Archive for Economics


Hey, at least it’s not Detroit!

No, seriously!

Moody’s Investors Service cut its rating on Chicago’s debt to junk, citing expected increases in unfunded pension burdens after a ruling by the Illinois Supreme Court that overturned state pension changes.

The ratings firm dropped Chicago debt two notches to Ba1 from Baa2, with a negative outlook, saying the city’s options for reducing the growth of its retirement system liabilities “have narrowed considerably.” The ratings change could trigger about $2.2 billion in accelerated payments and fees, Moody’s said.

“Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations” in the absence of revenue growth or expense cuts, Moody’s said.

Tuesday’s move comes after an Illinois Supreme Court decision last week to strike down the state’s 2013 pension overhaul. The law attempted to peel back cost-of-living adjustments to retirees and increase the retirement age for younger workers. Though the state ruling doesn’t directly affect the Chicago pensions, it raises the risk that the city’s proposed pension cuts won’t stand up in the courts, Moody’s said.

Howard Cure, director of municipal research at Evercore Wealth Management in New York, said his firm has been avoiding Chicago general-obligation bonds “for a while.” But he said he was surprised Moody’s cut the city’s rating low enough to place it in junk territory.

“It’s not as if the city’s economy is doing badly,” Mr. Cure said. “They’re actually gaining population and having growth downtown. They have some big-city problems, but it’s not a Detroit situation.”

True, Detroit is worse (B3), but Moody’s downgraded Chicago only a year ago. The trend is not good.

PS: What perfect timing, as Obama plans to locate his presidential library in Chicago. Junk for junk!

Comments (4)

Six Years an Economic Slave

With recovery like this one, who needs recession?

Since the Obama recovery began in the second quarter of 2009, public and private projections of economic growth have consistently overestimated actual performance. Six years later, projections of prosperity being just around the corner have given way to a debate over whether the U.S. has fallen into “secular stagnation,” a fancy phrase for the chronic low growth seen in much of Europe.

How bad is the Obama recovery? Compared with the average postwar recovery, the economy in the past six years has created 12.1 million fewer jobs and $6,175 less income on average for every man, woman and child in the country. Had this recovery been as strong as previous postwar recoveries, some 1.6 million more Americans would have been lifted out of poverty and middle-income families would have a stunning $11,629 more annual income. At the present rate of growth in per capita GDP, it will take another 31 years for this recovery to match the per capita income growth already achieved at this point in previous postwar recoveries.

When the recession ended, the Federal Reserve projected future real GDP growth would average between 3.8% and 5% in 2011-14. Based on America’s past economic resilience, these projections were well within the norm for a postwar recovery. Even though the economy never came close to those projections in 2011-13, the Fed continued to predict a strong recovery, projecting a 2014 growth rate in excess of 4%. Yet the economy underperformed for the sixth year in a row, growing at only 2.4%.

What’s that all about? Is the economy racist? Why do these things always happen to Obama?

[W]e know that the Obama program represents the most dramatic change in U.S. economic policy in over three-quarters of a century. We also know from the experience of our individual states and the historic performance of other nations that policy choices have profound effects on economic outcomes.

The literature on economic development shows that U.S. states and nations tend to prosper when tax rates are low, regulatory burden is restrained by the rule of law, government debt is limited, labor markets are flexible and capital markets are dominated by private decision making. While many other factors are important, economists generally agree on these fundamental conditions.

As measured by virtually every economic policy known historically to promote growth, the structure of the U.S. economy is less conducive to growth today than it was when Mr. Obama became president in 2009.

I’m going to stop here, because I get tired of arguing with a post. A big-eared post that plays too much golf and has an over-inflated opinion of itself.

Obama says the recession was worse than he thought, yet it was over before the echoes of his oath of office had died away. He has shepherded a recovery of rare duration—six years!—but of unprecedented weakness. To paraphrase and contradict Elizabeth Warren (and himself), he totally built that.

To conclude:

Despite the largest fiscal stimulus program in history and the most expansive monetary policy in more than 150 years, the U.S. economy is underperforming today because we have bad economic policies. America succeeded in the Reagan and post-Reagan era because of good economic policies. Economic policies have consequences.

