Free Markets, Free People
While President Obama vacations on Martha’s Vineyard, he is supposedly committing to paper a plan to boost employment. During the recession unemployment has remained high, near 10%, and with the economy slowing again, that number is likely to go higher.
One area that hasn’t suffered jobs losses during Obama’s time in office is the government regulatory regime. In fact, it has managed to add a significant number of jobs, all, unfortunately, at the expense of business. While most Americans feel some level of regulation is necessary by the Federal government, over-regulation is always a danger. When that danger is realized, it is businesses who bear the brunt of the cost of compliance. And, of course, businesses pass their costs on to consumers in the price of their goods. So regulation compliance costs drive the price of goods up.
In the past three years of the Obama administration we’ve seen an explosion of regulations. Investors Business Daily brings you the gory details:
Regulatory agencies have seen their combined budgets grow a healthy 16% since 2008, topping $54 billion, according to the annual "Regulator’s Budget," compiled by George Washington University and Washington University in St. Louis.
That’s at a time when the overall economy grew a paltry 5%.
Meanwhile, employment at these agencies has climbed 13% since Obama took office to more than 281,000, while private-sector jobs shrank by 5.6%.
Michael Mandel, chief economic strategist at the Progressive Policy Institute, found that between March 2010 and March 2011 federal regulatory jobs climbed faster than either private jobs or overall government jobs.
Those agencies have churned out new regulations and rules at an amazing rate:
The Obama administration imposed 75 new major rules in its first 26 months, costing the private sector more than $40 billion, according to a Heritage Foundation study. "No other president has imposed as high a number or cost in a comparable time period," noted the study’s author, James Gattuso.
The number of pages in the Federal Register — where all new rules must be published and which serves as proxy of regulatory activity — jumped 18% in 2010.
This July, regulators imposed a total of 379 new rules that will cost more than $9.5 billion, according to an analysis by Sen. John Barrasso, R-Wyo.
And much more is on the way. The Federal Register notes that more than 4,200 regulations are in the pipeline. That doesn’t count impending clean air rules from the EPA, new derivative rules, or the FCC’s net neutrality rule. Nor does that include recently announced fuel economy mandates or eventual ObamaCare and Dodd-Frank regulations.
As mentioned above, regulations and rules impose a significant cost on businesses which must comply with them. In a time when the economy is staggering, these increases in costs delivers another body blow to any recovery. And most of them have been imposed via the Executive Branch through its various Departments and not Congress. The agenda brought to the White House by Barack Obama is being serviced by regulators and the legislators are being left out
"Our economy is continuing to sink," Sen. Barrasso said, "and it’s being weighed down by regulations coming out of this administration."
By 2008, the cost of complying with federal rules and regulations already exceeded $1.75 trillion a year, according to a 2010 study issued by the Small Business Administration.
Worse, the SBA found that small companies — which account for most of America’s new jobs — spend 36% more per employee to comply with these rules than larger firms.
Of course the administration flatly denies what the reports above tell us is happening:
Cass Sunstein, who runs the White House Office of Information and Regulatory Affairs, denies the regulatory upsurge, writing recently that "there has been no increase in rule making in this administration." He also notes Obama ordered a comprehensive regulatory review in January that uncovered $1 billion worth of needless red tape.
As is always the case, never believe what the administration tells you, always look behind the curtain at the facts. And the facts are that 379 new rules have been imposed under this administration and it has 4,200 new regulations “in the pipeline” not counting the exceptions to that count noted in the IBD article. So, as usual, the numbers tell a different story.
If President Obama is serious about creating job opportunities, this is an area in which he obviously exercises direct control via the federal government and the executive branch. Rolling back the regulator regime, suspending all new rules until a comprehensive study can be made of their economic impact and generally getting regulators out of the way of businesses would be a very good start.
Somehow I doubt any of that will find its way into the jobs plan Mr. Obama presents after his vacation.
It might come as a surprise to some, but the bill Democrat Representative Jan Schakowsky (IL) plans to introduce as a jobs bill is long on borrowing money we don’t have and funneling that money through ineffective government programs. Apparently they still don’t get it.
