A New Level of the Unimaginable

Government Deficits and Private Growth
http://online.wsj.com/article/SB20001424052748703932904574511243712388988.html?mod=djemITP#articleTabs%3Darticle

We really can't imagine that the US economy won't revive, but...

It's rather like loading up a camel - for a while, it works. When the camel decides enough is enough, the entire load has to be removed. To wit, the entire deficit and transfer of wealth from producers to non-producers.

It's a new level of the unimaginable. But, is it real? Everyone is making bets. Mine would be it's highly likely - but, who knows?


The Business-Labor Divide
http://online.wsj.com/article/SB10001424052748704533904574543662226907336.html#articleTabs%3Darticle

Stern's comment about unions distributing wealth is exactly the problem. It doesn't distribute wealth based on productivity or as a reward for doing one's work well; rather, it ties it to things like longevity/seniority (see teacher's unions and the UAW, etc.).

Also, the union has no ability to evaluate whether the company can stay competitive over time. It wants immediate and long term benefits and rewards.

Thus, we can't ignore what has happened with our domestic car companies and exculpate the unions. Rather, we should be looking in horror at what happened. (I'd jail the union leaders, but that might be going a bit far.)

However, the world sets a price for labor (and this price includes all of the benefits and social charges labor or the employer has to pay for). This has gotten out of hand in America as the individual worker isn't making these decisions (it's his/her union and the government - both at a state and national level).

Why one might ask are there such high salaries paid to certain people and not to others (as union leader Stern says). Well, it might be that the productivity and value of the work performed that generates the ability to pay those salaries is exactly what happens in a world of supply and demand.

Likewise, we've denied society the ability to create and employ people at more menial salaries because we think those salaries are too low, the benefits too sparse. So, either the jobs go undone or they are done by people who drop out of the productive salary-paying economy and do the jobs themselves (the labor conundrum).


The Economy and Finance
http://online.wsj.com/article/SB10001424052748704204304574543920660621900.html#articleTabs%3Darticle

What's missing from this discussion - although closest in what's said by Amex - with a lens of increasing and supporting employment as a focus of all policy decisions - is the issue of individual employee choice on the benefits they want to pay for.

In other words, too much is taken from the average employee to pay for things that government decides are important - but which, the current economic situation doesn't support.

As a result, it may cost an employer $400 for every $100 in gross employee salary; and, the employee will only net $65 or 70 (and some only $45).

With that type of allocation, the government has taken the decision-making away from the employee - with a benevolent intent and high degree of social consciousness - but with an ultimately destructive impact on employment.

Since this overreaching on the part of government was excluded from anything presented, one can't have a very positive view of the jobs picture. Instead, the government and Fed will be pushing on the job string as they have been with easy money. And, as indicated by the price of gold and commodities and the unemployment rate, it looks like investors see inflation down the road. (And, no change on the job front.)

Overcharging, Underpaying - Blame the Government Not the Employer

Weighing Jobs and Deficit
http://online.wsj.com/article/SB125894389767760063.html#articleTabs%3Darticle

Perhaps a look at the jobs forest would be better than looking at the jobs trees?

For example: The electrical contractor hires an electrician. The salary is $100 for the electrician. But, the employer has to pay social security, medicare, unemployment, workmen's compensation, now healthcare, etc. So, the employer needs to charge someone using the electrician's services $300 - let's say for the day or hour.

Now the electrician, who nominally has a salary of $100, he/she also has to pay taxes for social security, etc. plus income taxes. Let's say the electrician takes home a net spendable salary of $60. So $240 has gone to taxes and benefits that the government has decided the electrician should be paying and contributing to.

Now - the electrician himself/herself would like to hire a plumber. But, the plumber has the same cost structure as the electrician - i.e. the electrician will have to pay the plumbing contractor $300 per hour or day for the services of the plumber. BUT THE ELECTRICIAN ONLY TAKES HOME $60 to pay the $300.

In other words, it's more than likely the electrician will try and do the plumbing himself or herself (or just not have the job done at all)!

As such, the society loses productivity (and gross domestic product).

Almost all the policies of the administration are geared to widening this gap between what the worker should earn and what the worker takes home.

One way out would be to make it possible for all workers to be independent contractors and to remove any required contributions to anything but a minimal social security and medicare. If they do contribute their level of contribution would be reflected in their final payout.

Also, for health insurance - let the private insurance industry come up with some bare bones policies. These would be much more like the cheapest health plans offered in Europe.

If something isn't done, the US economy will find it very difficult to add jobs when the competing economies (and we're not talking Europe here) avoid this huge labor conundrum where society takes so much of the income paid to the worker.

Is Michigan Going to Be Like a Camel?

Michigan's Broken 'Promise'
http://online.wsj.com/article/SB125893723996459927.html#articleTabs%3Darticle

We all have heard the story about the "straw breaking the camel's back". Well,Perhaps the straw and the camel have a sad lesson to teach the State of Michigan and the UAW?