With better economic policies America was like the fabled farmer with the goose that laid golden eggs. He kept the pond clean and full, he erected a nice coop, threw out corn for the goose and every day the goose laid a golden egg. Mr. Obama has drained the pond, burned down the coop and let the dogs loose to chase the goose around the barnyard. Now that the goose has stopped laying golden eggs, the administration’s apologists—arguing that we are now in “secular stagnation”—add insult to injury by suggesting that something is wrong with the goose.

And Michelle refuses to have goose served for school lunch, preferring instead tofu croquettes and cauliflower spears. Which the children save to throw at each other during Gay Sex Among Indigenous Peoples class.


Schooling the Teacher

When he’s not trying to find gainful employment for decapitators and immolators, Obama spares a few words for soaking the rich.

This guy never mentions Obama by name, but if the president were in his classroom, he’d be sitting in the corner wearing a dunce cap:

A few points to highlight:

Nearly everyone assumes that a person who is among the top ten percent of all income earners qualifies as rich.

But according to 2011 data, a top ten percent household makes around $150,000 or above in gross annual income — that’s income before deductions and taxes. Now, $150,000 is a nice living, but it certainly doesn’t make you rich.

OK, then. What about the top 5%?

You get into this percentile if your household makes around $190,000 or above. That’s a nice bump. But it hardly puts you in the rich category.

I don’t have to tell a lot of our urban readers that 150-190k hardly qualifies as rich in Boston, New York, San Francisco, etc. Professor Ohanian is right that the people we can all agree are rich are few and far between.

But thank God for them:

Now, let’s talk about fair.

Fair would seem be that the group of taxpayers who earn 10% of the country’s income would pay 10% of the country’s taxes; the group who earned 20% would pay 20% of the taxes and so on.

But what If I told you that, according to IRS data, the top 10% of all earners — the people making $150,000 and above — pay 71% of all federal income tax while earning only 43% of all income.

If anything, the top ten percent pay more than their fair share.

So, as it happens, do the much reviled top 1%. They earn 17 percent of all income, but pay 37% of all federal income taxes.

That’s an apples-to-apples comparison—income to income tax. You rarely hear those numbers in this discussion. Doubtless because they undermine Obama’s argument.

As does this:

Ah, but what about payroll taxes — the money we pay to fund Social Security and Medicare? That takes a bigger bite of the paycheck of lower earners than higher earners. Isn’t that unfair?

[T]he benefits we receive from Social Security are capped, no matter how much we have paid in. This means that the payroll taxes of high earners actually help subsidize the social security and Medicare benefits that low earners receive at retirement.

But there’s one group Professor Ohanian does finger for freeloading:

And what about those at the other end of the income scale, the lower earners? Are we squeezing them? Hardly. Those who make $45,000 or less, 47% of all earners, pay little and often no income taxes.

Pay up, pauper. It’s only fair.


Detroit Inc.

We’ve followed the decline and further decline of Detroit as a moral tale on the folly of Democrat politics stretching over decades.

But this writer, a portfolio manager at TIAA-CREF, once looked into the abyss of investing in Detroit, and tells of the Hieronymus Bosh-like terrors he saw:

A couple of years prior to Detroit’s bankruptcy filing, I visited the city for an investors’ conference. The financial situation did not look good, but I was determined to keep an open mind, even vaguely hoping it might be a turnaround opportunity.

No such luck. As a chartered bus took us around the city past block after block of abandoned homes, overgrown lots and empty industrial buildings, we peppered the city’s representatives with an obvious question: Why hadn’t the city acted sooner to remove abandoned homes and buildings?

The short answer was that the city didn’t have the money to bulldoze and remove all the abandoned homes on its list. As for the industrial wreckage, so long as the building owner was current on taxes, there wasn’t much the city could do. Could zoning rules or public safety be invoked to force a clean-up of these eye sores? What about foreclosure? After some reluctance, Detroit’s representatives admitted there wasn’t much political backing for that; the city needed the tax revenue more than an aesthetically pleasing building. And it certainly didn’t need more foreclosed real estate.

We returned in time for lunch with the Assistant Treasurer. As we worked our way through the rubbery chicken, he gave us some upbeat financial projections and then told a couple of stories. One was about a closet full of unopened property tax payments found, of all places, in an office of the fire department.