The member of the Congressional Progressive Caucus would spend $227 billion dollars and, best case, create 2.2 million jobs (or, again best case, a little over $108,000 a dollar a job). Her plan reads like something from the Franklin Roosevelt administration:
Under her plan, the following policies would be implemented:
- The School Improvement Corps would create 400,000 construction and 250,000 maintenance jobs by funding positions created by public school districts to do needed school rehabilitation improvements.
- The Park Improvement Corps would create 100,000 jobs for youth between the ages of 16 and 25 through new funding to the Department of the Interior and the USDA Forest Service’s Public Lands Corps Act. Young people would work on conservation projects on public lands including the restoration and rehabilitation of natural, cultural, and historic resources.
- The Student Jobs Corps would create 250,000 more part-time work study jobs for eligible college students through new funding for the Federal Work Study Program.
- The Neighborhood Heroes Corps would hire 300,000 new teachers, 40,000 new police officers and 12,000 new firefighters.
- The Health Corps would hire at least 40,000 health care providers, including physicians, nurse practitioners, physician assistants, nurses, and health care workers to expand access in underserved rural and urban areas.
- The Child Care Corps would create 100,000 jobs in early childhood care and education through additional funding for Early Head Start.
- The Community Corps would hire 750,000 individuals to do needed work in communities, including housing rehab, weatherization, recycling, and rural conservation.
Perusing the list, there’s absolutely no possible threat of waste, fraud and abuse, is there? 750,000 people hired to “work in the community” doing “recycling” and “rural conservation?” “Weatherization”? Nope, no chance of waste, fraud and abuse, none at all.
Of course, nowhere in there other than initially, is there any mechanism to fund the “jobs” created in the future. They’d last as long as the $227 billion did and then the jobs would go away. That would include the teachers, police officers and firefighters. Those are simply in the plan to make it sound more acceptable. If the localities who will get the teachers, police and firefighters funded by this boondoggle can’t afford to hire them now, chances are very good they won’t be able to keep them when the money runs out.
The jobs listed are also mostly make work jobs on make work projects that might be nice to have done, but aren’t going to contribute to the private economy (the actual engine of the economy) in any meaningful way. Nothing is really “produced”, no wealth is created, no revenue – other than salaries – is taxable.
And finally, which health care providers is “Health Corps” going to hire? There’s a shortage of health care providers in the private market. Why in the world would they leave that to work for government in “underserved rural and urban areas?”
It is clear with Rep. Schakowsky’s proposal that the Progressive side of the aisle still don’t get it. How much louder do the American people have to shout to be heard?
Cut spending. Make government smaller. Make government less costly.
Rep. Schakowsky and the Progressives are still stuck in the 20th century. We’re already living the Raw Deal thanks to spendthrifts like her.
Well, this is interesting. Paul Krugman finally agrees with me:
[W]e already know what isn’t working: the economic policy of the past two years — and the millions of Americans who should have jobs, but don’t."
I’d just like to point out that I knew those economic policies wouldn’t work back in 2009, writing about them here. Since then, I’ve just been watching the kangaroo. So It’s nice to see Krugman joining me in declaring "fail"—though he does so with the advantage of 20/20 hindsight.
I eagerly anticipate my upcoming invitation to Sweden.
Where we diverge is in providing solutions. As always, Krugman’s solution is more spending, and more debt. But with debt already at 100% of GDP, we’re really in uncharted waters, and I have no confidence that more debt is the answer, if the problem is the existing debt overhang.
The real question I’m concentrating on is, "At what point do the markets recognize not only that the debt path we’re on is unsustainable, but that it is going to be impossible to pay it back?" Is that 120% of GDP? 150%? I don’t know. But I fear that we’re going to learn the answer.
On the bright side, I’ll be able to pay off the remaining 19 years of my mortgage for the cost of a nice hat. On the down side, a new Astros baseball cap will cost $200,000. On the bright side, again, the $100,000 from my Nobel will cover half of that, so it’s all good.
The headline numbers for the the July employment situation show that 117,000 new non-farm payroll jobs were added last month, while the unemployment rate dropped to 9.1%. But, the true story is—as we’ve come to expect—more complicated when you delve below the fold.
