Rooted in Reason: Nurturing the Seeds of Liberty

Rush Jobs by maliab
September 6, 2011, 7:26 pm
Filed under: Economy | Tags: , , , , , , ,

It’s the jobs, stupid.  At least, that’s what the new call of the politicians (and political advisers) seems to be of late.  Personally, I always find it a bit surreal watching politicians talk about their plans to increase jobs.  As though our economy was powered by hot air and political promises.  Granted, sometimes one of them will stumble upon an economic truth. (Like the fact that the best thing they can do for the job market is remove some of the federal barriers to economic growth–especially the banking regulations and monetary policy that prevent small to  mid-range businesses from growing in this struggling economy.)  But then, likely as not, they’ll just pick themselves up and hurry off as though nothing has happened.

And now, many of us are faced with a conundrum on Thursday night.  Do we tune in to see President Obama unveil his “Jobs Plan”?  Or do we make sure we are properly stocked up on buffalo wings and chips and watch the first game of the NFL season?  It’s true that we are facing a serious unemployment crisis in this country.  On the other hand, it seems unlikely that the President was visited in the night by the ghost of Milton Friedman and saw the error of his big government ways.  And the Saints are playing the Packers, which could not only be a glimpse of the NFC playoffs, but carries major implications for millions of fantasy football rosters.  And I’m not the only one feeling less than enthused about what I secretly fear is the unveiling of yet another giant spending program.   Consider what Dr. Merrill Matthews, Resident Scholar for the Institute for Policy Innovation has to say:

Perhaps the most underreported story last week was the announcement from the Office of Management and Budget that the unemployment rate would likely remain in the 9.0 percent range throughout 2012. And this a week before the president plans to deliver to Congress and the nation a jobs package that is supposed to help create jobs.

So what is OMB telling us? You would think that if the White House and its relevant advisors had been developing a drop-dead jobs-creation package, OMB would have waited until after the speech and then released an analysis saying that unemployment would likely remain in the 9 percent range, but that number could be significantly lower if Congress adopted the president’s jobs plan.

So did the White House not consult with OMB about its jobs proposals? Or, more likely, is it that everyone in the administration knows that there’s nothing new or innovative in the jobs package, and that it likely won’t pass anyway because it costs billions of federal dollars the government doesn’t have?

Either way, the “anticipation factor” for the president’s speech is very low, because no one expects that his proposals—mired as the White House is in Keynesian economics and big-spending notions—would do any good anyway. No one, including, apparently, the president’s own budget office.

Unstimulated by maliab
August 31, 2011, 9:07 pm
Filed under: Economy | Tags: , , , , , , , ,

The President will be unveiling his new jobs plan next week.  (Though when seems to be in doubt, as Rep. Boehner has indicated that Wednesday isn’t good for him and Congress, what with the GOP presidential debate and the last minute-ness of it all, and the White House has indicated that they’re not in love with Thursday as a day–with some commentators speculating that they don’t want to compete with the first NFL game of the season.)  If presidential conversation about jobs could create employment opportunities, we’d be at about 0% unemployment right now.

But, of course, it doesn’t.  And it turns out that buying jobs with huge chunks of federal dollars doesn’t do much better.

As the Weekly Standard points out, a study of the hiring practices of firms who received stimulus funds reveals that the stimulus package created as much job poaching as job creation.  Yet more proof (if we even needed it) that Keynesian economic theory so loved by this Administration seems to crumble in the face of the real world practice:

The Mercatus Center at George Mason University has just released an important new study on the hiring practices of firms that used stimulus funds. It’s fairly comprehensive, based on over 1,300 surveys of managers and employees. There’s been very little good empirical data on the stimulus thus far, so the study contains a lot of valuable insights. Among the findings by authors Dan Rothschild and Garrett Jones:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.

Put simply, stimulus funds caused more job shifting than job creation. Another key finding? Union-friendly wage protections kill jobs:

Among organizations required to pay prevailing wages, 38.2 percent thought that they could have hired workers at wages below the Davis-Bacon prevailing wage (Figure 3) while another 17 percent were unsure. This meant higher costs for the federal government and fewer jobs created.

Of course, merely having your economic philosophy proved disastrously wrong doesn’t seem much of a hindrance to the Left.  Talk about the power of wishful thinking.

