adults say that Obama shares a “great deal/moderate amount” of blame, while they also believe that George W. Bush continues to share blame by a 69% to 30% margin.  But notice something interesting.  For all the talk of hyper-partisanship from Republicans, the primary reason Bush’s numbers look worse is that Republican survey respondents split 50% to 50% on whether Bush shares some blame.  Democrats, in contrast, were far less willing to admit that their guy Obama shares blame, disagreeing by a 75% to 25% margin.  Independents by a 60% to 40% margin say that Obama shares some blame.

Here’s another noteworthy fact.  For all of Obama’s talk that he and his wasteful trillions of “stimulus” spending saved our economy from “the next Great Depression,” government economic figures show that we actually began our cyclical recovery before Bush had left office.  That’s a point that must be highlighted to voters as we approach a pivotal 2012 election in which Americans must choose between two governmental philosophies.  But in the meantime, at least most of us now recognize Obama’s role in our continuing economic struggles.

In a brilliantly written refutation of the Obama-as-Genius argument, Mortimer Zuckerman explains why even taking all the money from “rich” people and corporations won’t solve the deficit problem:

Even if the government instituted a 100% tax on both corporate profits and personal incomes above $250,000 per year, it would yield enough revenue to run the government for only six months. Why? Because under Mr. Obama’s presidency, government spending has swelled to 24% of GDP from 18%.

Spending is Obama’s original sin as president.  Unless he’s willing to repent of that folly and ratchet back on the flow of money, the American economy will stay mired in a recession.

Recently, I wrote about the Social Security Trust Fund being a piggy bank for other federal spending programs.  In return, federal spenders put worthless IOUs back in piggy with an implied promise to pay back the debt with higher taxes in future years.

Now, there is word that Social Security Disability Insurance – yet another expense drawn from the empty retirement Trust Fund – will go bankrupt by 2017.  The reason for the rapid insolvency of disability insurance is simple: eligibility for disability can begin before reaching retirement age.  Per the Associated Press:

Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can’t find new ones in an economy that has shed nearly 7 million jobs.

The more President Obama’s Washington dithers on enacting policies to spur economic growth, the more unemployed people will be forced to find money wherever they can.  The vast majority of Americans want to work, but Obama’s job-killing policies just aren’t giving them the chance.

It would be an unnecessary irony if a liberal like Obama presided over an austerity government that not only raised taxes, but also cut services like Social Security that liberals love.  Yet that is the path we’re on as a recessed economy lurches from market plunges to debt downgrades to a contracting job market.

We need an “opportunity president,” and this one surely isn’t it.

In just a few hundred words a Wall Street Journal editorial writer summarizes how out-of-touch supposed ‘experts’ can be when it comes to how policies affect everyday Americans.  The object lesson comes courtesy of New York Fed President William Dudley’s failed attempt to convince citizens in Queens that the economy is doing much better than they think.

The former Goldman Sachs chief economist gave a speech explaining the economy’s progress and the Fed’s successes, but come question time the main thing the crowd wanted to know was why they’re paying so much more for food and gas. Keep in mind the Fed doesn’t think food and gas prices matter to its policy calculations because they aren’t part of “core” inflation.

So Mr. Dudley tried to explain that other prices are falling. “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he said. “You have to look at the prices of all things.”

Reuters reports that this “prompted guffaws and widespread murmuring from the audience,” with someone quipping, “I can’t eat an iPad.” Another attendee asked, “When was the last time, sir, that you went grocery shopping?”

Mr. Dudley has been one of the leading proponents of negative real interest rates and quantitative easing, so this common-man razzing is a case of rough justice. If Mr. Dudley were wise, he’d take it to heart and understand that Americans aren’t buying the Fed’s line that rising commodity prices are no big deal. Unlike banks and hedge funds, they can’t borrow at near-zero interest rates, and most of them don’t have big stock portfolios. Wall Street and Congress may love the Fed’s free-money policy, but Mr. Dudley and Chairman Ben Bernanke ought to worry about losing the confidence of the middle class.

