Friday, December 16, 2011

Keystone Blue-Collar Blues

Larry Kudlow at RealClearPolitics:

The payroll-tax-cut debate is not really about the payroll tax, which is a very weak-kneed economic stimulant and a lackluster job creator because of its temporary nature. Without permanent incentives at lower tax rates, these rebates don't do anything for growth and jobs.

Instead, the key to understanding the payroll-tax debate is to grasp President Barack Obama's leftist vision of taxing successful earners (the millionaire surtax) and his obsession with clean energy at the expense of fossil fuels. These are ideological positions. They support the Obama vision of class warfare and his attachment to radical environmentalism.

And the key to understanding this state of affairs is the disposition of the TransCanada Keystone XL pipeline, which Republicans cleverly threw into the payroll-tax debate as the only real job creator.

By siding with the radical greenies and standing against the Keystone pipeline, Obama has turned his back on the most traditional voting bloc in the Democratic Party: blue-collar, hardhat workers.

Manufacturing workers. Construction workers. Truckers. Pipefitters. Plumbers. The Keystone opposition coming out of the White House is completely alienating all these people, the folks who work with their hands. And it's these workers who have been decimated in the recession far more than any other group in the economy.

David Barnett, the head of the United Association of Plumbers and Pipefitters, told me on CNBC that unemployment is currently running at 20 percent to 25 percent in this blue-collar sector. He has repeatedly lobbied the White House to allow the Keystone pipeline to go through, and he notes high environmental standards in the work his men do. And yet even now, three years after the initial Keystone reviews began, the issue is still not resolved.

How can you have a jobs bill without putting blue-collar workers back to work? Answer: stubborn ideological insistence.

The Teamsters support the Keystone. So does the AFL-CIO. So do the machinists. And along with the plumbers and pipefitters, so does the Laborers' International Union of North America.

And we're not just talking about the 20,000 jobs that would accrue directly from the pipeline, but the secondary and tertiary jobs from a long supply chain that total well over 100,000.

As of this writing, the White House may dump the millionaire surtax. But that's not much of a concession, since it never would have passed anyway. Republicans are adamant. It's a nonstarter in the House, and probably the Senate, too. Meanwhile, Republican Senate leader Mitch McConnell told me the Keystone pipeline is the key to the payroll-tax-cut deal.

Both practically and symbolically, Obama's obsessive stance against the pipeline rips a huge split in the Democratic Party, and in the country as a whole. His manic support of clean energy -- just think Solyndra -- has blocked out any rational evaluation of the ongoing importance of oil and natural gas -- including the oil-and-gas-shale fracking revolution that has become a huge jobs creator in North Dakota, Pennsylvania, Texas and elsewhere.

The Obama administration recently shut down the Utica shale field in Ohio because of an Agriculture Department objection. Two hundred thousand jobs are at stake. A field in Wyoming may be shut down. New York state desperately needs jobs and growth, but is wavering because of EPA actions elsewhere.
And with the Keystone ruling delay now extending for another year, the Keystone folks might give the whole project up in the U.S., in favor of a Pacific Ocean pipeline in Canada that will sell oil to the Chinese.
While the U.S. dithers, the Canadians are taking action. As a shot across the unbalanced environmental bow, the Canadian government is opting out of the Kyoto global-warming treaty. As energy analyst Daniel Yergin writes, while the unstable Persian Gulf countries represent 16 percent of U.S. oil imports, Canada represents 25 percent.

Yergin also writes that by the beginning of the next decade, Canadian oil sands could double production to 3 million barrels per day. That means an even higher share of U.S. imports coming from our friendly neighbor and largest trading partner.

So in addition to being an economic-stability issue, this becomes an energy-independence issue and even a national-security issue.

Obama's decisions on the pipeline and other new energy breakthroughs are inimical to U.S. interests. They also are hostile to Democratic Party hardhats who may desert the president in droves come next November.

On top of all that, what may be America's leading new source of job creation will be stifled.

Monday, December 12, 2011

The Hot Race Nobody Is Talking About

A battle for the soul of the Republican party?

Andrew Stiles at NRO:

The Iowa caucuses are still weeks away, but those in search of a hotly contested GOP election need look no farther than the Capitol this Tuesday, when Senate Republicans will select a new vice chairman of the GOP conference.

What may seem like a relatively mundane affair (vice chairman of the conference is the lowest-ranking leadership position), some are billing it as a monumental struggle for the very soul of the Republican party. RedState founder Erick Erickson, for example, is touting the race, which pits Sen. Ron Johnson (R., Wis.) against Sen. Roy Blunt (R., Mo.), as “the most important fight for conservatives in America.”

Erickson and other conservative activists are aggressively backing the freshman Johnson over Blunt, who is also a first-term senator, but whose 14 years serving in the House of Representatives (including a brief stint in leadership) classify him, in their eyes, as a member of “the GOP establishment.”