Private payrolls rose by 154,000 jobs, while government payrolls declined by 37,000. Average weekly hours were unchanged at 34.3, while hourly earning rose slightly to $23.13.
The decline in the unemployment rate to 9.1 was not a reflection of the increase in non-farm payrolls, but a decline of 193,000 in the labor force, as workers dropped out of the labor market. As a result, the labor force participation rate continued to decline to 63.9%. In addition, the total number of employed persons declined from 139,334,000 to 139,296,000, meaning that 38,000 fewer people were actually working last month, compared to June.
The U-4 unemployment rate, which includes discouraged workers, held steady at 9.8%, while the broadest measure of unemployment/underemployment, the U-6, which includes workers who have part-time jobs for economic reasons, dropped 0.1% to 16.1%.
Overall, the report is not positive. At best, it can be said that we’re about the same last month as we were in June. The trend over the last few months is not good, however, as the table below illustrates.
|Mar 2011||July 2011|
Finally, if we go back to the historical average of labor force participation prior to the recession, which was 66.2%, the proper size of the labor force should be 158,662,000, rather than 153,228,000. Use that figure to calculate the employment rate with the 139,334,000 persons actually employed, and you get an actual unemployment rate of 12.2% for July. The caveat here, of course, is that with the first tranche of Baby Boomers so close to retirement, some number have just retired early and are out of the labor force permanently, so that historical participation rate may no longer be valid.
In any event, once you add in the workers who’ve gotten discouraged, and workers who have part-time jobs because full-time employment isn’t available, this month’s employment report makes it clear that real unemployment is actually back on the rise.
So you’re wondering why the “recovery” stalled? Well we all know that correlation is not causation, but this sure looks suspicious doesn’t it?
So looking at the chart, we see job growth starting to pick up at an average of 67,000 a month. Not earth shattering, but much better than the average (ten times less) after the passage of ObamaCare.
Why, people wonder, would something like that happen with the passage of a bill that is supposed to improve health care and make it cheaper to boot? Wouldn’t that encourage people to hire and expand.
Well … no. Because we had to pass the bill to find out what was in the bill. And what we’ve found out is none to pleasing.
As the report states, correlation cannot prove causation — but the change in course is statistically measurable and testing reveals a structural break between April and May of 2010. Moreover, small-business owners have said Obamacare is a deterrent to hiring. Take Scott Womack, the owner of 12 IHOP restaurants in Indiana and Ohio, as just one example. Before Obamacare became law, he had development plans in Ohio. Now, he’s worried he won’t be able to carry out his original plans unless Obamacare is repealed. Those restaurants he planned to open would provide jobs not only for his future employees, but also for everyone involved in the construction of the restaurant buildings themselves.
But … and you knew there was one, this threw a wrench into everyone’s works. Why? The Heritage Foundation points out 3 reasons businesses are discouraged from doing so by the law:
- Businesses with fewer than 50 workers have a strong incentive to maintain this size, which allows them to avoid the mandate to provide government-approved health coverage or face a penalty;
- Businesses with more than 50 workers will see their costs for health coverage rise—they must purchase more expensive government-approved insurance or pay a penalty; and
- Employers face considerable uncertainty about what constitutes qualifying health coverage and what it will cost. They also do not know what the health care market or their health care costs will look like in four years. This makes planning for the future difficult.
Korb provides the link between what that law is doing and the current debt and deficit talks going on in Congress:
The Heritage report recommends repeal — and comes as a welcome reminder that the health care law can’t be ignored as the president and Congress attempt to address the debt and deficit or as the nation attempts to right the still-struggling economy. Nor can it be ignored in the upcoming presidential election. Likely U.S. voters have said jobs and the economy are their No. 1 issue. That means the repeal of Obamacare should be a top priority, too.
Couldn’t agree more. I’ve seen any number of people saying “yeah, repeal it” but then asking “what are you going to replace it with”?
Uh, personal responsibility? How about we try that for a change? It is each citizen’s job to care for themselves and do (and pay for) those things necessary to see that they aren’t a burden on the rest of the citizenry.
What a concept, huh?