The greed of unions and the state to tax, tax, tax and over consume have killed the state's previously existing job engine. Sure, there was China and competition; but, you either meet competition intelligently or stupidly. Sadly, Michigan and the UAW chose the least possibly intelligent route. And, it has failed. As the load on the camel gets bigger, it's harder to get things turned around.

Since they are still loading the camel, Michiganders can only hope that it's not going to take until the last straw and a major restart with everything coming off. This is not a picture one can look forward to.

Not so Different from the Movie 2012

The Coming Deficit Disaster
http://online.wsj.com/article/SB20001424052748704888404574547492725871998.html?mod=djemITP#articleTabs%3Darticle

What do current economic circumstances have in common?

As one recalls how people who held bonds got battered in the far better economic climate of the 1970's, one is only left to imagine how many retirees (and particularly early retirees) will come to rue the days ahead in the economy.

It reminds one of the part of the Titanic movie after the ship had struck the iceberg but the Captain assured everyone there was not problem, so lifeboats weren't launched.

There are those who, as union leaders and followers, had no problem with the bleeding of GM (UAW) or the failure to teach children (40% of Washington's public school students were recently reported to not graduate from high school). Thus, they don't see a problem.

The administration and the Democratic congress clearly don't believe a problem really exists either. They are paying lip service and would like to have more jobs, but don't have the ability to see what the problem is. Red herrings are ever present.

Somehow it seems very similar to religion which relies on faith with or without results.

Those who see the travails a head are giving lots of warning. In a way, it's not unlike perhaps the survivors in the movie 2012. Even seeing what lies ahead doesn't guarantee survival.

Here a job, there a job - whoops, there goes another job.

With the Democrats concentrating on adding more labor costs (the healthcare fund raiser currently before Congress) and hearings on capital hill worried more about what the Fed is doing and the bailout of banks by Geitner, it's clear that the real cause of businesses not hiring and expanding with US labor is being ignored.

Thus, the question about where the price of gold will go.

Because, if the administration and the Congress continue on their current paths, then there will be huge debts, likely another economic downleg and in all liklihood the necessity of having the Fed cover even more of the government's borrowing costs.

None of this is good for jobs - but they just don't seem to be applying any logic. Ah well, they learned from the UAW and the other unions, so what does logic matter. It's all for immediate gratification.

Blinder Ways to Add Jobs

How Washington Can Create Jobs (by Alan Blinder)

http://online.wsj.com/article/SB20001424052748703683804574533843234723498.html?mod=djemITP#articleTabs%3Darticle

What is missing from Prof. Blinder's discussion and the other general jobs discussions? Can we say 'business-friendly' policies?

We hear about a health overhaul, which is designed to find a way to get more money into a health system that is supporting the costs of basically medicare and medicaid (the red herring of bringing the currently uninsured in is basically a money grab for young people who have fewer claims and aren't paying the huge premium costs).

As for supporting business through saner tax policies - let's admit that the administration never saw a taxable dollar from someone with money that they couldn't find a worthy recipient of a government program for!

There does seem to be an implicit admission that we need to find private sector jobs - so, where are the questions about why the jobs aren't forthcoming? My guess is the answers are so strident and obvious and obviously going to gore some constituency or another of both parties that they'd like to avoid the facts and go with the fiction.

It's all nice to think of minimum wages and blaming the Chinese, but we spend too much on consumption in this country - in particular, on the consumption of government services, mandated benefits - and the fact that we don't want to allow wages to reflect the actual value added of the work being performed (the old labor conundrum comes in here - whereby so much is taken out of the salary that could be paid to the worker by the employer that the worker is left with too little net purchasing power - i.e. it costs the employer $300 per day for the worker but the worker goes home with only a $100. Where did the rest go? Government programs.).

Let's get back to letting people know and choose what benefits they are paying for, etc., etc., etc.

The Wrong Trees in the Woods

Overly Stimulating
"ADMINISTRATION ESTIMATES OF JOBS created or saved by stimulus spending are embarrassingly inaccurate..."

http://online.barrons.com/article/SB125815707307947809.html?mod=BOL_hps_dc#articleTabs%3Darticle

Could it be that we're looking and counting the wrong trees in the woods and not considering the actual forest?

In other words, should we even be looking at the jobs created by government spending; or, should we be looking at jobs lost or not created by misbeguided government policies?

I'd suggest we look at whether we are creating a better, stronger, more entrepreneurially rewarding business climate or not. And, my own answer, which I'd posit is reflected in the unemployment rate, is that we are not.

While looking at what government allowed to happen to GM (bankruptcy and equity investor wipe-out to preserve some union jobs and retirement benefits) as the government's plan for the economy, it is perhaps worth considering the impact it has on investors and business people.