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The New Jersey model

An interesting article in the Wall Street Journal about newly elected NJ governor Chis Christie.  The Republican, elected in a traditionally blue state, ran as if he’d be a one-termer and laid out the distasteful medicine necessary to put the state’s fiscal house in order.  To the surprise of many, he won.  He’s now engaged in doing what he said he’d do.

His assessment and conclusion are solid:

“We are, I think, the failed experiment in America—the best example of a failed experiment in America—on taxes and bigger government. Over the last eight years, New Jersey increased taxes and fees 115 times.”

And what has NJ gotten for that?

New Jersey’s residents now suffer under the nation’s highest tax burden. Yet the tax hikes haven’t come close to matching increases in spending. Mr. Christie recently introduced a $29.3 billion state budget to eliminate a projected $11 billion deficit for fiscal year 2011.

Obviously, as must be done in a state which has the nation’s highest tax burden, Christie has laid out a very aggressive plan that cuts spending to eliminate that deficit. And, as you might imagine, the entrenched interests which will see their budget’s cut are almost unanimous in their opposition. Most the opposition comes from government unions, and especially from New Jersey Education Association, the state’s teacher’s union.

And Christie is using a little of the left’s favorite tactics against them:

“I’m a product of public schools in New Jersey,” Mr. Christie explains, “and I have great admiration for people who commit their lives to teaching, but this isn’t about them. This is about a union president who makes $265,000 a year, and her executive director who makes $550,000 a year. This is about a union that has been used to getting its way every time. And they have intimidated governors for the last 30 years.”

Christie is obviously not going to be intimidated. And he’s got the numbers and, apparently, the public behind his effort to pare the educational establishment down to a manageable and affordable size:

While the state lost 121,000 jobs last year, education jobs in local school districts soared by more than 11,000. Over the past eight years, according to Mr. Christie, K-12 student enrollment has increased 3% while education jobs have risen by more than 16%. The governor believes cuts in aid to local schools in his budget could be entirely offset if existing teachers would forgo scheduled raises and agree to pay 1.5% of their medical insurance bill for one year, just as new state employees will be required to do every year. A new Rasmussen poll found that 65% of New Jersey voters agree with him about a one-year pay freeze for teachers.

The union, of course, has it’s own favored solution and I assume you can guess what it involves:

But the teachers union wants to close the budget gap by raising the income tax rate on individuals and small businesses making over $400,000 per year to 10.75% from its current 8.97%.

Obviously he has a lot of other fights within the state on his hands, such as cutting the onerous regulation regime the state has built, but he has a primary goal and desire to return the state to fiscal sanity. And he also knows that to do that he has to lower overall taxes – if he wants to again attract business and those who earn enough to provide a solid tax base.

The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country’s highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.

So here’s a governor who understands that what has been heaped on the back of the taxpayers that are left is too much and is looking at other real ways of reducing the cost of government – i.e. actually seeking out where it has become bloated, putting some of the costs of the benefits government workers receive back on them, cutting unnecessary spending all with a goal of eliminating the deficit the state faces. And, by the way, planning on reducing the tax rate with an eye toward luring back the affluent and businesses with an eventual goal of actually increasing tax-revenues, and jobs, and all the other benefits such an influx would bring.

“What I hope it will do in the end is first and foremost fix New Jersey, and end this myth that you can’t take these people on,” he says. “I just hope it shows people who have similar ideas to mine that they can do it. You just have to stand up and grit your teeth and know your poll numbers are going to go down—and mine have—but you gotta grit it out because the alternative is unacceptable.” He also strongly believes that voters elected him specifically to fight this fight. “They’re fed up. They’ve had enough. In normal circumstances I wouldn’t win,” he says.

He’s probably right about that. He probably wouldn’t have won 3 or so years ago.  And he’s right that the voters, as his election demonstrates, are “fed up”.  But, once the cuts start to hit, nothing says Christie will be given the continued support necessary to accomplish his goals.  But he seems to be a man who is going to do all he can to accomplish them. I call it the New Jersey model because if successful, Gov. Christie will provide both the blueprint and the success story which small government/fiscally conservative types can point to when discussing what must -and can – be done at both a state and national level. I’ll be watching the NJ saga develop with great interest over the years, and wishing Gov. Christie the best of luck in attaining his goals.