I suppose he thought this would be entertaining, but to a room of financial professionals, that was far from the case. For a city gasping for revenue, to have uncashed, mislaid checks sitting around in closets was like putting a kink in your own oxygen hose. Moreover, in this age of electronics, why hadn’t payments been automated?

Why would anyone invest a nickel in such an economic and political basket case?

The meeting changed my view of Detroit’s ability to fulfill its pledge to investors, even though the bonds were specifically backed by the unlimited taxation power of the city. The City of Detroit was “required by law to levy and collect ad valorem taxes….without limitation as to rate or amount” in order to pay principal and interest on the bonds. This was stated clearly and unambiguously in the Official Statement. It was the strongest language for general obligation bonds across the country.

Oh, so they promised. Well, that would have been good enough for me.

Moreover, this was America’s 18th largest city, with $388 million of highly secured debt outstanding and a total of $562 million of general obligation debt overall, a candidate for the municipal version of “too big to fail.” No city of this size had ever defaulted. Detroit would either raise taxes voluntarily or be compelled to do so before even considering touching the third rail of bankruptcy and violating the sacrosanct General Obligation Unlimited Tax security pledge.

Or so we thought. Detroit filed for bankruptcy on July 18, 2013. Resolution came five months later as Detroit penned an agreement with bondholders, repaying the debt secured by “unlimited” tax revenue at 74 cents on the dollar. The holders of the limited security general obligation bonds got 34 cents on the dollar.

The lessons here are many, and the longer-term implications mostly negative. To our mind, the primary investment lesson is simple: economics trumps legalisms. Yes, the bond contract said Detroit had to raise taxes “without limitation as to rate or amount.” But as a practical matter, they couldn’t really do that. The budget constraints, tax base and infrastructure to capture taxes had deteriorated so much that they could not adhere to their obligation.

Perhaps this is a hint as to how the other 28 other states that allow municipal bankruptcy or have conditions on filings might respond.

If you are one of those investors running to “revenue” bonds–which have secured liens on specific revenue streams or dedicated taxes–as a way to gather more security, you may be missing the point. There may be some psychological comfort in that language, but as Detroit has shown, words sell at a discount in a bankruptcy.

This may have no direct relevance to you, but it has political relevance to us all. Cities and states issue bonds all the time. But wise investors will remember the lessons of Detroit. You don’t go from the fifth-largest city in the nation to the eighteenth—and still falling—without a lot of rot. Your town may not be as rotten as Detroit—no place is—but ask yourself: how many Democrats have been running it, and for how long?

PS: Hyenas fighting over the skeletal remains:

Wayne County is threatening to unravel a breakthrough deal that settled Detroit’s bankruptcy case unless it receives land or more than $30 million — money the city needs to bankroll Detroit’s revitalization.

In a recent bankruptcy filing, Wayne County said it had a deal with the city to demolish the police headquarters and build a jail. The deal between Detroit and Wayne County dates to 1976, but the city dumped it in bankruptcy court last fall, a move that went unopposed by Wayne County until last month.


You Didn’t Build That Business

And you didn’t ruin it either.

Government did:

Borderlands Books, a much-praised science-fiction and comic-book store in San Francisco, opened for business in 1997. It has survived two recessions, a 100 percent rent increase, the opening of big chain bookstores, and the rise of Amazon’s deep-discounting online empire. What will finally force it to close its doors next month is San Francisco’s proposed increase in the minimum wage, which will hit $12.25 an hour in May.

Owner Alan Beatts minced no words about the reason for his store’s closure: “Borderlands Books as it exists is not a financially viable business if subject to the minimum wage.” Ironically, he said 2014 was the store’s best year in its 18-year history, and the store turned a small profit and was able to employ six people. But Beatts says the planned increases in the city’s minimum-wage law — which top out at $15 an hour by 2018 — will sink him. He would either have to increase sales by 20 percent (unrealistic) or reduce the staff to two managers and one part-time employee — all of whom would have to work greatly extended hours. “Keeping up our morale and continuing to serve our customers while knowing that we are going to close has been very painful for all of us over the past three months,” Beatts wrote in a statement to his customers. “Continuing to do so for even longer would be horrible. Far better to close at a time of our choosing, keep everyone’s sorrow to a minimum, and then get on with our lives.”