Ronald Reagan destroyed confidence in Jimmy Carter with one simple question: “Are you better off now than you were four years ago?”  Any Republican presidential hopeful that can channel the frustration in Queens into a similarly concise indictment of President Barack Obama will be well positioned to oust yet another bumbling Democratic incumbent.

The Los Angeles Times — that bastion of journalistic daring do — has discovered that recessions cause job losses. Don’t laugh — they will probably submit this to the Pulitzer people.

What really steams the Times’ clams, however, is that manual labor is being replaced by mechanical automation. Writing in this morning’s edition of the paper, reporter Alana Semuels notes:

Forced to cut costs during the recession, employers across the country are looking at ways to avoid hiring. They’ve accelerated use of computers and technology, replacing administrative assistants with software, cashiers with self-service kiosks and laborers with machines.

These structural changes mean some jobs that disappeared during the recession may never come back. Productivity gains are good for company profits and help the economy grow over the long run. But in the short term, the shift is exacerbating America’s jobless recovery.

Kudos to Semuels for at least noting the importance of productivity gains, but there’s a still something of a misdirect here. It’s probably an overstatement to say that employers “are looking at ways to avoid hiring” (my money is on the fact that most employers would love to be in a financial position to consider new employees). While there are many instances where shifting to automation is inherently superior to relying on labor, the scales are tilted by government intervention. Consider this passage from elsewhere in the article:

“Labor is so expensive,” said [farmer Mike] Young, whose great-grandfather started farming row crops in Kern County in 1910. “There’s their wages, truck, insurance, workers’ comp and the safety regulations. We went to a high-value crop that needed less labor input.”

Notice a trend? With the single exemption of trucks (and even that’s debatable given California’s automotive taxes), these are all factors created or exacerbated by government. California has one of the highest minimum wages in the nation, a heavily regulated insurance sector, and excessive workers’ comp and safety regulations. Technology may have an inherent economic appeal, but the challenge it presents to labor is only compounded by state government’s attempts to “help” the working man.

Apart from government distortions of the market, however, there is a bigger point to be made here. Technology’s displacements of the labor force may be jarring, but they lead to a stronger economy (the capital savings can be directed towards more productive investments) and an infinitely better life for all Americans. After all, we could have attempted to protect the horse-drawn carriage industry by suppressing the development of the automobile, subsidized makers of candlesticks and gas lamps by impeding the development of the light bulb, and employed many more bank tellers by standing athwart the ATM. But we’d live in a society that had made decisively less progress from 100 years ago than the one we currently inhabit.

This principle was captured brilliantly by the French political economist Frederic Bastiat in a satirical letter that he wrote to the French Parliament under the aegis of seeking “protection” for his nation’s candlestick makers:

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.

When you’re 150 years behind the French on economics, you know you’re in trouble. Or that you work for the Los Angeles Times.

During a television appearance over the weekend former Clinton Treasury Secretary Robert Rubin stumbled onto a hard truth for liberals when it comes to proving they can be trusted to reduce the deficit.

“If you could do it and it was credible and people believed it and it was real, I think that could do a lot for confidence.”

Let’s reword that a bit: If a deficit reduction plan was credible – meaning people believe it can work based on its assumptions and terms – and real – meaning the people proposing it are committed to implementing it – then the public would have confidence that the government could reduce the deficit.

Put another way: Credibility + Reality = Confidence

Applying that formula to ObamaCare and the Recovery Act shows just how much liberals fail to make the grade.

• Credibility: For months President Obama and Congressional Democrats swore that the individual mandate was not a tax, before claiming it was an excise tax so it can survive charges of being unconstitutional.
• Reality: A key argument for passing the Recovery Act was to keep unemployment below 8%.  Nearly $800 billion later, the number is 9.5%.
• Confidence: The latest RealClearPolitics average shows 60% of Americans agreeing that the country is on the wrong track.