~McQ

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Oh, by all means – tax the banks

And yes, if you’re wondering, I’m being highly facetious with the title.

But that’s the growing consensus among our political leadership – at least that brand of it which believes such taxes are actually paid by the institutions themselves.  And you have to love the reasoning:

The U.S. and European governments are moving toward a consensus on taxing large banks to cover the cost of any future bailouts rather than asking taxpayers to foot the bill, as happened regularly in past banking crises.

The tax proposals vary. Germany and Sweden would use the money to fund a “resolution authority” that would use the money to shut troubled banks whose failure would put the broader economy at risk. Others, such as France, would assess the fee after a crisis passed.

What’s wrong with that, you say? Well anyone – if you’re going to be bailed out and you know it, where the aversion to risk come from? Why not play with other people’s money a little more if there’s no death penalty for doing so? If you are a assured a fail-safe position, why not go for broke?

It seems to provide a perverse incentive to do exactly what you don’t want to see happen.

Our leadership is split on how they should approach it. I bet it doesn’t take you much time to figure out what part of the leadership sides with France’s concept and which would like to see an ongoing tax fund. You’re right, the administration wants to see assessments made after the fact and the Congress prefers a slush fund they can plunder an ongoing fund established (Unsurprisingly Ezra Klein of juicebox mafia fame finds this the most satisfying solution of the two).

Either way, it’s going to cost you money.

And instead of leaving the banks with the threat of punishment by the market for stupid risks (failure), they’ll collect money from you in the form of higher fees and other costs and pass them on to the government so it can subsidize their bad behavior and then wonder why its regulations didn’t work.

Oh, wait, we’ve already wondered about that, haven’t we? I know, let’s make even more regulations.

The core problem? It, like health care, remains unaddressed.

~McQ

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The BFD – its first week

So, how is ObamaCare being greeted by the real world since it was signed into law Tuesday?  Well, pretty much as expected by those who were paying attention (and that wouldn’t include the unicorns and moon pony crowd).  For instance, employees at Verizon were greeted with a statement by the company explaining its interpretation of the law and what that would mean in terms of future coverage:

In an email titled “President Obama Signs Health Care Legislation” sent to all employees Tuesday night, the telecom giant warned that “we expect that Verizon’s costs will increase in the short term.” While executive vice president for human resources Marc Reed wrote that “it is difficult at this point to gauge the precise impact of this legislation,” and that ObamaCare does reflect some of the company’s policy priorities, the message to workers was clear: Expect changes for the worse to your health benefits as the direct result of this bill, and maybe as soon as this year.

You may recall that Caterpillar said that the bill would cost them $100 million more in health care coverage in the first year alone. That ought to make them highly competitive.

Verizon is also being punished for offering retirees health benefits:

Mr. Reed specifically cited a change in the tax treatment of retiree health benefits. When Congress created the Medicare prescription drug benefit in 2003, it included a modest tax subsidy to encourage employers to keep drug plans for retirees, rather than dumping them on the government. The Employee Benefit Research Institute says this exclusion—equal to 28% of the cost of a drug plan—will run taxpayers $665 per person next year, while the same Medicare coverage would cost $1,209.

In a $5.4 billion revenue grab, Democrats decided that this $665 fillip should be subject to the ordinary corporate income tax of 35%. Most consulting firms and independent analysts say the higher costs will induce some companies to drop drug coverage, which could affect about five million retirees and 3,500 businesses. Verizon and other large corporations warned about this outcome.

Or, instead of discouraging employers from dumping retirees on the government, the new plan encourages it and essentially punishes those who don’t. In fact, you could say that the entire bill encourages companies to dump employee coverage. If they’re of a certain size and don’t offer coverage, they are fined $750 per employee. Compare that to the thousands of dollars in cost for coverage plus the expense of administering an employee health insurance program. If you’re running a company in an economy mired in recession, what is one of the primary things you try to do? Cut costs. You have 50 employees and you’re spending $5,000 each on health insurance or $250,000 plus the cost of administration of the program. You can dump it all and pay a fine of $37,500. What would you do?

Oh, and there’s this little goodie to encourage companies to act quickly:

U.S. accounting laws also require businesses to immediately restate their earnings in light of the higher tax burden on their long-term retiree health liabilities. This will have a big effect on their 2010 earnings.