How perfect an epitaph for the bookstore, for California, for the nation as a whole: “Keep everyone’s sorrow to a minimum, and then get on with our lives.” American lives will be much reduced, our capacity for joy diminished to almost nothing, but better than the “painful”, “horrible” alternative of fighting against pervasive progressive orthodoxy. Retreat to ever smaller enclaves of liberty, however curtailed and illusory. Idaho, in other words.

PS: Don’t worry about the bookstore employees. They’ll be raking it in as fry cooks at Wendy’s.


Detroit’s $178,000,000 Bankruptcy

A bargain!

Legions of lawyers, consultants and other advisers have been paid nearly $178 million for their work on Detroit’s historic bankruptcy, a number that comes in under budget but still makes it the most expensive municipal restructuring in U.S. history.

The law firm Jones Day led the way in the fees disclosed Tuesday with a $57.9 million bill. Detroit hired the firm in the months leading up to its July 2013 bankruptcy filing and chose one of its former partners, Kevyn Orr, to be emergency manager. Mr. Orr resigned in mid-December after almost 21 months in office.

Of course, billable hours are a pittance compared to the true costs:

The city recently exited bankruptcy protection after cutting about $7 billion of $18 billion in long-term obligations and promising to reinvest more than $1.4 billion in essential city services.

Maybe I should get past the blame stage, but I do have to wonder: shouldn’t someone or something—perhaps the Democratic National Committee—shoulder the responsibility for this economic crime against humanity? For are not the consequences of bankruptcy (and the decades of irresponsible government that led to it) indeed an abuse of the powerless citizens who are left behind—80% of whom are black? Heck, they even called in the UN to declaim a “human right” to water—a bit rich for a city on a river of its own name, also on a lake, and whose name translates as “the straits”.

All that’s behind Detroit now. It’s a city that wants to get clean:

Expect to learn in more detail this year about the Ilitch entertainment group’s plans for a 45-block district that will include residential, retail, bars, restaurants and a new hockey arena. Those plans will determine the fate of several historic buildings, including two large structures that stand near the new arena.

Downtown development impresario Dan Gilbert, meanwhile, is expected to put more meat on the bones of his vision for the area south of Ilitch’s entertainment empire. Gilbert has acquired many buildings along and just off Woodward, some of which already have been rehabbed and are rented, others whose renaissance is underway or planned as businesses are lured to an area that is steadily drawing new breath.

Work on the $140 million M-1 light rail streetcar line, which broke ground in mid-2013, will continue through 2015 — a minor annoyance for Woodward drivers. With its 12 stops, M-1 is integral to the Gilbert and Ilitch development areas, and north. Businesses already have opened along the route, once largely bereft of shops and offices, and more are likely to follow.

The future of Detroit’s riverfront and the Joe Louis Arena, whose main tenant, the Red Wings, will move to the new arena in 2017, continues to be murky. But since some coveted riverfront land went to city creditors during Detroit bankruptcy, development is expected there.

The historic Corktown neighborhood west of downtown should continue to grow and thrive in 2015, spurred by some brave entrepreneurs who opened shops, restaurants and wine and liquor specialty places in recent years. Their success, along with the promised redevelopment of the old Tiger Stadium property, is expected to keep that area’s mojo working in the coming year and beyond.

One day at a time, Detroit. Easy does it.


What Was That All About?

An occasional series here to stop and reconsider a one-time big ruckus, now forgotten—a journalistic ghost town, if you will. ObamaCare in two years’ time, for example.

Or France’s 75% tax rate:

It was supposed to force millionaires to pay tax rates of up to 75 percent: “Cuba without the sun,” as described by a critic from the banking industry. Socialist President Francois Hollande’s super tax was rejected by a court, rewritten and ultimately netted just a sliver of its projected proceeds. It ends on Wednesday and will not be renewed.

And that critic of the tax? He’s now Hollande’s economy minister, trying mightily to undo the damage to France’s image in international business circles.

The tax of 75 percent on income earned above one million euros ($1.22 million) was promoted in 2012 by the newly-elected Hollande as a symbol of a fairer policy for the middle class, a financial contribution of the wealthiest at a time of economic crisis.

But the government was never able to fully implement the measure. It was overturned by France’s highest court and rewritten as a 50 percent tax paid by employers.