“I like both senators tremendously,” Erickson writes, “but for conservatives, Ron Johnson is a no-brainer here. Senator Blunt’s thinking is the same thinking that has plagued Senate Republicans for a decade now — the same old ideas and same old strategies.” Brent Bozell, chairman of ForAmerica, concurs. Johnson, he argues, is “a champion for the principles of conservatives,” whereas Blunt is a “creature of the establishment.”

Johnson supporters are quick to point out the senator’s conservative credentials via the Heritage Action for America congressional scorecard: He enjoys a 91 percent rating, compared with Blunt’s 64 percent. (Heritage Action is a notoriously tough grader; Paul Ryan rates just 78 percent.)

That said, conservative support for Johnson appears to derive less from his voting record than from his status as a true political outsider — in other words, his relative lack of political experience. Johnson, who has never held political office until now, touted his extensive private-sector experience — 31 years as an accountant and plastics manufacturer — to great effect in his campaign to oust incumbent senator Russ Feingold (D., Wis.) in 2010. In doing so, he was able to win broad support within the GOP, from both “the establishment” (the National Republican Senatorial Committee) and the Tea Party, in year that saw a fair amount of infighting between the two factions.

“I thought it was important for people from the private sector, citizen legislators, to bring that valuable perspective to Congress,” Johnson tells National Review Online. “I’ve exported products. I’ve actually created jobs. And now that I’m here, I think I can bring that valuable perspective to the leadership in the Senate.”

The case for Blunt, meanwhile, emphasizes his congressional experience. During his time in the House, which included brief tenures as majority whip and majority leader, Blunt developed close working relationships with Reps. John Boehner (R., Ohio) and Eric Cantor (R., Va.). Blunt’s supporters argue that his ties to the current House leadership would be a valuable asset when it comes to the relationship between Republican leaders in the upper and lower chambers, particularly in the (likely) event that the GOP wins control of the Senate in 2012. “Since when did experience become a negative attribute?” asks one Senate aide. “You know, it actually tends to come in handy around here.”

Blunt’s supporters also note that he would bring his own unique perspective to the Senate leadership. If elected, he would be the first chairman of the Values Action Team — a congressional coalition focusing primarily on social issues — chosen for a leadership post.

“Each one has a pretty good argument to make,” observes another Republican aide. “I’d say it’s still up in the air at this point.” Indeed, most observers predict a close vote. However, another critical factor driving support for Johnson among conservatives is the perception that “the establishment” has rigged the race in Blunt’s favor. Some suspect that Senate minority leader Mitch McConnell (R., Ky.) is actively whipping the vote against Johnson, a charge the leader’s office strongly denies.

The vice chairman’s slot initially became available in September when the current conference chairman, Sen. Lamar Alexander (R., Tenn.), announced his intention to step down from the No. 3 leadership position. Sen. John Thune (R., S.D.), who holds the No. 4 spot as policy chairman, is running unopposed to replace him. Current vice chairman Sen. John Barrasso (R., Wyo.) is expected to succeed Thune.
Johnson announced his intention to run for vice chairman just hours after Alexander’s announcement. Blunt, meanwhile, quietly began seeking support for a run of his own, but made his candidacy public only last week, after Alexander set a date for the election.

Erickson cried foul, writing: “[The election] was going to happen in January. But conservatives started gaining momentum. Naturally, Mitch McConnell had to go try to pull the rug out from under conservatives.” Sen. Jim DeMint (R., S.C.), a tea-party favorite who is backing Johnson, said he was “kind of surprised” to learn that the election was being moved up.

One Senate source contends that the decision to move the date up was made at McConnell’s bidding in a deliberate effort to help Blunt, while others insist that the vote was never officially scheduled for January and that it was Alexander who made the call. The purpose of holding the election now, they say, is to give the new leadership team sufficient time to be able to hit the ground running when Congress returns after the holiday recess.

In addition to DeMint’s, Johnson has received endorsements from Sens. Tom Coburn (R., Okla.), Lindsey Graham (R., S.C.), and Bob Corker (R. Tenn.), as well as from fellow freshman senators Marco Rubio (R., Fla.), Kelly Ayotte (R., N.H.), Mike Lee (R., Utah), and Rand Paul (R., Ky.). The endorsements from Rubio, Lee, and Paul are noteworthy because those freshman lawmakers embody the tea-party/establishment rift that characterized a number of high-profile races in 2010: Each of them defeated an establishment-backed candidate to win the Republican nomination. “There’s a broad spectrum in the conference between any party,” Johnson says. “I may be on one side, others may be on the other side.”

Having only recently announced his bid, Blunt remains mum with respect to the endorsements he has received thus far. His supporters expect a close race and note that the outcomes of such elections, which are decided by secret ballot at the weekly GOP lunch meetings, are often difficult to predict, as some senators have a habit of pledging support to multiple candidates in the run-up to a vote. Johnson acknowledges the same. “I like my chances,” he says, “but it could go either way.”

The two senators agree that, however the election turns out, 2012 will be a critical year for Senate Republicans — and for the future of the country. “America is facing a critical moment, when we’re going to decide who we’re going to be as a nation,” Blunt said in a statement announcing his bid.