Of course it will. And that will have a significant impact on the economy and first quarter earnings.

Some companies, however, have an alternate plan:

Consumers Energy, a Michigan gas and electric company with 2.9 million customers, said it will not take a big first-quarter charge because, like most utility companies, it can try to recover the added costs from its customers through rate hikes.

The increased costs are going to be paid by someone – customer, taxpayers – it’s all the same in the end.

And that’s pretty much where the states are right now as well. South Carolina just tallied up its new unfunded mandate:

The expansion represents a 4.4 percent increase in the $20.9 billion the state would have spent on Medicaid during that nine-year period, adding roughly $100 million a year to the state’s costs.

The state is looking at a 1 billion dollar shortfall next year – the unfunded mandate adds $914 million to the shortfall over the next 10 years. Any guess who will end up paying for that?

It should be clear, given the Verizon info that the intent is to move people off employer based insurance and on to something else. I’ve always been a proponent of individual health insurance purchased by families individually in a free and competitive insurance market like we do any other insurance product. It immediately solves the portability problem and it drives cost down. What we’re seeing here is a manipulation of tax code pointed at effectively ending employer insurance programs but with a different aim in mind – single-payer government run insurance.

The intent to again offer legislation to establish an public option, voiced by Harry Reid and House Democrats makes that point rather clearly. Democrats will try to pass that before November – bet on it. Should they succeed, then all the parts would be in place to move in that desired direction. Meanwhile, unsurprisingly the promise of “if you like your plan and if you like your doctor you can keep them” appears to be a hollow one. The law incentivizes drastic changes in plans to avoid costs and taxes and in many cases, it is clearly smarter for a business to dump health care coverage altogether.

As for 95% of us not seeing a dime in new taxes – that too was a load of nonsense as most of us knew. Unless you live in the 57th state where none of this has any impact, the new unfunded mandates promise increased taxes – states, unlike the federal government can’t print money and thus have to either cut spending or increase taxes. Since the increased spending is being mandated, it leaves them little choice, does it?

~McQ

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When Girl Scouts Attack

Some of you would no doubt love to be accosted by a bunch of girl scouts plying their wares (you know who you are), but you won’t be subject to such a harrowing experience in Seattle:

Tim Burgess’s move to outlaw “aggressive panhandling” may be an unconstitutional, attention-seeking bully tactic, but at least the Councilmember appears willing to apply the law equally to anyone asking for money on the streets. Even if they just want to sell you a box of thin mints.

The issue, such as it is, arose from a (possibly facetious) email exchange between a Seattle Councilmember and an alleged citizen complaining about what can only described as a channeling of a Mike Myers mock-horror scene:

Councilmember Burgess:

I was strongly opposed to your panhandling proposal until my experience on the streets of downtown West Seattle yesterday. Now I totally understand where you’re coming from.

Here’s what happened: on the way to the West Seattle Farmer’s Market, I encountered a band of Girl Scouts aggressively promoting cookie sales within spitting distance of a KeyBank ATM where I was withdrawing money. The situation was so extreme that I could actually hear their aggressive, repeated, high-pitched solicitations at the very moment I was entering my PIN. Then as my cash was dispensed and I nervously removed my receipt — trying to stay calm despite this invasion of my constitutional right to not be confronted by my relative class status — I saw two adult women. They were the ringleaders, I assume. They didn’t seem to be doing anything but watching over the whole scene and talking discreetly to each other about god knows what. All in all, a nerve-racking experience.

So there they were, asking for money, repeatedly, despite my lack of interest in what was on offer, all happening well within 15 feet of an ATM. Would this be banned by the your ordinance? I certainly hope so, because there’s a long history of applying laws like this inequitably, almost as an excuse to push poor people out of desirable areas instead of addressing the actual problem.

Thanks for any information you can offer.

My best guess is that this email comes from a rather disgruntled, yet somewhat clever, panhandler. The Councilmember’s response is both appropriate and obviously skeptical, but it does raise an interesting question: if the state is going to exercise it’s police powers judiciously, doesn’t that ensure that we miss out on opportunities that are neither a threat nor an offer of something we don’t really want? After all, what sort of hair-shirted aesthete do you have to be to not want girl scout cookies?