One of the things economists watch to try to gauge the job market is how the temporary worker market is doing. Many times a rise in temp workers signals businesses are gearing up for more permanent hiring as the economy gains steam. The opposite is many times also true. And, unfortunately, it appears that this particular indicator isn’t giving us the warm fuzzy feeling we hoped it would:
Last month’s fall in the number of temporary workers could herald continued weakness in the job market.
The total number of temporary employees placed by staffing agencies dipped by 12,000 last month and is down 19,000 the past three months, the Bureau of Labor Statistics reported Friday.
Now perhaps 3 months can’t be considered a “trend”, but it is pretty darn close. And it parallels the news we’ve been getting about unemployment and the economy in general.
Temporary workers, however, could be the most telling signal. The number of contingent workers started growing in fall 2009, about six months before the broader job market began to emerge from the recession. From September 2009 to March, employers added nearly 500,000 temporary workers.
Roy Krause, CEO of SFN Group, a top staffing agency, says temporary placements for white-collar jobs in accounting, computers and legal remain strong. But those for lower-skilled light industrial, clerical and certain call-center jobs — which accounted for most of last year’s growth — have slowed. "They tend to be more sensitive to economic conditions," he says.
Chemical maker Arkema of Philadelphia employed about 150 temporary workers earlier this year. But it trimmed that total by about 50 in April and May as the weak economy prompted it to cut its 2011 forecast, Vice President Chris Giangrasso says. Arkema, he says, will likely not add this year to its permanent staff of about 2,500 in North America.
Key point – “weak economy”. He had enough growth last year to warrant hiring temp workers but not full time staff. Now he doesn’t even have enough business to warrant 2/3rds of the temps he hired and had to let them go.
That weakness in the economy continues to linger because, as we’ve noted any number of times, of the unsettled business climate. And that’s something government could do to help the situation – back off regulation, taxes and interference (*cough* NLRB/Boeing*cough*) and stay out of the way. It seems, though, that doing so is just not in this administration’s genes.
And so the negative indicators continue to pile up while the President of the United States and a complicit media attempt to make bad guys out of the GOP as they hold the line against economy crippling tax increases.
Cluelessness seems to be a fairly rampant disease among those who seem unable to peer objectively at reality and analyze it. They prefer to pretend they know what they’re talking about and unhelpfully prescribe exactly the wrong antidote every single time (in this case, more of what we’ve watched fail for two plus years). And, as it turns out, the New York Times editorial board is peerless among that group:
It was not surprising to hear the Republican presidential candidates repeat their tiresome claim that excessive government spending and borrowing were behind Friday’s terrible unemployment report. It was depressing to hear President Obama sound as if he agreed with them.
And the NYT’s claim as to why that’s not the case?
There has never been any evidence that the federal debt is primarily responsible for the persistent joblessness that began with the 2008 recession. The numbers have remained high because of weak consumer demand and stagnant wage growth, along with an imbalance between jobs and job skills.
Who has ever argued that “federal debt is primarily responsible for the persistent joblessness?” Certainly there are other factors. However, there’s no question that excessive government spending – i.e. borrowing to spend – has had a hand in the stagnation we’re now undergoing. In fact, increased and excessive government spending has had no effect and, given the promises made, could be argued to have had a negative effect.
The debt is the indicator of the problem – excessive and unaffordable spending. As we’ve been pointing out for months, revenue isn’t the problem – spending is. So pointing to this strawman, as the NY Times does, is just more politics from the side who thinks it prudent to penalize those who produce in order to bail out those who spend what they produce (and the reason the Democrats insist on calling the present income tax levels “Bush tax cuts”). What doesn’t seem to penetrate the thinking of those who continue to push this line is one of the reasons we’ve had weak consumer demand and stagnant wage growth is the unsettled business and regulatory atmosphere this administration has created in its 2 plus years. That, of course is pushed aside by the NYT in favor of this argument:
The president may have a nebulous approach to unemployment, but he is hardly indifferent to it. His re-election hinges on reducing it. It is hard to understand, though, why Mr. Obama has adopted the language of his opponents in connecting the economy to the debt. To his credit, he talked about the one step that would work — investing money in rebuilding the country. But the debt-ceiling ideas he is now considering would make that investment much less likely by pulling hundreds of billions of dollars out of the economy at precisely the moment when the spending is needed most.