Faced with a stalling economy and rising unemployment, the government reversed course in 2014 with a plan to cut payroll taxes by up to 40 billion euros ($49 billion) by 2017, hoping to boost hiring and attract more investments.

Cutting taxes to boost hiring and investment—those crazy French. When’s the next Jerry Lewis film festival, Marcel?

Où sont les taxes d’antan? Loosely translated: what was that all about?


Demographics Against Democrats

Here’s a word you don’t often see associated with Republicans: Demographics.

Over the past five years, the Democratic Party has tried to add class warfare to its pre-existing focus on racial and gender grievances, and environmental angst. Shortly after his re-election in 2012, President Obama claimed to have “one mandate .?.?. to help middle-class families and families that are working hard to try to get into the middle class.”

Yet despite the economic recovery, it is precisely these voters, particularly the white middle and working classes, who, for now, have deserted the Democrats for the GOP, the assumed party of plutocracy. The key in the 2014 mid-term elections was concern about the economy; early exit polls Tuesday night showed that seven in 10 voters viewed the economy negatively, and this did not help the Democratic cause.

“The Democrats have committed political malpractice,” says Morley Winograd, a longtime party activist and a former top aide to Vice President Al Gore during the Clinton years. “They have not discussed the economy and have no real program. They are offering the middle class nothing.”

Winograd believes that the depth of white middle- and working-class angst threatens the bold predictions in recent years about an “emerging Democratic majority” based on women, millennials, minorities and professionals. Non-college educated voters broke heavily for the GOP, according to the exit polling, including some 62% of white non-college voters. This reflects a growing trend: 20 years ago districts with white, working-class majorities tilted slightly Democratic; before the election they favored the GOP by a 5 to 1 margin, and several of the last white, Democratic congressional holdovers from the South, notably West Virginia’s Nick Rahall and Georgia’s John Barrow, went down to defeat Tuesday night.

Rather than the promise of “hope and change,” according to exit polls, 50% of voters said they lack confidence that their children will do better than they have, 10 points higher than in 2010. This is not surprisingly given that nearly 80% state that the recession has not ended, at least for them.

Much more; do read.

But we have enough for discussion to work with here. The GDP grew a respectable 3.5% last quarter, after a whopping 4.6% the quarter before. The unemployment rate is finally below 6%, and the “Unexpected”™ weekly layoff numbers have been historically low recently. Yet nobody feels good about the economy.

Are we stupid? Or have five-plus years of piss-poor “recovery” left us jaded? The labor participation rate is still at historic lows, and 93 million Americans—about the total population of Spain and Kenya combined—don’t work.

And some of us have more personal reasons:

[W]hile failing most Americans, the Obama era has been very kind to plutocrats of all kinds. Low interest rates have hurt middle-income retirees while helping to send the stock market soaring. Quantitative easing has helped boost the price of assets like high-end real estate; in contrast middle and working class people, as well as small businesses, find access to capital or mortgages still very difficult.

Perhaps the biggest attrition for the Democrats has been among middle-class voters employed in the private sector, particularly small property and business owners. In the 1980s and 1990s, middle- and working-class people benefited from economic expansions, garnering about half the gains; in the current recovery almost all benefits have gone to the top one percent, particularly the wealthiest sliver of that rarified group.

You can bet Elizabeth Warren knows those numbers. It would behoove the Republicans to learn them too. I have no patience for bashing the wealthy and chanting about the “99%”, but if Obama’s recovery has left the middle class behind—how many new jobs are full time? who gets a raise any more?—smart people know their political future, and the country’s economic future, lie in getting that right.

And I do not want that person to be Elizabeth Warren.


Number 32 With a Bullet

To the head:

On Monday the Tax Foundation, which manages the widely followed State Business Tax Climate Index, will launch a new global benchmark, the International Tax Competitiveness Index. According to the foundation, the new index measures “the extent to which a country’s tax system adheres to two important principles of tax policy: competitiveness and neutrality.”

A competitive tax code is one that limits the taxation of businesses and investment. Since capital is mobile and businesses can choose where to invest, tax rates that are too high “drive investment elsewhere, leading to slower economic growth,” as the Tax Foundation puts it.