Fact Check: Criticizing the “Texas Economic Miracle” by maliab
August 24, 2011, 5:58 pm
Filed under: Economy | Tags: , , , ,

There is an interesting game that goes on when the political conversation turns to unemployment.  Despite the rather depressing unemployment numbers, there are still plenty of arguments to be found about the kinds of jobs available.  Some of these criticisms are well-founded, as when it is pointed out that creating temporary government jobs via state-funded spending sprees is not a path to long-term economic recovery.  Others, such as the spats over the relative “quality” of new jobs available are a bit more complex.  As Dr. Steve Pejovich, a Professor Emeritus from Texas A&M University writing for the Institute for Policy Innovation, explains, there’s a lot more to economic recovery than the wage rate:

Challenging the supposed “Texas economic miracle” under Governor Rick Perry, CBS recently reported, “Critics also note that many of the jobs created on Perry’s watch are low-paying and lack benefits.” This statement is wrong at best and stupid at worst. Here is an economist’s explanation for non-economists.

The demand for labor, like the demand for all scarce goods, is a function of price. The lower the wage the more people are hired.

What’s known as the “market-clearing wage” (i.e., price) is the wage at which all people who want to work at that wage have jobs. At any wage above the market-clearing wage not all people who want to work at that wage have jobs.

Government can’t determine the market-clearing level, only markets can. But government can distort it by imposing regulations on business, minimum wage laws, and unions (think of the Boeing case), which force wage rates above the market–clearing level.

Perry’s critics are confusing the wage rate with income. The higher the wage rate (above the market-clearing level) the more who are unemployed. That is, high wage rates mean zero income for many. The market-clearing wage rate means positive income for all.

Governments can choose to make labor markets less or more competitive. Perry has chosen the latter for Texas. Yes, the average wage rate in Dallas might be lower than in Detroit, but more people are earning money from work in Dallas than in Detroit. This raises an important question upon which a free society depends: the freedom of choice.

Any person in a right–to-work environment can choose between zero income and the wage he or she could get in the labor market. No person in a union-controlled or government-regulated environment can choose between zero income and the wage at which he or she is willing to work.

No one has to work for a lower wage, but at least in Texas more people can choose that option over being unemployed.

Unemployment benefits: the delicate balance by grassroothawaii
December 6, 2010, 8:20 am
Filed under: Economy | Tags: , ,

By Frances Nuar

One of the the major benefits of a contemporary civilized society is that we take care of each other in time of hardship and need. Formerly that role was fulfilled by families and communities, now we have delegated that task to government. When hardship hits, the economy goes bust, and jobs grow increasingly hard to find, we’ve agreed that part of each paycheck from those who do work go towards those who cannot find work to keep them on their feet. The whole idea being that if we were in need, we would want help as well. There is a common human bond that unites us with the desire to help feed, clothe, and shelter those who have come upon hardships.

As reported late last week, more and more people are unemployed, the latest data putting national unemployment at 9.8%, the highest level since April. Times are tough. Here in Hawaii unemployment is at 6.4%. Better than the national average, to be sure, but still no consolation to those without work. Regular benefits end after 26 weeks, while Emergency Unemployment Compensation lasts for 47 weeks, and is divided into three tiers, each of which must be exhausted before an individual moves to the next level.

But Congress just voted to not extend unemployment benefits, so as of November 30, anyone who exhausts their tier will not be able to move to the next tier.What then?

And then the question comes up that no one really wants to ask: how much public assistance is too much? How much help should we give people before they become complacent and don’t look quite as hard as they need to for work? Is it too much to ask someone to find a job outside his or her profession? Or take this example of a woman in “need” lamenting over her soon to expire unemployment benefits: Even with her husband’s job as a restaurant server and Panoke’s unemployment benefits and part-time paycheck, she still can’t afford to buy her teenager the iPod she wants for Christmas.

Really? Worried about buying an iPod when some people are worried about feeding their kids? I don’t see her getting many sympathy votes for extending unemployment benefits to buy iPods.

Because the issue always comes back to this: someone has to be working and making money to pay for those who aren’t making money. And let’s face it. If we didn’t have a limit to unemployment benefits, there would be those who would forever milk the system. Thus, unfortunately unemployment benefits have to strike that balance between enabling someone to remain complacent, and being the essential aid someone else needs before landing that job he or she is working so hard for. So if you have a job, be thankful. And if you don’t have a job, we’re here to help. Time to own that job market and make us proud. And don’t go buying iPod’s in the meantime.

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