“We don’t have much time,” Johnson says. “It’s absolutely crucial that the 2012 election is actually a mandate election, and we’re not just running to get over the finish line.”

Whoever gets the nod on Tuesday will certainly have his work cut out for him.

Sunday, December 11, 2011

Obama on jobs: Words, not action

Steve Huntley at The Chicago Sun-Times:

President Barack Obama rolled out his 2012 campaign theme the other day, a populist message with the tired mantra of Republicans as the party of the wealthy while casting himself as the defender of the middle class. “This is a make-or-break moment for the middle class,” he declared. The problem is that, as usual, his record doesn’t match his rhetoric.
A make-or-break moment for the middle class “and all those who are fighting to get into the middle class” would cry out for immediate decisive action to protect that cherished status and give a boost to all those knocking on the door of the American dream.
But that’s not the case when it comes to good-paying energy jobs.
For example, Obama decided to put off for a year construction of the Keystone pipeline to deliver oil from Canada to U.S. refineries on the Gulf Coast. That $7 billion shovel-ready construction project would generate 20,000 jobs. It’s make-or-break time but, hey, job-seekers can wait a year for a chance at an oil pipeline paycheck.
The administration is keeping the lid on oil and gas exploration since the BP oil rig accident, not only preventing new job growth but threatening more job loss. A study of oil permitting by Greater New Orleans Inc. shows that 52 percent of drilling plans in the Gulf of Mexico have been approved this year, down from the historic rate of 73.4 percent. The regulatory maze facing fossil fuels pushed the average approval time to 118 days, nearly twice the historic average of 61 days.
Saying the administration has lifted the BP-inspired moratorium “only in name,” Gregory Rusovich, chairman of the Business Council of Greater New Orleans, declared, “The governmental work stoppage has gone on long enough. Now is the time for action to prevent further job loss.”
“Now is the time for action” echoes the sentiment of Obama’s speech. But his political desire to score points with environmentalists and to promote unprofitable green energy schemes trumps this “make-or-break moment.”
The president uses his rhetoric to push his latest “jobs” plan, a one-year extension of a temporary payroll tax cut to be funded by a tax hike on the rich. There’s little evidence this temporary measure has helped the economy much.
A make-or-break moment calls for fundamental reform — like the economic blueprint presented by Obama’s deficit reduction commission a year ago. It got the cold shoulder from Obama. Its concept of raising more revenues for the government through a simpler tax code with lower rates and few or no deductions runs afoul of Obama’s populist rabble rousing over raising taxes for the rich.
Closing loopholes would also deliver a blow to crony capitalism in Washington and the influence of lobbyists. It would deprive Washington of avenues to pick winners and losers in the economy, a reduction in political clout that Obama and other big-government advocates cannot abide.
Obama mocked common-sense Republican assertions that the economy needs breathing room from red tape. Yet the huge expansion of government rule-making on his watch — the Dodd-Frank finance bill — failed to stop the finagling of Jon Corzine, the former Democratic New Jersey governor for whom Obama campaigned. Corzine’s financial machinations plunged MF Global into the eighth-largest bankruptcy in U.S. history with $1.2 billion in customer money missing.
A “make-or-break moment” requires more than words; it demands commitment and action.

Thursday, December 8, 2011

Obama Abandons the Working Class

The president is pursuing a top-and-bottom coalition instead.

Michael Barone at NRO:

Has Barack Obama’s Democratic party given up on winning the votes of the white working class? Thomas Edsall, the longtime Washington Post reporter now with the Huffington Post, thinks so.
Surveying the plans of Democratic strategists, Edsall wrote in the New York Times on November 28 that “all pretense of trying to win a majority of the white working class has been effectively jettisoned.”
Of course, an Obama campaign spokesman issued a prompt denial. No campaign wants any groups of voters to know that it has written them off.

But Edsall is plainly on to something. Obama campaign strategists have made it known that they are concentrating on states like Colorado and Virginia — states with high percentages of college-educated voters, young voters, and minorities.

Obama carried both these states in 2008, even though Republican presidential candidates had carried Virginia in every election and Colorado in all but one election between 1964 and 2004.
Not all Democrats accept the Colorado/Virginia strategy. William Galston, a top domestic aide in the Clinton White House, has argued that the Obama campaign should concentrate on states like Ohio, with an older and more blue-collar population.

Only one Democrat in the last century has won the presidency without carrying Ohio, Galston points out. If John Kerry had run just two points stronger there in 2004, he would have been elected president.
And Ohio’s demographics look a lot like those in Pennsylvania, which Obama carried by ten points in 2004 but where he is now running behind in the polls.

But Galston’s advice has been spurned, and perhaps that just reflects an acceptance of a longstanding reality.

For the Democratic party has not been the party of the white working class for a very long time. Democrats lost the support of white non-college voters starting in the late 1960s, as rioters burned city ghettos and college campuses were beset by student rebellions.