The index takes into account more than 40 tax policy variables. And the inaugural ranking puts the U.S. at 32nd out of 34 industrialized countries in the Organization for Economic Co-operation and Development (OECD).

One small correction: the authors of the study list Slovenia and Slovakia separately when everyone knows they’re the same thing. And is there really a Switzerland and a Sweden? Someone should clean that up.

Aside from that, however:

Any day now the White House and Sen. Charles Schumer (D., N.Y.) will attempt to raise taxes on business, while making the U.S. tax code even more complex. The Obama and Schumer plans to punish businesses for moving their legal domicile overseas will arrive even as a new international ranking shows that the U.S. tax burden on business is close to the worst in the industrialized world. Way to go, Washington.

With the developed world’s highest corporate tax rate at over 39% including state levies, plus a rare demand that money earned overseas should be taxed as if it were earned domestically, the U.S. is almost in a class by itself. It ranks just behind Spain and Italy, of all economic humiliations. America did beat Portugal and France, which is currently run by an avowed socialist.

The new ranking is especially timely coming amid the campaign led by Messrs. Obama and Schumer to punish companies that move their legal domicile overseas to be able to reinvest future profits in the U.S. without paying the punitive American tax rate. If they succeed, the U.S. could fall to dead last on next year’s ranking. Now there’s a second-term legacy project for the President.

And people wonder why Recovery Summer V has been no more successful than Recover Summers I-IV. (People wonder, but the media seem not to.)

But get a load of this remedy. Are you sitting down?

Rather than erecting an iron tax curtain that keeps U.S. companies from escaping, the White House and Congress should enact reform that invites more businesses to stay or move to the U.S.

OMG! You are one bad-ass newspaper, WSJ. Next you’ll be arguing for a cut in the capital gains tax rate:

A rising tide lifts all boats, but Obama warned us that the tide would stop rising if he were elected president. One promise he kept.


Jobbed and Jobless

Jane Austen’s novel of bad manners on the state of Americans under the burdens of ObamaCare:

On Thursday the Federal Reserve Bank of Philadelphia reported the results of a special business survey on the Affordable Care Act and its influence on employment, compensation and benefits. Liberals claim ObamaCare is of little consequence to jobs, but the Philly Fed went to the source and asked employers qualitative questions about how they are responding in practice.

The bank reports that 78.8% of businesses in the district have made no change to the number of workers they employ as the specific result of ObamaCare and 3% are hiring more. More troubling, 18.2% are cutting jobs and employees. Some 18% shifted the composition of their workforce to a higher proportion of part-time labor. And 88.2% of the roughly half of businesses that modified their health plans as a result of ObamaCare passed along the costs through increasing the employee contribution to premiums, an effective cut in wages.

Those results are consistent with a New York Fed survey, also out this week, that asked “How, if at all, are you changing (or have you changed) any of the following because of the effects that the ACA is having on your business?” For “number of workers you employ,” 21% of Empire State manufacturers and 16.9% of service firms answered “reducing.”

To complete the triptych, an Atlanta Fed poll earlier this month found that 34% of businesses planned to hire more part-time workers than in the past, mostly because of a rise in the relative costs of their full-time colleagues. ObamaCare may be contributing to that surge to the extent the law’s insurance mandates and taxes increase spending on fringe benefits for people who work more than 30 hours.

Somewhere between one-fifth and one-third of employers are cutting hours for their employees. The Left likes to think of itself as fact-based and scientific. But ObamaCare was built on the promise of sugar plums and unicorns. Define full time workers at 30 hours a week, and that’s what you’ll get, an army of 29-hour a week workers without health care. The Soviet Union learned that a command economy doesn’t work. Now we don’t work.


Lemons for Lunkheads

Like so many Democrat schemes, it seemed like a bad idea at the time:

The government’s “Cash for Clunkers” program – pitched as a plan to jump-start U.S. auto sales and clean up the environment by getting gas-guzzling vehicles off the road — may have been a clunker itself, according to a new economic study.

Researchers at Texas A&M, in a recently released report, measured the impact of Cash for Clunkers on sales and found the program actually decreased industry revenue by $3 billion over a nine-to-11-month period.

“Strikingly, we find that Cash for Clunkers actually reduced overall spending on new vehicles,” the researchers reported, noting households “tended to purchase less expensive and smaller vehicles such as the Toyota Corolla, which was the most popular new vehicle purchased under the program.”