When it comes to local rules and regulations, I’m not one to quibble too much unless such restrictions impinge on fundamental rights. Setting up shop in a public way certainly deserves some treatment of police power since the sidewalks belong to the public. At the same time, if you are just standing around hawking your legal goods, I really don’t understand what it is we need to be protected from. Can it be annoying to walk through a gauntlet of capitalism? Sure. Maybe worse for some than others. But we don’t have any right to be free from annoyance, do we?

I mean, if that were the case, then why should I be bothered by ACORN morons marching up and down the street where I work? Nothing has ever been done about that. Once, I nearly came to blows with some idiot preaching about how we needed a new New Deal while I was trying to enjoy a leisurely stroll in downtown Alexandria, VA. Do I have the right to be free from that annoyance? Not bloody likely.

And the fact of the matter is that I shouldn’t be “free” from those annoyances, anymore than I should expect to be “free” from girl scouts selling cookies on a street corner, or a hippie selling dew rags in a city square. If one of them genuinely threatens my peace, then the appropriate authorities should be able to step in, but how often is that truly the case? That some panhandler was able to point out this hypocrisy in the enforcement of Seattle’s anti-public-space-economy laws (to coin a terrible phrase) only underscores how ridiculous the application of police power (local or otherwise) has become.

The bottom line is that, whether one is selling girl scout cookies or dew rags, why do I need the state’s protection? Keep the public ways clear for the public sure, but let’s not forget that commerce is what truly makes the world go ’round. Without it, that police protection doesn’t get paid for.

[HT: Tom Scott]

Will Proposed Bank Regulations Kill US Bank Competitiveness?

That is certainly what New York City Mayor Michael Bloomberg believes.  And, surprisingly, his position is supported by none other than the Secreatary of the Treasury, Timothy Geitner.

The proposed bank regulations, all driven by President Obama’s war on Wall Street, would limit big bank’s trading and size. Obama claims that the nation will never again be held hostage by institutions deemed “too big to fail”.

Well, here’s a clue – the only ones who claimed they were too big to fail and threw all that money at them are the same ones now trying to regulate them into noncompetitiveness. You’d almost think this was part of a plan if you didn’t believe they weren’t smart enough or quick enough to do such a thing. But, as they’ve claimed, they won’t let a crisis go to waste.

In fact, this is another battle in the long class war against the rich. Nothing symbolizes the “rich” like Wall Street. And nothing serves Democrats in trouble better than a populist cause (or at least one they deem to be populist). So while voters continue to send messages to the Democrats via VA, NJ and MA, health care reform implodes and the President’s job approval rating tanks, he’s warring on the institutions which are critical to the economic recovery of the nation.

How freakin’ tone deaf can one be?

Mayor Bloomberg has some immediate local issues that concern him – possible layoffs and the erosion of the tax base. But he also recognizes that handicapping US banks when no such handicaps exist for foreign banks, hurts their long term competitiveness and will therefore have negative long term consequences.

Obama’s proposals would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.

He called for a new cap on the size of banks in relation to the overall financial sector that would take into account not only bank deposits, which are already capped, but also liabilities and other non-deposit funding sources.

The proposed rules also would bar institutions from proprietary trading operations that are for their own profit and unrelated to serving customers

According to sources, Geithner says the proposed regulations “do not necessarily get at the root of the problems and excesses that fueled the recent financial meltdown.”

He’s not alone in that criticism:

Lawrence White, a professor at New York University’s Stern School of Business and a former regulator, said Obama’s proposals were “a solution to the wrong problem.”

“They have this rhetoric that it was proprietary trading that was the problem,” White said. “That’s wrong.”

Of course the Obama war on Wall Street is certainly having an effect – bank shares have declined as has the dollar against other currencies.

If you don’t get the idea that this is mostly an ideologically driven “war” trying to cash in on populist anger at a time when nothing is going well for the administration, you’re not paying attention. It also points to an “war of choice” based in a very poor understanding of economics and the fact that we’re engaged in a global economy where competitiveness is critical. If these regulations pass and when the recovery falters because banks are hobbled and noncompetitive, I’m sure that somehow the White House will again play the “greed” card out in a effort to hide the effects of their own short-sighted and ideologically driven economic malpractice.

~McQ

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Warren Buffet – Bank Levy Makes No Sense

Barack Obama was quite fond of quoting Buffet during the campaign. My guess is he’ll not be as willing to quote Buffet about his opposition to the President’s proposed bank tax:

“I don’t see any reason why they should be paying a special tax,” said Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., in an interview on Bloomberg Television today. Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it.”