Democratic politicians responded by seeking to assuage what they considered to be righteous grievances.
For more than 50 years, from 1917 to 1968, the Democrats were the more hawkish of the two major parties, more likely than Republicans to support military intervention. Since 1968, they have been the more dovish party.

For more than 30 years, from 1933 to 1964, the Democrats pushed programs designed to help the working class: Social Security and Medicare, FHA home-mortgage loans, support for labor unions. But since the middle 1960s, when anti-poverty programs took center stage, Democrats in Washington and big cities have pushed welfare programs for the poor and lenient measures against crime.

The Democrats’ shift produced vote gains in some segments of the electorate. Blacks, who voted 62 percent for John Kennedy, have voted about 90 percent Democratic starting in 1964.

Democrats’ dovishness and liberal stands on cultural issues won them support from the growing percentage of college-educated voters. But those same stands cost them support among those who came to be called “Reagan Democrats.”

Talented Democratic strategists like pollster Stanley Greenberg and elections analyst Ruy Teixeira struggled for decades to come up with strategies to bring the white working class back to what they considered their natural political home. But even Bill Clinton was unable to get them back.

You can see the results in the 2008 exit poll. Barack Obama got a higher percentage of the total vote than any other Democratic nominee in history except Andrew Jackson, Franklin Roosevelt, and Lyndon Johnson.

But he did it without capturing the vast middle of the electorate. He won with a top-and-bottom coalition, carrying voters with incomes over $200,000 and under $50,000, and losing those in between. He carried voters with graduate-school degrees and those with no high-school diplomas, and ran only even with the others.

Obama lost among non-college whites by a 58 percent to 40 percent margin. And in the 2010 House elections, non-college whites went Republican by 63 percent to 33 percent.

So maybe it makes sense for Obama to write off the white working class. Yet he is doing it in an odd way, by enacting New Deal‒like programs and expending great energy on raising taxes on high earners.
Historically, that was the way to win working-class votes. But it plainly isn’t doing so now, and it seems poorly calculated to enthuse the top half of the top-and-bottom coalition. Class warfare is a dubious strategy when you’ve written off the working class.

Obama's Rx: Bad News for Middle Class

Debra Saunders at The San Francisco Chronicle:

In his big economics speech in Osawatomie, Kan., Tuesday, President Barack Obama asserted, "This is a make-or-break moment for the middle class."

That's not good news for the middle class. What's the big problem facing Americans today? A lack of good jobs or the fact that rich people make more now than rich people used to make?

The president seems to believe the latter. He seems to think that if Democrats raise tax rates on the wealthy, jobs will become fruitful and multiply. Or if they don't, at least he can blame Republicans for not agreeing to his economic package.

"I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share (and) when everyone plays by the same rules," Obama told Osawatomie. But his actions and his words do not mesh.

Fair shot? How much help is a fair shot if the job market isn't improving? With the world's second-highest corporate tax rate, the United States should be more competitive in the global marketplace. Yet the president's answer isn't flatter tax rates that send a positive signal to investors. No, he wants "investments" in education and technology.

In this speech, Obama didn't mention "green jobs," his erstwhile jobs of the future. A June audit found that $500 million slated for training for green jobs in 2009 created a mere 1,336 jobs that lasted six months or longer.

Obama's jobs of the future would be construction workers "rebuilding our roads and our bridges."
Problem: The administration delayed a decision on the 1,700-mile Keystone XL pipeline until 2013. That's what happens when real jobs could cost Obama his job by alienating green voters.

Fair share? In the Kansas speech, Obama extolled Minnesota manufacturer Marvin Windows and Doors for laying off workers only once in 100 years. During tough times, Obama noted, Marvin's unnamed owners shared the pain of reduced compensation with their workers.

So who is Obama's jobs czar? Not the suckers at Marvin. General Electric chief executive Jeff Immelt, whose compensation doubled last year as GE was seeking concessions from workers, is Obama's go-to guy on jobs. The New York Times reported that General Electric didn't pay a dime in federal taxes in 2010 -- even though the multinational corporation earned $5.1 billion in U.S. profits.

Obama's other model rich guy is investor Warren Buffett, who frequently complains that his taxes should be higher. Now, Buffett doesn't pay what he says he should pay, but he says he wants to do so, and that's enough. Thus, Buffett is a member in good standing in Obamaland's fellow big-shot club.

Besides, Obama told the audience gathered at Osawatomie High School, under his plan the rich would only have to "contribute a little more."

This administration is dedicated to never telling voters that they have to pay for its agenda. Only the top 1 percent of income earners, who already pay 38 percent of federal income taxes, have to pay for big government -- and then just a skosh more.

Same rules? Please. The Obama way is to talk up fairness while your cronies hire a stable of lawyers and lobbyists to grease the path for favorable tax loopholes. This is where high tax rates come in handy; they create an incentive to cozy up to the administration to win tax incentives for pet training and technology.
That's the problem with Obama's prescription for the middle class. Sure, he wants to create more jobs, as long as all jobs go through Washington.