They found buyers who participated “spent an average of $4,600 less on a new vehicle than they otherwise would have.”

During the two months of the program, the frequency of purchasing a new vehicle was around 50 percent higher for those who qualified for the program compared with those who did not. But after the program ended, the researchers found, car-buying habits returned to normal.

It should be known as Twenties for Toyota from now on, though I have to admit that the title of the actual study, Cash for Corollas, is better than mine.

I glanced through the report, and I found this intriguing footnote:

We focus only on identifying the stimulus impact for the U.S. auto industry. Though we believe that this policy likely had important consequences for the broader U.S. economy, we do not attempt to quantify the impact of the program on overall economic growth.

Government intervention always drags down economic performance, even when (especially when) it is intended as a “stimulus”. If only liberals would get that through their thick skulls.

Comments (1)

Black Man Keeping the Young Down

No, that’s not dyslexia or a typo:

In President Obama’s speeches this year, a steady theme has been creating jobs and economic opportunity for Americans. In his State of the Union address in January he said that “what I believe unites the people of this nation . . . is the simple, profound belief in opportunity for all—the notion that if you work hard and take responsibility, you can get ahead.” And in his weekly address on Saturday, he repeated his strong appeal to young people: “As long as I hold this office, I’ll keep fighting to give more young people the chance to earn their own piece of the American Dream.”

Yet during the more than five years Mr. Obama has been in office, young people have been especially hard-hit by the slow and virtually jobless recovery. Given the destructive effect this has on individual initiative and the prospects of a productive and rewarding working life, the continuing struggle of young Americans to find jobs, start building families and contribute to society is no longer simply a matter of politics or policy. On a deeply human level, it’s profoundly sad.

Yeah, but parents’ basements have never been put to more use! Sorry, out of place.

Where are the entry-level jobs?

Five years of 2% average yearly GDP growth simply doesn’t produce enough jobs to absorb the natural increase in the labor force, and over the past eight quarters GDP growth has averaged only 1.7%. Between May 2008 and May 2014, BLS data show that the employable population increased by 14,217,000 while the number of people employed actually decreased by 94,000 and the number of people unemployed increased by 1,404,000. It remains a bad time for young people to be looking for jobs.

We noted the same point yesterday: the media may herald the recovery to the number of jobs pre-recession, but we’re fourteen million people bigger than we were then. Where are their jobs?

Nonetheless, various states and municipalities have increased their minimum wage, thereby increasing the cost of employing inexperienced workers. Minimum-wage jobs have always been a gateway to better opportunities. In making hiring decisions, businesses must weigh the quality and value of work that entry-level employees produce against the cost of employing them. For many businesses in high-minimum-wage states or municipalities—Seattle leads the list, having approved a move to a $15 minimum wage—that trade-off is no longer working.

The bottom line on labor: Make something less expensive and businesses will use more of it. Make something more expensive and businesses will use less of it. The Congressional Budget Office has forecast a loss of 500,000 jobs should the president’s proposal to increase the federal minimum wage to $10.10 an hour become law.

The CBO also forecast that this increase would lift a number of people who already have jobs above the poverty threshold. For 500,000 unemployed people, however, that’s 500,000 opportunities American businesses will never create.

Don’t get this guy started on ObamaCare. Talk about a job killer. In fact, looking at Obama’s policies, you’d almost think he was killing the job market on purpose. Perhaps to capture a permanent class of dependents. He couldn’t be doing a better job (fortunate as he is—and unfortunate for us—to have one).

I think more than a few young people would be happier to graze on ol’ Obama’s farm than work like this:

I’m not speaking primarily as a business CEO. My company will adjust to new laws. I’m speaking as someone from a working-class family. I started work scooping ice cream for the minimum wage at Baskin-Robbins. To put myself through college and law school while supporting my family, I cut lawns, painted houses and busted concrete with a jackhammer. I know how important these jobs are. For one thing, they taught me—as no lectures from my parents ever could—that I needed a good education so I wouldn’t have to settle for low-paying work the rest of my life. Too many young people today are being deprived of even that basic lesson.

For which they give great thanks!


« Previous Page« Previous entries « Previous Page · Next Page » Next entries »Next Page »