What he’s talking about, of course, is the tax Obama has proposed ostensibly to recover the losses incurred in the TARP program. Obama has targeted about 50 banks to make this repayment.

The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”

Of course Buffet throws out a point, which I’ve put it bold, that the administration, Democrats in general and the media have studiously avoided. That’s the role that the two quasi-governmental organizations, Freddie Mac and Fannie Mae, played in the financial meltdown (and how much of the TARP money they sucked down). In fact, the tax is as much about recovering the money they required as anything. But pointing that out would be detrimental to the narrative the administration has been building about the “greed of Wall Street” and their unilateral culpability. According to Bloomberg data, Freddie and Fanny owe about $110 billion. Buffet, of course, is not so easily fooled:

The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

“Most of the banks didn’t need to be saved,” Buffett said. “Including Wells Fargo.”

The bank tax would raise $90 billion over 10 years and, of course, be paid for by the banks customers. Also note that the sum of $90 billion is very close to the amount owed by Freddie and Fanny.

Obama is correct – “we want out money back”. But we want it back from the institutions which wasted it. Of course that’s impossible since taxing Freddie and Fanny is taxing ourselves. Of course, so is taxing banks. However, it is much more useful to demonize them, play the greed card and pretend the government is blameless than to tell the truth, isn’t it?

I mean, if they told the truth, they’d have to implicate Congressional Democrats like Barney Frank, wouldn’t they – and that would never do.

~McQ

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Why, You Ask, Are Businesses Not Hiring? The EPA For One Reason…

As regular readers know, we’ve been talking about why businesses are sitting on the sidelines and not hiring at the moment.  Businesses don’t like unsettled questions about the arena in which they must operate.  Health care legislation will effect the cost of doing business.  Until that is settled, there’s little incentive to take a chance and hire or expand their business.   If it costs more to do so after the legislation is passed – and it seems it will, they’ll wait to see the eventual outcome (and cost) and adjust accordingly.  Same with cap-and-trade.

However, in that regard, the EPA seems ready to proceed on it’s own schedule and businesses are not liking what they’re hearing:

Officials gather in Copenhagen this week for an international climate summit, but business leaders are focusing even more on Washington, where the Obama administration is expected as early as Monday to formally declare carbon dioxide a dangerous pollutant.

An “endangerment” finding by the Environmental Protection Agency could pave the way for the government to require businesses that emit carbon dioxide and five other greenhouse gases to make costly changes in machinery to reduce emissions — even if Congress doesn’t pass pending climate-change legislation. EPA action to regulate emissions could affect the U.S. economy more directly, and more quickly, than any global deal inked in the Danish capital, where no binding agreement is expected.

Bottom line – if the administration can’t get it done legislatively, they’ll just assume the authority and implement what they wish to do to restrict emissions and require “changes in machinery” unilaterally.

An EPA endangerment finding “could result in a top-down command-and-control regime that will choke off growth by adding new mandates to virtually every major construction and renovation project,” U.S. Chamber of Commerce President Thomas Donohue said in a statement. “The devil will be in the details, and we look forward to working with the government to ensure we don’t stifle our economic recovery,” he said, noting that the group supports federal legislation.

Can you imagine a more pervasive “emission” or arbitrarily applied set of mandates? Start asking yourself who the favored and unfavored industries are out there? Do you suppose coal fired power plants might be target one? And I’d guess that refiners would be in the same boat – unless they make ethanol.

The point of course is this is a perfect way to target and increase the cost of operating businesses that the EPA decides are the worst CO2 polluters. They’ll just write regulations that require costly renovations and changes. The net outcome, of course, is increased cost to consumers – most likely in their electricity bills, the cost of goods (transportation) and just about every other aspect of life you can imagine.

An endangerment finding would allow the EPA to use the federal Clean Air Act to regulate carbon-dioxide emissions, which are produced whenever fossil fuel is burned. Under that law, the EPA could require emitters of as little as 250 tons of carbon dioxide per year to install new technology to curb their emissions starting as soon as 2012.

The EPA has said it will only require permits from big emitters — facilities that put out 25,000 tons of carbon dioxide a year. But that effort to tailor the regulations to avoid slamming small businesses with new costs is expected to be challenged in court.