Wednesday, December 7, 2011

Obama vs. Capitalism

David Harsanyi at RealClearPolitics:

In Teddy Roosevelt's era, President Barack Obama explained to the nation this week, "some people thought massive inequality and exploitation was just the price of progress. ... But Roosevelt also knew that the free market has never been a free license to take whatever you want from whoever you can."
And he's right. Even today there are people who believe they should have free license to take whatever they want from whomever they can. They're called Democrats.

Yet the president, uniter of a fractured nation, the mighty slayer of infinite straw men, claims that some Americans "rightly" suppose that the economy is rigged against their best interests in a nation awash in breathtaking greed, massive inequality and exploitation. Or I should say, he's trying to convince us that it's the case.

The middle-class struggle to find a decent life is the "defining issue of our time," the president went on. And nothing says middle-class triumph like more regulation, unionism, cronyism and endless spending. Hey, Dwight Eisenhower (a Republican!) built the interstate highway system, for goodness' sake. Ergo, we must support a bailout package for public-sector unions -- you know, for the middle class.

In what other ways will Obama secure the dream in this "defining" moment? Is the middle class going to be salvaged by raising the top marginal tax rates a few points on 1-percenters and adding $1 trillion to the federal budget in 10 years (equal to one year of federal deficit spending)? Or is the middle class going to rise again on the strength of a temporary tax holiday from programs it actually uses?

Surely, that won't do. If not, what are you talking about exactly, Mr. President? Give us the big plan. What program have you devised that offers middle-class Americans more opportunity, not just more dependency? How have you expanded the fortunes of the bitter, occasionally clingy bourgeois in the past three years -- by adding $4 trillion to their offspring's tab?

Smart people can grouse all they want about the supposed zealotry of the tea party or the conservative presidential field (and sometimes, they might be right), but Obama's mimicking Teddy Roosevelt's end-of-career hard left turn tells us a lot about the president's worldview. In his speech in Osawatomie, Kan., Obama dropped almost all pretenses and made the progressive case against an American free market system, which he called "a simple theory ... one that speaks to our rugged individualism and our healthy skepticism of too much government. ... And that theory fits well on a bumper sticker. But here's the problem: It doesn't work."

Obama, after all, is such a towering economic mind that in Osawatomie, he once again blamed ATMs (and the Internets) for job losses. This is a man we can trust. "Less productivity! More jobs!"

That's not to say capital isn't useful occasionally, of course. A few days ago, Obama hosted a $38,000-a-plate fundraiser for wealthy Manhattanites. The president -- with the Democratic National Committee -- has hauled in more cash from rent-seeking financial-sector companies than all Republican candidates combined. This president has supported every big-business bailout with taxpayers' money, even though he claims they shouldn't be on the "hook for Wall Street's mistakes."

But it is refreshing to hear Obama come out and give us a clear picture of this country in all its ugly class-conscious, unjust, menacing glory rather than veil his arguments with any of that soothing rhetoric that got him elected last time. It's time, my friends, for a new square deal.

Big Statism in Osawatomie

Michael Knox Beran at NRO:

He’s been LincolnFDR, and Reagan; today, President Obama travels to Osawatomie, Kansas, to unveil his latest persona: Teddy Roosevelt, who delivered his “New Nationalism” manifesto in the town’s John Brown Cemetery in August 1910.

Obama would do well to be cautious in inviting comparison to the popular image of the “Rough Rider.” The president whom Matt Drudge delights to picture on his vacation bicycle, safety helmet in place and a Dukakis-in-the-tank grin on his face, does not compare favorably as an action hero to the man who fought at San Juan Hill.

But where economic policy is concerned, Obama and the “New Nationalist” Roosevelt are not so far apart. At Osawatomie, the former president lamented the “absence of effective state” in America and advocated a policy of paternalist “control” of the nation’s commerce. President Obama, too, wants more “effective state” in America. The difference is that in 1910 government spending amounted to about 8 percent percent of GDP. A century later it comes to around 40 percent. The country today has too much state, not too little.
H. L. Mencken’s analysis of Teddy as a Big State Man is worth pondering. The “America that Roosevelt dreamed of,” Mencken wrote

was always a sort of swollen Prussia, truculent without and regimented within. . . . He didn’t believe in democracy; he believed simply in government. His remedy for all the great pangs and longings of existence was not a dispersion of authority, but a hard concentration of authority. He was not in favor of unlimited experiment; he was in favor of rigid control from above, a despotism of inspired prophets and policemen. He was not for democracy as his followers understood democracy, and as it actually is and must be; he was for paternalism of the true Bismarckian pattern, almost of the Napoleonic or Ludendorffian pattern—a paternalism concerning itself with all things, from the regulation of coal-mining and meat-packing to the regulation of spelling and marital rights.
There is more than a whiff of President Obama in this, for he too is a Big State Man. And as such he is out of step with the time. A century after Roosevelt called for more government control atOsawatomie, the dead hand of Big Statism is destroying the economies of the West and bankrupting the treasuries. Yet President Obama and his party stubbornly resist policies to restore a more reasonable balance between state power and private enterprise.

