Capital Commerce
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How to Create Jobs in The Face of Globalization
Continue reading… 1 CommentYesterday's Washington Post had a very one-sided article on how it has been difficult for one region of North Carolina to cope with global economic competition. The local residents quoted in the story—many of whom have lost their jobs as local manufacturers move to China and elsewhere—are quite skeptical of the claim that local economies can adapt in the face of globalization:
"The people in the think tanks keep saying we are going to become—what's the term?—an 'information and services' economy," said Allan Mackie, manager of the North Carolina Employment Security Commission office. "That doesn't seem to be working out too good."
I wish author Peter Whoriskey had spent time investigating the other side of the coin—the entrepreneurs who are trying to create those new information and services jobs. That's the harder side of the story to report because it is never obvious where the new drivers of job growth will be, and it can be a slow process to discover them.
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Are Social Conservatives Holding Back Economic Conservatives?
Continue reading… 4 CommentsThe national debate has been all about economics recently. While the conventional wisdom is that economic issues tend to favor the Democrats in the realm of public opinion, there is at least some evidence that complaints about the economy and Obama's plan to fix it helped fuel the GOP victories in Virginia and New Jersey last week. And as I blogged about last week, conservatives' shift to the right on economics has led to the decidedly-unconservative Ayn Rand being annointed as a GOP idol.
But maybe Republicans aren't getting as much mileage from their economic arguments as they could. A recent article in the Nation looks at how young conservatives are turned off by some of the extremes of the party.
While these young conservatives may not present silver-bullet solutions to the GOP's woes, they believe rebuilding the party shouldn't take a back seat to birthers, deathers and the rest of the far-right fringe. David Laska, the 22-year-old president of New York University College Republicans, says, "We need to start paying less attention to the Tom Tancredo wing of the Republican Party. I don't think that wing of the party is as big as some people make it out it be."
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Healthcare Reform: As Congress Debates, Small Business Hiring in Paralysis
Continue reading… 0 CommentsIrwin Stelzer asks how private-sector employers are responding to the healthcare debate in Washington:
Small-business men I met with this week tell me they are in a state of paralysis as they watch the debate over the health care "reform" bill wending its way through Congress. Lurking in its 1,502 pages (the Senate version) are provisions that will markedly raise their costs, and their personal taxes. So even as business gets better, they won't take on more staff because they can't figure out what it will cost them to do so.
What are these cost-raising provisions? In my analysis of the Baucus bill, I mentioned the tax penalties that would apply to businesses that do not provide healthcare for employees who would be subsidized under the plan. But those penalties only applied to firms with 50 or more employees—only 4 percent of all employer businesses. The bill Congress is currently debating, however, is more expansive.
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GOP Healthcare Plan Claims 'Universal Access'
Continue reading… 0 CommentsRhetoric is important in all political debates, but it seems to be especially dominant in healthcare. From "public option" to "death panel," it seems like the war of words has eclipsed the war of ideas.
With their one-page summary of their healthcare plan, the Republicans seem to be toting a new phrase meant to capture our hearts and minds: "Universal Access Program," described in the summary as programs that will "expand and reform high-risk pools and reinsurance programs to guarantee that all Americans, regardless of pre-existing conditions or past illnesses, have access to affordable care—while lowering costs for all Americans."
What does that mean? High-risk pools are offered by most states as separate subsidized insurance pools for people with pre-existing conditions. So the Republicans want to expand these pools in order to try to cover these people without mandatory health insurance.
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Cash for Clunkers Critics Get White House Response
Continue reading… 0 CommentsThe White House has responded to an analysis of the Cash for Clunkers program by Edmunds.com that claims the program created only a trivial amount of new car sales, and many of the cars purchased under the program would have been sold anyway. Here's a point by Macon Phillips, the White House director of new media:
This analysis ignores not only the price impacts that a program like Cash for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program.
[emphasis mine]
That point goes two ways though. If we include cars that weren't directly eligible for the Cash for Clunkers program in our analysis, that means we need to look at the used car market. Of course, as I've pointed out before, subsidizing new car purchases is a good way to push up prices in the used market. A whole class of consumer for which used vehicles is all they can afford were pretty much given an "anti-stimulus."