Legislators are aware that polls show the public appetite for action that would raise energy prices to protect the environment has fallen precipitously amid the recession.

Understanding that the public appetite for such action is very low, legislators are perfectly happy to let cap-and-trade languish. So the bureaucracy is being empowered to go where no elected politician dares at the moment. And if you’re a business, that means you’re still not clear what that means to you at the moment.

And so, you don’t hire. You don’t expand. You’re barely competitive in the global market as it is and now they’re talking about adding more cost? Yeah, that settles everything, doesn’t it? They’ll start hiring tomorrow.

~McQ

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Action : Reaction

Gee, I wonder who would have guessed that this would happen:

In a London preview of Wall Street’s bonus nightmare, more than 1,000 investment bankers have quit Royal Bank of Scotland to work at rivals due to curbs on their paychecks, according to people familiar with the situation.

Wall Street banks fear top talent would flee en masse for greener pastures if Uncle Sam’s pay czar, Ken Feinberg, and Congress try to put more ceilings on bonuses and pay at financial firms.

In the UK, the rules are modeled after US actions to curb pay at firms bailed out by the government.

[…]

The protest exodus at RBS — first reported on the Web edition of the Times of London — involved less than 5 percent of its banking professionals.

Some headhunters see more bankers jumping ship in the coming year as the controversy deepens over pay freezes and curbs.

Pay people less than they think they can earn elsewhere, then “elsewhere” is where you will find them.

Some will say that these ship-jumpers can’t be worth too much if their companies had to be bailed out, but that gets it exactly backwards. For the most part, it’s those who are responsible for the floundering that will be left working for the rotting (and now government owned) corpse, while those most capable find positions in more stable firms.

There’s nothing particularly bad about this sort of slough off, except that with the bailouts thrown into the mix, it’s the public that’s left holding the bag. Absent the government takeovers, the same sort of thing would have happened, only in a quicker, more orderly way (see, e.g. the fallout from the collapse of Arthur Anderson, or the bankruptcy of BearingPoint).

Moreover, the demonization of Wall Street types accomplishes nothing constructive, and may very well convince otherwise enterprising young B-school grads (or potential grads) to employ their intellectual talents in other fields that may not fully capture their potential or interest. All that does is deprive the rest of us of smart, young and industrious business people who might make our world better, and instead treats us to a glut of some other professionals that we likely don’t need (i.e. lawyers). And we really don’t want that now, do we?

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Jobs – White House Summits Aren’t The Answer

If you’re among the 15 or so in this country that believe this White House job summit will actually end up creating policies that produce jobs, I think Evan Newmark’s WSJ piece might dissuade you from that belief:

Now, I’ve never been to a White House summit, so I can’t say exactly what will happen on Thursday. But as a past Davos World Economic Forum participant, I’m pretty familiar with these kinds of VIP schmooze and snoozefests.

And here’s how it will likely play out. A senior White House official — perhaps the president — will give a welcome pep talk to the 130 gathered “summiteers.” He’ll ply them with thanks and stirring patriotic words.

But then he’ll urge them to not waste the day in conference fuzzy talk. Instead, the summiteers should turn words into actions and actions into jobs. After all, it is a “jobs” summit.

And then the summiteers will shuffle off to one of six working groups — where of course they’ll end up wasting the day in conference fuzzy talk.

It’s inevitable. Prepared remarks, banal anecdotes and empty debates are the stuff of these mushy forums. I can count on one hand the number of memorable moments from the dozens of my Davos sessions on technology super-revolutions, entrepreneurial innovation and world peace.

That’s because the VIPs at these things aren’t there to say or do anything unexpected.

Do you think that FedEx CEO Fred Smith and United Steelworkers President Leo Girard will somehow reach agreement that the best way to create jobs is to kill the union-card check?

Do you think that Randi Weingarten, President of the American Federation of Teachers, will suddenly serve up innovative ideas for trade unions to assist small businesses?

It seems unlikely.

And so the jobs summit will fail for the same reason Obamanomics is failing: The White House mistakenly believes economic growth and new jobs are created by society’s stakeholders — business, labor and government — cooperatively working together.

Like most of these events, this is a political stage show. It is a visual representation meant to convey the idea that a) the government is interested in your problems and, most importantly, b) it is here to help.