The remedy for pernicious concentrations of power is free competition. That was true in 1910, although Roosevelt didn’t realize it; what the country needed then was not state control of commerce but an effective anti-monopoly law. (Although the Sherman Act had been on the books since 1890, anti-trust law was in its infancy.) Today, too much power is concentrated in Washington and on Wall Street, and the two concentrations reinforce one another. Wall Street helps fund the campaigns of politicians in both parties, and in exchange the politicians give Wall Street regulation that insulates the biggest banks from competition by subsidizing their failures. The remedy here, too, is not more state control, but more competition and more free, unsubsidized enterprise.

What's stopping job creation? Too much regulation

Clarence Otis at CNN:

Editor's note: Clarence Otis Jr. is CEO of Darden Restaurants, parent company of Olive Garden, Red Lobster and LongHorn Steakhouse. He is a member of the board of the Federal Reserve Bank of Atlanta.
Orlando (CNN) -- "Businesses adding jobs" is a headline every elected official loves to read. Sadly, it's one that's getting harder and harder to find because of a policy and regulatory landscape that makes it increasingly difficult for businesses to see why and where creating new jobs makes sense.
That's especially true for me and my colleagues in the restaurant industry, who find ourselves facing a plate piled high with more and more federal, state and local regulations.
Regulatory mandates flowing from federal health care reform may be the most visible, but the list also includes measures such as new mandatory paid leave provisions that require us to change the way we accommodate employees who need to take time off when they are ill and ever more unrealistic requirements regarding employee meal and rest breaks that, in California for example, force our employees to take breaks in the middle of serving lunch or dinner.
This reality is the result of the best intentions. Policymakers working in silos at every level are pushing through regulations that on their face seem to address admirable goals -- that are each directed at outcomes that seem desirable.
The cumulative effect of these regulations, however, is significant damage to the hard-working Americans who are the intended beneficiaries.
Ben Stein: Get a job!
Obama: Help middle class Americans
U.S. factories face labor shortage
The employer mandate contained in the new health care reform law, for example, forces us to change the way we have offered health care coverage to our full- and part-time workers and, together with all the other looming regulations, causes us to rethink the way we schedule the hourly work force that is at the heart of how we deliver our product to customers.
Some suggest we accommodate the costs of new regulations in one of two ways: Accept lower profits, or charge customers more. Neither is a realistic alternative for many businesses, and certainly not for those in our industry. Like most in retail, low profit margins are a fact of life for us for good reason -- low margins are consistent with charging prices our customers can afford.
The difficult reality is that neither our shareholders nor our customers -- who are of course, the very working people policymakers champion -- can afford the cost of the unbridled increase in regulation we're experiencing.
This is not to say that the restaurant industry should not be appropriately regulated. Food safety and cleanliness standards are just two examples of categories of regulation we welcome given their importance in helping protect two critical elements of our promise to our guests, which are their safety and well-being.
So, what are restaurants doing about all of this? We are labor-intensive businesses and always will be, but we're relying more and more on technologies that make our businesses less labor intensive. It's an ominous development considering restaurants' role as a path to opportunity and entrepreneurship.
More than half of today's adults worked in food service at some point in their career, for example -- whether as a first job, a way to pay for higher education, a bridge to a new direction in their lives or as a path to a career in restaurant or food service management.
To preserve this important driver of economic opportunity, we need policymakers to understand the snowball effect of too many regulations. Their collective effect is to threaten job creation and prevent us in the restaurant industry from doing our part to put our economy back on its feet.
Policymakers and pundits bemoan the economic news of the day and chastise the business community for not "investing" or creating jobs to help lead us out of the recession. But through the lens of a business owner, a regulatory "perfect storm" is forming that causes even the most well-intentioned business leaders to pause.
Some industries -- including the restaurant industry -- continue to grow and add jobs, but what we see on the horizon puts that at risk. In the year ahead, the company I lead expects to open roughly 80 new locations, each with about 100 jobs. The entire industry projects adding 1.3 million jobs over the next decade, according to the National Restaurant Association.
My plea to policymakers is simple: Before you impose another well-meaning mandate, consider the burden we already bear and engage us in conversation. Regulations are not inherently detrimental to growth. Responsible companies such as ours, that have been supportive of the president and elected officials of both parties across the country, won't say "no" to everything and, indeed, what you might find is that we can help craft solutions that truly are better for everyone.
Our success depends on our ability to deliver on three promises: a promise to our guests to provide them exceptional dining experiences at appropriate value; a promise to our employees to provide them jobs with appropriate compensation, benefits and opportunity for advancement; and a promise to our shareholders to provide them appropriate returns on their investment. Our ability to deliver on these promises in the future is directly challenged by the regulations we see as we look ahead.