Yeah, there’s absolutely no connection between the “economy” and the “debt” is there? Of course there is? And pretending that borrowing money we don’t have to push it out in the economy and calling it an ‘investment’ doesn’t fool most rational folks. The NYT even points out that the last time the money was thrown out there is it mostly went to service state debt which only delayed the inevitable. Now, apparently, that will somehow be different in the face of “weak consumer demand”. Really? And, of course, the jobs the NYT laments about aren’t private sector jobs but government jobs (state and local) which we all know are the engine of our economy (/sarc).
The types of increases in revenue that government should be encouraging are those that come from private sector jobs. They provide tax revenue from created wealth. They don’t require the government to borrow money to “invest” (i.e. borrow money, create jobs and then tax the jobs created with the borrowed money and claim “increased revenue”. Make sense to you?).
So while I don’t disagree with the Times when it says “his re-election hinges on reducing” unemployment, it appears the Times would opt for the easy and wrong way to do it – borrow more money, pump it into creating make-work jobs just long enough to get Obama past the 2012 election. Then, who care? Debt ceiling, increased drag on the economy’s GDP and all that stuff, forgetaboutit. Well, at least till they get this guy re-elected. Then, of course, I expect a clarion call by the Times wondering how this could have all be so mismanaged and spinning and twisting it, as they have in this editorial, so it all ends up being the fault of the Republicans.
urea am glad we wasted all the money on Stimulus so we could stay below the promised 8% aren’t you?
U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dousing hopes the economy would regain momentum in the second half of the year.
Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists’ expectations for a 90,000 rise.
The unemployment rate climbed to a six-month high of 9.2 percent, even as jobseekers left the labor force in droves, from 9.1 percent in May.
So here we are in Recovery Summer II, huh? You know, I’d go through all the reasons for this but I think you know them pretty well by now.
The results, however, should be reviewed, because we’re suffering them because of this administration’s cluelessness, the Fed’s cluelessness, and the government’s over-regulation and war on business – not to mention the mounting debt. Oh, wait, I just went through all the reasons again, didn’t I?
"The message on the economy is ongoing stagnation," said Pierre Ellis, senior economist at Decision economics in New York. "Income growth is marginal so there’s no indication of momentum.
Gee, wish we’d been saying that for the last few months/years. As Dale has said for quite some time on our podcast, we’re looking stagflation directly in the eye and in the process of recreating the Japanese “lost decade” – except it is possible this may linger for more than a decade given our debt.
The report shattered expectations the economy was starting to accelerate after a soft patch in the first half of the year. It could prompt calls for the Federal Reserve to consider further action to help the economy, but Fed officials have set a high bar.
The U.S. central bank wrapped up a $600 billion bond-buying program last week designed to spur lending and stimulate growth.
"This confirms our view that the Fed will continue to keep rates on hold into 2012 and if weak employment continues it will be pushed out even further," said Tom Purcell, chief economist, RBC Capital Markets in New York.
Classic, obviously predictable (I mean, we did it) and inevitable given the way the problem was tackled.
Oh, btw, 10% is not at all impossible, given the continued policies of this administration.
Just saying’, so it won’t be considered “unexpected” if it happens.
When is a "green job" not a job? When you lose yours because of the initiative:
The Detroit News’s dogged David Shepardson has unearthed a study by one of world’s most respected automotive research firms that reveals that President Obama’s radical CAFE mandate that vehicles average — average! — 62 MPG by 2025 “could force vehicle prices up by nearly $10,000, reduce sales by 5.5 million vehicles annually, and eliminate more than 260,000 jobs.”
Shepardson is quoting from the Michigan-based Center for Automotive Research and the 260,000 job loss figure (consistent with past job losses from CAFE rule hikes) is another dent in White House’s propaganda that Green creates jobs.
The CAR study also reveals that Obama’s NHTSA and EPA have been gaming the figures when it comes to the cost of their new rules. The center’s study predicts it will cost between $3,744 and $9,790 per vehicle, while the agencies have low-balled the figure at $770 to $3,500 per vehicle.