But the key to the failure of this summit, even if they were serious about creating jobs, is found in Newmark’s last sentence. The key to economic growth and new jobs aren’t the product of summits among “society’s stakeholders”. They never have been.

In fact, it’s pretty simple as he notes:

But that’s not the way capitalism works. It doesn’t take a village to create a new job. It takes a businessman trying to make another buck.

So why aren’t the businessmen out there trying to “make another buck”? While business is all about risk, the risks they take are rational.  Businessmen aren’t at all inclined to take risks that can ruin them, especially in unsettled markets. Right now economy is very unsettled and government has huge tax laden legislative bills pending which will directly effect these businesses in a very negative way. And of course, there’s new and increased financial regulation pending which may effect their ability to get funds to expand their businesses and hire new workers.  Thus they’ve concluded it would be entirely irrational to expand their business or hire in such an atmosphere.

Instead, they’ll hold off on hiring or expanding until the economy and markets are much more settled and they’ve had the opportunity to gauge the cost to them of all of this new legislation and regulation.

That said, the simple answer on how ease economic uncertainty and thereby create more jobs is kill health care, kill cap-and-trade and back off the increased regulation. Additionally, a corporate tax cut might help as well. All of that would certainly settle market down and give businesses an incentive to both expand and hire.  But this job summit? Newmark nails it. Fuzzy talk aimed at the wrong solution. The best thing the government can do is back off and let the market get back to work. Unfortunately, that won’t be the solution the “summit” proposes nor will it be the policy the White House will adopt.

~McQ

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The AGW Payoff For Al Gore

His supporters call him a visionary. His detractors call him a con artist.  One thing is certain though, the hype of AGW is making Al Gore a very rich man. And that alone should make people very skeptical of his “cause”.

Few people have been as vocal about the urgency of global warming and the need to reinvent the way the world produces and consumes energy. And few have put as much money behind their advocacy as Mr. Gore and are as well positioned to profit from this green transformation, if and when it comes.

Critics, mostly on the political right and among global warming skeptics, say Mr. Gore is poised to become the world’s first “carbon billionaire,” profiteering from government policies he supports that would direct billions of dollars to the business ventures he has invested in.

And, in fact, the NYT describes just such a venture that will now pay off for Gore and his partners. You remember those “smart grid” grants handed out a week or so ago?

The company, Silver Spring Networks, produces hardware and software to make the electricity grid more efficient. It came to Mr. Gore’s firm, Kleiner Perkins Caufield & Byers, one of Silicon Valley’s top venture capital providers, looking for $75 million to expand its partnerships with utilities seeking to install millions of so-called smart meters in homes and businesses.

Mr. Gore and his partners decided to back the company, and in gratitude Silver Spring retained him and John Doerr, another Kleiner Perkins partner, as unpaid corporate advisers.

The deal appeared to pay off in a big way last week, when the Energy Department announced $3.4 billion in smart grid grants. Of the total, more than $560 million went to utilities with which Silver Spring has contracts. Kleiner Perkins and its partners, including Mr. Gore, could recoup their investment many times over in coming years.

How very, uh, convenient. Anyone who doesn’t believe Gore’s connections inside government at very high levels isn’t paying off just isn’t paying attention. Gore has pushed AGW vigorously for years and until recently when the science he based his pitch on has been found seriously wanting, he’s pretty much had it his way. Governments around the globe swallowed it whole and the movement has grown into a veritable religion.

Gore’s reaction to the skepticism about his profiting off what many, myself included, consider a gigantic scam?

Mr. Gore says that he is simply putting his money where his mouth is.

“Do you think there is something wrong with being active in business in this country?” Mr. Gore said. “I am proud of it. I am proud of it.”

There’s absolutely nothing wrong with being active in business in this country, Mr. Gore – unless of course it’s the coal business or the lumber business or the nuclear energy business, or the oil business. Or for that matter the pharmaceutical business, health insurance business or financial sector. Then there’s the car business …

Well you get the idea. What Mr. Gore is actually proud of is creating a business that’s a politically popular one and stands to suck in untold piles of money based on a scam that would make Bernie Madoff green with envy. Because Al Gore has created and is engaged in a “legal” ripoff the size of which the world has never seen. Of course he’s “proud of it”.

~McQ

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