Tuesday, December 6, 2011

Gingrich was for cap-and-trade and lots of other things

Jennifer Rubin at Right Turn:

Newt Gingrich says things about his career (“I was hired as an historian”) with such conviction that it’s easy to forget that he says so many things that just aren’t so. In the Mike Huckabee forum Saturday night he proclaimed, “I’ve never favored cap-and-trade.” But the Rick Perry campaign was quick to e-mail this excerpt from a Feb.15, 2007 interview on PBS:
In 2000, candidate George Bush pledged mandatory carbon caps; it was a campaign pledge. What did you think of it at the time? Were you for that?
I think if you have mandatory carbon caps combined with a trading system, much like we did with sulfur, and if you have a tax-incentive program for investing in the solutions, that there’s a package there that’s very, very good. And frankly, it’s something I would strongly support.
Remember when the hard-core right went nuts over Mitt Romney’s suggestion that human activity may play some role in climate change? Well, this was Gingrich in the same interview:
What was it that convinced you that global warming was a real and pressing problem?
Oh, I think the weight of evidence over time [convinced me] that it’s something that you ought to be careful about. As a conservative, I think you ought to be prudent, and it seems to me that the conservative approach should be to minimize the risk of a really catastrophic change.
And when did you come to that?
Well, I thought over the last eight or 10 years it was useful to move in that direction. I was strongly opposed to Kyoto treaty the way it was written; I think it was written by the Europeans as an anti-American document. I also think it doesn’t get the job done because it excludes China and India. But I felt that was a lost opportunity to talk about: How do you design a pro-science and pro-technology strategy that lowers the amount of damage the human race does to the planet? ...
He has since said that he doesn’t know whether global warming is due to human activity. But in 2007 he was ready to “design a strategy” around his conviction. But that is quintessential Newt.
Whatever the latest technology fashion or scientific trend (stem-cell research, global warming, ethanol subsidies, space colonization, electric cars, electromagnetic pulse weapons) Gingrich has always been ready to leap first, fork over taxpayers’ money and save the nitty-gritty details for later. If he actually had the power to see his ideas come to fruition (rather than just make money from books and lectures), we’d be hundreds of billions more in debt and have a mound of unintended consequences.
In this regard he’s the personification of what he inveighs against: right-wing social engineering. Unlike libertarians, who want government to do very little, or advocates of limited, energetic government — e.g., Rep. Paul Ryan (R-Wis.) — who want government to do a few more things but do them well, Gingrich wants to do lots and lots of things all at once. Everything is “urgent” and “essential” with him. Is there any reason to believe government could take on all his ventures without running up a bill and doing most of them poorly?
Like the frenetic White Rabbit (“We’re late! We’re late!”), Gingrich implores us not to dawdle and hence not to soberly evaluate the potential consequences of his schemes. There is a word for someone convinced of his own wisdom, willing to enact radical changes, indifferent to unintended consequences and certain everything will “pay for itself”: liberal.

Monday, December 5, 2011

The Welfare State's Reckoning

Robert Samuelson at RealClearPolitics:

WASHINGTON -- We Americans fool ourselves if we ignore the parallels between Europe's problems and our own. It's reassuring to think them separate, and the fixation on the euro -- Europe's common currency -- buttresses that mindset. But Europe's turmoil is more than a currency crisis and was inevitable, in some form, even if the euro had never been created. It's ultimately a crisis of the welfare state, which has grown too large to be easily supported economically. People can't live with it -- and can't live without it. The American predicament is little different.
Government expansion was one of the 20th century's great transformations. Wealthy nations adopted programs for education, health care, unemployment insurance, old-age assistance, public housing and income redistribution. "Public spending for these activities had been almost nonexistent at the beginning of the 20th century," writes economist Vito Tanzi in his book "Government versus Markets."