So far, the liberals running Washington, D.C. have shown themselves anything but credible and based in reality.  No wonder nearly two-thirds of Americans have no confidence in them.

Are Barack Obama’s economic policies sucking oxygen from our precarious economic recovery?  Economic numbers released at the end of last week provide the latest evidence of that troublesome possibility.

On Thursday, the Federal Reserve reported that American businesses were hoarding an all-time record $1.84 trillion in cash and other liquid assets at the end of March.  This inclination to sock away their accumulated dollars rather than spend on expansion or new hiring suggests trepidation regarding the prospects of near-term economic recovery.

Then, on Friday, the Commerce Department reported that consumer spending – which constitutes over 2/3 of our economy – unexpectedly plummeted 1.2% from April to May.  This was the first month-on-month decline in seven months, and prompted The Wall Street Journal to report that, “the surprisingly poor sales cast fresh doubt on the durability of a rebound in consumer spending that had allowed economists to raise their forecasts for U.S. growth this year despite a moribund housing market, a dismal job market and tepid business investment.”

Obama and his allies continue to claim credit for the cyclical end of the 2008-2009 recession, but it appears more likely that their policies are stifling it.  Coming out of our most recent severe recession, the U.S. achieved rapid gross domestic product (GDP) growth of 8%.  Now, in contrast, we’re witnessing lukewarm 3% growth and depressing employment numbers.

With Obama promising even more tax hikes, deficit spending and unpredictable new regulations, it’s becoming increasingly apparent that both businesses and consumers are bracing for an Obamanomics storm, not a spring bloom.

Regardless of one’s political preference, no patriotic American welcomes economic misfortune.  With this week’s news, however, one wonders whether we’re witnessing the onset of “Obama Malaise.”

Yesterday, the Commerce Department revised its already-sluggish initial 3.2% first quarter gross domestic product (GDP) estimate downward to 3.0%.  Additionally, the Commerce Department reported that corporate profits slowed to 5.5% in the first quarter of 2010, down from the 8% growth rate of the 2009 fourth quarter.

These numbers are disturbing because our economic recovery should be much stronger at this point, and gaining steam rather than slowing.  Coming out of the 1981-1982 recession, the last downturn comparable to the 2008-2009 recession, the U.S. logged remarkable GDP quarterly growth rates of 5.1%, 9.3%, 8.1% and 8.5% for 1983.  America’s torrid Reagan Recovery continued into 1984, with 8.0% and 7.1% growth rates in the first two quarters.  That constituted impressive growth, on the heels of Reagan’s tax-cutting and deregulatory platform.

In contrast, we’ve now witnessed GDP growth rates of 2.2%, 5.6% and now a deceleration to 3.0%.  Obama and Democrats take joy in claiming credit for our natural cyclical recovery, but what they should instead be doing is explaining why their policies are tossing a wet blanket over what should be stronger growth.

It looks like there will be more jobs next year as the American economy struggles free of the recession; it’s just that half of them won’t be full-time.  Or come with a retirement plan.  Or offer health coverage.  Or even sick days.  But hey; it’s work!

In a sobering report, Eve Tahmincioglu – herself an independent contractor – writes about the emergence of the “contingent workforce,” an umbrella term for freelancers, temps, and pay-for-project workers.  According to a study released by Littler Mendelson, a leading employment law firm, up to 50% of the new jobs in the next economy will be contract work.  The benefit to the company is payroll flexibility.  The benefit to the worker is a job, or more likely, multiple jobs for less pay than a full-time equivalent position.

A bit surprising is the projection that managers and professionals like engineers, scientists, and attorneys are joining the ranks of the temporarily employed.  So, what does all this mean for public policy?  Plenty.  With millions of workers on the hook for their own health care, retirement, and payroll taxes don’t be surprised if many of them default into “public options” like ObamaCare; especially if the government offers it at a lower price than the private sector.  Just what The One wants: more jobs, more dependency on government!