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Ayn Rand's Problem With the Right
Continue reading… 2 CommentsAyn Rand and especially her magnum opus Atlas Shrugged are more popular than ever, as I've blogged about before. This might largely be in part to conservative activists appropriating imagery and the message from the book in their criticism of the Obama administration's economic policies. Now the literary world is getting in on the action, with a number of high-profile Rand biographies being published. The New York Times reviewed one such biography yesterday, Ayn Rand and the World She Made by Anne Heller.
If the protestors at tea party rallies carrying signs like "John Galt was right" were to read biographies of Rand, would they still tout her ideas and characters?
Here's an example: Glenn Beck has approvingly covered Ayn Rand on his show, and has likely increased her popularity among tea party activists. He has also called marriage the "building block of the universe" and criticized attempts to expand the definition of marriage to include same-sex relationships.
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Skilled Immigrants Get Washington Cold Shoulder
Continue reading… 17 CommentsThe H-1B visa program brings many of the skilled employees used by Silicon Valley and Wall Street firms to the U.S. With the current state of hiring, it makes sense that far fewer employers are requesting H-1B workers than in previous years. But, the WSJ reports, it's not just the economy that's making employers wary of looking abroad—it's also the "anti-immigration sentiment in Washington."
How is that sentiment materializing itself?
The cost and bureaucracy of applying for H-1B visas is another deterrent. Lawyers' fees, filing fees and other expenses can easily reach $5,000 per applicant.
And immigration lawyers say some would-be employers are put off by a crackdown on fraud. U.S. Citizenship and Immigration Services, which administers the H-1B program, has been dispatching inspectors on surprise company visits to verify that H-1B employees are performing the jobs on the terms specified. The fraud-detection unit in coming months is expected to inspect up to 20,000 companies with H-1Bs and other temporary worker visas.
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Using Economics to Solve Bone Marrow Transplant Crisis
Continue reading… 0 CommentsHow does bad economics become bad law? One thing that doesn't help is when legislators can't be bothered to read the bills they pass. Some activists recently launched a Read To Vote campaign that demands all elected officials and especially members of Congress to actually read legislation before voting. If they did, maybe we wouldn't have the situation we do with the 1984 National Organ Transplant Act—which bans people from being paid for donating bone marrow, despite the fact that monetary compensation for blood plasma is common practice, and the bill itself even explicitly says it should not criminalize compensation for "renewable tissue" (like blood and bone marrow, as opposed to things that can't regenerate like organs).
Congress threw "bone marrow" into the bill (which bans you from doing things like selling your kidney to the highest bidder) at the last minute probably because it "sounds like an organ," I was told by Robert McNamara, an attorney at the Institute for Justice. The Institute for Justice (IJ), you may recall, is the DC-based pack of libertarian lawyers behind many prominent lawsuits (they were the ones who sued the city of New London, Conn., to protect Susette Kelo's house in a now infamous Supreme Court decision). Today they filed suit in Los Angeles on behalf of a nonprofit group, MoreMarrowDonors.org, that seeks to offer people money to be used for college scholarships, charity gifts, or housing allowances if they agree to donate their marrow. The problem is that if MoreMarrowDonors.org did that, it would be committing a felony under the law punishable by up to five years in prison. "[Compensation for bone marrow donation] is treated exactly like black-market organ sales," McNamara told me. All because of a legislative decision that was "almost an accident."
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One Sign America Is Not in Decline
Continue reading… 2 CommentsYou should definitely check out my colleague Rick Newman's 9 Signs of America in Decline. He combines together some different thought-provoking data that make up for a very worrisome whole. But I do have one comment to make on one of his signs that might make the overall picture not look as bad.
Poverty. The U.S. poverty rate, about 17 percent, is third worst among the advanced nations tracked by the Organization for Economic Cooperation and Development. In that sample, only Turkey and Mexico are worse.
That's completely true. But there's "poverty" and then there's what we normally think of when we think about being poor and its impact on quality of life. The fact that there are more people living "in poverty" in the United States than in most advanced nations does not mean that the U.S. has more poor people than most of those countries.
Poverty is a relative concept. Specifically, the OECD defines it as less than one half of the nation's median household income. Because that income is so high in the U.S., people who would be rich if they lived in Turkey or Mexico could be considered impoverished in America.
When we look at standard of living on an absolute basis, the U.S. fares much better.