"Survival of the fittest" no longer sufficed. Europeans have never liked markets as much as Americans do. In the 1880s, German Chancellor Bismarck created health, old-age and accident insurance: landmarks regarded as originating the welfare state. The Great Depression discredited capitalism, and after World War II, communists and socialists enjoyed strong support in part because they "had formed the backbone of wartime resistance movements," writes Barry Eichengreen in "The European Economy Since 1945."The numbers -- to those who don't know them -- are astonishing. In 1870, all government spending was 7.3 percent of national income in the United States, 9.4 percent in Britain, 10 percent in Germany and 12.6 percent in France. By 2007, the figures were 36.6 percent for the United States, 44.6 percent for Britain, 43.9 percent for Germany and 52.6 percent for France. Military costs once dominated budgets; now, social spending does.
To flourish, the welfare state requires favorable economics and demographics: rapid economic growth to pay for social benefits; and young populations to support the old. Both economics and demographics have moved adversely.
The great expansion of Europe's welfare states started in the 1950s and 1960s, when annual economic growth for its rich nations averaged 4.5 percent compared with a historical rate since 1820 of 2.1 percent, notes Eichengreen. This sort of growth, it was assumed, would continue indefinitely. Not so. From 1973 to 2000, growth settled back to 2.1 percent. More recently, it's been lower.
Demographics shifted, too. In 2000, Italy's 65-and-over population was already 18 percent of the total; in 2010, it was 21 percent, and the projection for 2050 is 34 percent. Figures for the European Union's 27 countries are 16 percent, 18 percent and 29 percent.
Until the financial crisis, the welfare state existed in a shaky equilibrium with sluggish economic growth. The crisis destroyed that equilibrium. Economic growth slowed. Debt -- already high -- rose. Government bonds once considered ultra-safe became risky.
Switch to the United States. Broadly speaking, the story is similar. The great expansion of America's welfare state (though we avoid that term) occurred in the 1960s and 1970s with the creation of Medicare, Medicaid and food stamps. In 1960, 26 percent of federal spending represented payments for individuals; in 2010, the figure was 66 percent. Economic growth in the 1950s and 1960s averaged about 4 percent; from 2000 to 2007, the average was 2.4 percent. Our elderly population was 13 percent in 2010; the 2050 estimate is 20 percent.
What separates the United States and Europe is that (so far) we haven't suffered a backlash from bond markets. Despite high and rising U.S. government debt, Treasury securities still fetch low interest rates, about 2 percent on 10-year bonds. Will that last? It's true that cutting spending too quickly might threaten a fragile economic recovery. But President Obama and Congress can't be accused of making this mistake. They do little and excel at blaming each other.
The modern welfare state has reached a historic reckoning. As a political institution, it hasn't adapted to change. Politics and economics are at loggerheads. Vast populations in Europe and America expect promised benefits and, understandably, resent any hint that they will be cut. Elected politicians respond accordingly. But the resulting inertia poses an economic threat, one already realized in Europe. As deficits or taxes rise, the risk is that economic instability will increase, growth will decline, or both. Paying promised benefits becomes harder. Or austerity becomes unavoidable.
The paradox is that the welfare state, designed to improve security and dampen social conflict, now looms as an engine for insecurity, conflict and disappointment. Facing the hard questions of finding a sustainable balance between individual protections and better economic growth, the Europeans have spent years dawdling. The parallel with our situation is all too obvious. 

Time for Congress to step up on debt

From Judd Gregg at The Hill:

There are defining events in all nations’ progressions. Often they are violent, such as the Battle of Britain or our own Civil War or the French Revolution. Sometimes they are just things that happen without death and destruction, such as the Smoot-Hawley trade bill which was the accelerant of the Great Depression, or the massive inflation of the Weimar Republic that led to the rise of Adolf Hitler.
When people point back in history 20 years from now, looking for the causes that led the United States into a period of economic decline and a significant erosion in our standard of living, the example most given will be the failure of President Obama and Congress to make the supercommittee work.
We are now functioning under a government on autopilot, leaderless but not without direction as the autopilot follows its very distinct course. The growth of the government and the advancing of the march of debt and deficits are locked in. The path is one where deficits will average $1 trillion for years to come, where the government as a percent of GDP will grow to European scale and where the debt will soon be a burden that will lead to some type of fiscal calamity, most likely hyperinflation and a seizing-up of our ability to sell our debt at a reasonable price.

How does this autopilot get turned off?
It is clear after the crash of the supercommittee and the disappearance of the president to Bali that the course is not going to be adjusted by those leaders who are supposedly elected and paid to make rational policy and avoid such things as the meltdown of our nation’s future prosperity.
There is, of course, the Federal Reserve, but it too is becoming timid in the face of what is now a bipartisan bashing of its independence. It seems that for many elected personages it is a free shot to beat up on the Fed as a conspiratorial group dedicated to manipulating the lives of Americans in a manner that has caused most of the fiscal problems in our society.
This allows such personages to avoid looking in the mirror to assess blame. Thus, the Federal Reserve becomes cautious for fear that taking assertive action might lead to Congress actually doing a de facto takeover of the printing presses through “oversight.”
This leaves us with the people. There’s not a whole lot of hope there, given the tendency to demand more in services, especially when it affects you, than the country can afford. It’s hard to do the right thing if it means slowing the flow from the entitlement spigots.
Thus we must return to Congress.
Maybe it is time for the 37 senators and 100 House members who signed the important and thoughtful letters calling on the supercommittee to go for a big deal to step forward and turn off the autopilot.
That is a significant number of members of Congress. It is, for all intents and purposes, a working majority. They should consider convening as a group. They should probably do this in Philadelphia at Independence Hall to re-enforce the seriousness of their effort and the threat to the nation.

They should agree that they will not leave until they have reached an agreement that reduces the deficits and debt over the next 10 years by at least $4.5 trillion, because that is what is required to put our debt to gross domestic product ratio at a responsible and survivable level.
They should not call themselves Republicans or Democrats or organize as such but instead call themselves “Elected Representatives of a Free People and Great Nation” or the “Founders’ Movement.”
They should deliver on the true hopes that Americans have for their government, which is that it will protect them from avoidable chaos and pass on to our children a more prosperous and safer nation. It is their job. It is time for some rational people to take charge and do it. The names are already there on the letters. Now let’s ask them to follow through on their language with action that will give our people confidence in our nation.
Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations subcommittee on Foreign Operations. He also is an international adviser to Goldman Sachs.