The resulting costs would shrink the new-car market, with 5.5 million potential buyers disappearing (and manufacturing jobs with them) by 2025. That assumes that the auto fleet can even be built to meet such an absurd spec. Currently, no car — much less the average — meets 62 mpg. Indeed, only a handful of small vehicles meet the 35-mpg fleet-wide standard mandated in just five years.
Yes friends, just like the story I covered the other day, we have an administration which is more agenda driven than reality driven. We’re in the middle of a horrible recession, unemployment hasn’t really moved in over a year, the future doesn’t look much better, but the agenda to raise the price of energy (at the cost of jobs) and CAFE standards (at the cost of even more jobs) continues apace.
If you’ve ever wondered what market distortion and intrusion by government looks like, this is a good example. And this intrusion will cost hundreds of thousands of jobs and price many consumers out of the new car market (again, this administration sees that as a feature, not a bug).
Another in a litany of reasons Mr. Obama needs to be retired in 2012.
I’m beginning to wonder if the Republicans can run just about anyone for President (note the qualifier – “just about” – not everyone, even among the declared candidates) and win given this economy and this president:
Americans’ disapproval of how President Barack Obama is handling the economy and its growing budget deficit has reached new highs amid broad frustration over the slow pace of economic recovery, according to a Washington Post-ABC New poll released on Tuesday.
The ratings boost Obama received after the killing of Osama bin Laden has dissipated with his job approval rating back to 47 percent. Forty-nine percent disapprove of his performance.
Obama’s approval rating bounced to 56 immediately after bin Laden was killed last month.
But it went back to a plurality very quickly. On the key issue, however, it hasn’t returned to a particular percentage – it’s gotten worse. Much worse:
Fifty-nine percent, a new high, gave Obama negative marks for his handling of the economy, up from 55 percent a month earlier.
Obama’s approval rating on the deficit issue hit a new low of 33 percent, down 6 points since April.
Anyone who doesn’t understand that is where the election will be decided hasn’t been paying attention to politics very long. Bill Clinton knew it when he rode to victory on his “It’s the economy, stupid”. Ronald Reagan knew it when he continually asked, “are you better off now than you were 4 years ago”? And Barack Obama would probably kill to have the economic problems Jimmy Carter faced – not that he’d do any better than Carter.
The point is, in bad economic times, incumbents have a tough road ahead of them at election time. That’s because economic issues, joblessness, insecurity and fear are felt and understood by everyone. Pocketbook issues are personal issues. And the public has always voted those issues in general elections – much to the disadvantage of incumbent politicians, especially presidents. There’s a number going around out there which claims that no president since FDR has been re-elected with unemployment over 7.2% . Of course keep in mind only a some of them since then have run for re-election and not all of them had bad unemployment numbers at the time. The point, however, is that this sort of issue is critical to re-election chances.
The survey reflects a broadly pessimistic public mood as high gasoline prices, sliding home values and high unemployment numbers raised concerns about the pace of the U.S. economic recovery, The Washington Post said.
Eighty-nine percent of Americans say the economy is in bad shape; 57 percent say the recovery has not started and 66 percent said the United States was seriously on the wrong track.
Forty-five percent said they trust congressional Republicans over Obama to handle the economy, up 11 points since March.
If much of what is listed in the first paragraph isn’t improving fairly dramatically when 2012 arrives, Obama is in for a long year and, just guessing here, an “upset” loss. The shine has worn off. The cache of electing a black president has run its course. History has been made. And now the results part of the show come to bear. Having been a moment in history won’t save Obama if the economy still sucks as badly as it does now.
My dad used to always tell us boys, “you live between your ears”, meaning attitude was critical to how you approached life and overcame obstacles. Attitude is also critical in economies. Pessimism isn’t the predominant mood one wants within the citizenry when they’re hoping to see it turn around. And it certainly isn’t the mood a president wants through out the lane when he’s running for re-election.
Yeah, this is going to be an interesting year and a half until election day 2012. I’m betting it’s not better economically and, again depending on who the GOP eventually nominates, Republicans stand to win the election. Or, and you heard it here first with all the caveats – it is most likely the Republican’s election to lose.
Of course, knowing them, I have little doubt they can manage to do that.