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Don't Forget Too Big to Fail
Continue reading… 1 CommentA former Citigroup chairman and a partner at Roaring Brook Capital (founded by a former Merrill Lynch executive) issue their recommendations for financial reform in the WSJ:
One thing our public officials should not do is get caught up in a debate over "too big to fail." It's a catchy phrase, but that's about it. Indeed, it is important to recognize that our recent financial crisis was provoked by last year's failure of Lehman Brothers, a company that few, if anyone, would have argued was too big to fail. Rather than get side-tracked on this and other complex questions, our policy leaders should focus directly on how to create and enhance market discipline.
Citigroup, of course, is the biggest of the "too big to fail" institutions.
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Executive Paycheck Curbs: Problem-Solving or Populism?
Continue reading… 5 CommentsJimmy P calls the new restrictions on executive pay at bailed-out firms a "great distraction."
If it really is just a distraction, the cynical explanation for why Washington is putting executive compensation on the front burner is that it plays well on Main Street. It's much easier to show to voters that you are doing something about the financial crisis by pinning the blame on fat-cat CEOs and their luxury jets, rather than, say, the byzantine vagaries of Federal Reserve policy.
I've recently pointed to the lack of evidence that compensation made much of a difference in determining which institutions did poorly in the crisis. Here's another interesting study out this month from the NBER. It finds a few counterintuitive results:
1. It's not salaries as much as other incentives:
...the salary of the median CEO has increased less than average wages in the non–farm sector. It turns out that most of the post–1999 increase in Current compensation is accounted for by net proceeds from trade in stock, i.e. by options exercise and stock sale.
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Gas Tax Hikes on The Way?
Continue reading… 0 CommentsAs the dollar continues to fall, the decline will tend to make gasoline more expensive (see Rick Newman's explanation why).
But regardless of the currency situation, Washington might make Americans pay more at the pump. The WSJ reports:
But skepticism remains high over whether any of the measures under consideration would spur significant job creation. Business executives are calling for more dramatic moves, including passage of a proposed six-year, $500 billion highway infrastructure bill, which some Democrats want to see funded through an increase in gasoline taxes.
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Why We Should Open Up The Border With Canada (And Other Political Tips From Tim Draper)
Continue reading… 1 CommentI've been at the AlwaysOn OnDC conference, and I just heard an interesting speech from legendary venture capitalist Tim Draper. Draper was a key figure in the launch of Skype, Baidu, and many other companies that took off. He also was an early developer of the concept of viral marketing.
So what does a guy who is so prescient about business think about the role of government in jumpstarting the economy?
Here's my summary of what he thought the government should do:
- Open up the border with Canada: They've got the oil, and they want more trade.
- Drop Sarbanes-Oxley regulations for the first ten years in the life of a public company. Sarbox is just too costly for the small public firms getting off the ground, Draper said. Thanks to Sarbanes-Oxley, Draper argued, the U.S. has seen a decline in the number of public companies, while European and Chinese stock exchanges have seen increases.
- Green incentives: Use carrots, rather than sticks like carbon taxes, to encourage businesses to address public goods problems like global warming.
- The federal government should make more secure loans to innovative companies like Tesla Motors. But, I should note that Draper has invested in Tesla.
- More free trade: If we didn't have trade with China, we wouldn't have semiconductors, flat screens, computer memory, etc.
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Marijuana And State Budgets: Now What?
Continue reading… 16 CommentsThe Justice Department will no longer go after medical marijuana users in states where the substance is partially legal. At about the same time as the Obama administration made headlines for that move, Gallup announced that a recent poll has found the greatest-ever number of Americans in support of legalizing marijuana.
But still, marijuana activists in California, a state with dire budget problems, have been unable to succeed in a long effort to regulate and tax marijuana to raise money for the state. (see previous post here).
Baby steps toward state-wide legalization might come in the form of tax increases for medical marijuana at the local level (PBS reports here). If those policies prove to be big windfalls for those towns, the state legislature will probably take notice.
No one knows which (if any) states will be the first to take this step, but the idea is certainly getting more popular: A committee in the Massachusetts legislature just entertained the notion of creating a taxable cannabis market.
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How Outsourcing Creates American Jobs
Continue reading… 6 CommentsThis highly-Dugg article lists the top U.S. businesses that have moved facilities and jobs abroad. It's generating comments like this one:
you outsource your country and theres nothing LEFT for normal people to work at except malls and retail stores.
But just a few days earlier, Vivek Wadhwa wrote this interesting article in The American that explains why, outsourcing from the U.S. to other countries withstanding, the U.S. is also a beneficiary of outsourcing by foreign companies:
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Name That Country
Continue reading… 1 CommentIn today's Financial Times, David Pilling gives a good overview of how the "dead hand" has returned to American economic policy:
Much of the banks’ money has been lent not to small private enterprises, but to big [state-supported financial institutions], many of which do not really need the cash. Some are putting loans straight back into the bank. Much is leaking out into real estate and equity investments, creating concerns about asset bubbles. If, as many suspect, the rash of lending eventually leads to a leap in non-performing loans, most banks probably expect the state to wipe the slate clean.
But oops, I made a mistake. Find out after the jump...
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Best Cities to Launch a Business (According to Fortune)
Continue reading… 0 CommentsFortune Small Business has a new list of the best cities in which to launch a small business. Here's their ranking for metro areas with over 1 million in population:
- Oklahoma City, OK
- Pittsburgh, PA
- Raleigh, NC
- Houston, TX
- Hartford, CT
- Washington, DC
- Charlotte, NC
- Austin, TX
- New York City, NY
- Baltimore, MD
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Is the Dow at 10,000 the Result of an Obama Bubble?
Continue reading… 1 CommentThe Dow's closing at the symbolic 10,000 mark yesterday has some people excited that maybe Washington really is doing the right thing. Jim Pinkerton says, "Obama should get some credit." But he immediately follows that up with:
...if I had borrowed, printed, or otherwise conjured up more than $12 trillion, and pumped it mostly into the financial sector, I could have made something happen. What would happen? Most likely, Wall Street would start, uh, bubbling again, even as unemployment rose and the rest of the country languished.
There are three reasons that come to mind that suggest that anyone who cites the Dow as evidence of the health of the underlying economy (and as a corollary, the efficacy of Obama's policies to revive the economy) is wrong. You'd be wrong if pre-2008 you had cited the run-up in housing prices as a sign of health. We could be seeing a new bubble at work.
[See Why Stocks Are Surging As Jobs Disappear]
1. 7,537, not 10,000 is the more important number.
It is good news that the Dow has gained 53 percent in seven months. Derek Thompson in The Atlantic says that the gains should "[put] to rest the silly argument peddled in the WSJ that the stock market was allergic to an Obama presidency."
But really, the 53 percent gain isn't that dramatic. Most of the news coverage has only been looking at nominal, not real, values. Comparing the Dow now to 1999 or, to a lesser extent, even earlier this year, is a bit of an apples-oranges comparison because the value of the dollar has fallen. If we index the Dow based on the value of the dollar (see here), we can view 1999 and 2009 on the same playing field. The Dow is at 7,537 relative to 10,000 in 1999, and has gone up only from 6,216 since February 27, 2009.
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Why Do Apple and Nike Support Climate Change Legislation?
Continue reading… 4 CommentsThe Journal has a somewhat odd editorial today on Apple and Nike's recent decisions to resign from the U.S. Chamber of Commerce because of the group's opposition to cap and trade. The editorial gives some persuasive reasons why Apple and Nike would not be hurt much by cap and trade (much of their manufacturing is done overseas) but then concludes that successful climate change reform actually would come back to bite them:
Yet even this self-interested calculation is likely to be short-sighted for both companies. Since climate change is a global issue, green activists won't stop their carbon pursuit at the U.S. border. It wouldn't be long after cap and trade passed in the U.S. that Nike and Apple were pressured to move their manufacturing out of countries that haven't signed Kyoto II. That would threaten their production lines and cost structure, with potential damage to sales and competitiveness.
The Journal uses this argument to support the conclusion that Apple and Nike are making mistakes, but I'm not sure that follows.
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More On Remittances
Continue reading… 2 CommentsCommenter NM says my last post "doesn't make useful sense" because I don't answer questions like:
How many dollars of imports did America buy from Mexico, including oil, to counteract the $120.4 billion they bought from us?
The answer, according to the State Department, is that Mexican exports to the U.S. amounted to $223 billion in 2007.
So yes, Americans consume more Mexican goods than Mexicans consume American goods. But in what sense does this affect my main point that remittances are good for Americans?
Mexican imports into the U.S. do not "counteract" against American exports to Mexico. It simply means that U.S. consumers have more goods to enjoy. If anyone is convinced that this trade deficit poses a problem, more immigration (and more remittances) would help narrow the deficit by pushing up Mexican incomes and allowing them to buy more of our exports.
One more fact: Merely looking at U.S. exports to Mexico doesn't fully account for how much Mexican consumers contribute to the U.S. economy.
