Tag Archives: Economy

What happened to the economy of North Carolina when Republicans cut taxes?

This story is from The Wall Street Journal.

Excerpt:

Four years ago, North Carolina’s unemployment rate was above 10 percent and the state still bore the effects of its battering in the recession. Many rural towns faced jobless rates of more than 20 percent.

But in 2013, a combination of the biggest tax rate reductions in the state’s history and a gutsy but controversial unemployment insurance reform supercharged the state’s economy and has even helped finance budget surpluses.

As Wells Fargo’s Economics Group recently put it: “North Carolina’s economy has shifted into high gear. Hiring has picked up across nearly every industry.”

The tax cut slashed the state’s top personal income tax rate to 5.75 percent, near the regional average, from 7.75 percent, which had been the highest in the South. The corporate tax rate was cut to 5 percent from 6.9 percent. The estate tax was eliminated.

Next came the novel tough-love unemployment insurance reforms. The state became the first in the nation to reject “free” federal payments for extended unemployment benefits and reduce the weeks of benefits to 20 from 26. The maximum weekly dollar amount of payments, $535, which had been among the highest in the nation, was trimmed to a maximum of $350 a week. As a result, tens of thousands of Carolinians left the unemployment rolls.

[…]After a few months, the unemployment rate started to decline rapidly and job growth climbed. Not just a little. Nearly 200,000 jobs have been added since 2013 and the unemployment rate has fallen to 5.5 percent from 7.9 percent.

[…]Even with lower rates, tax revenues are up about 6 percent this year according to the state budget office. On May 6, Gov. McCrory announced that the state has a budget surplus of $400 million while many other states are scrambling to fill gaps.

[…]Because North Carolina built in a trigger mechanism that applies excess revenues to corporate rate cuts, the business tax has fallen to 5 percent from 6.9 percent, and next year it drops to 4 percent.

Although North Carolina is too liberal for me, it is nice to see them turning their economy around with tax cuts on job creators, and benefit cuts to those who choose not to work.

At the end of the day, the only real security that any of us has comes from the skills we have developed by working and the work experience we put on our resumes. The economy is in for some harsh conditions going forward. The more we can get Americans working, the better they will be able to weather the coming storm. A little kick in the ass might hurt, but in the long-term, it’s for the best.

Seven ways to cut government spending and anti-business regulations

This is an article from The Federalist.

The 7 policies:

  1. Repeal ObamaCare
  2. Health Savings Accounts
  3. Means-test Social Security
  4. Restart economic growth
  5. Re-reform welfare
  6. Save the cities
  7. Federalism

Since we just had a horrible quarter of negative GDP growth, (-0.7%), I think I’ll focus on #4:

Since the financial crisis, the United States has slipped into the Obama rate of growth, a permanent state of semi-stagnation. We’ve been through market crashes and recessions before, but usually after a year or two of pain, we get a strong burst of growth to make up for it. This time, we’re in the long twilight of a non-recovery recovery. The economy is technically growing again, but at such a feeble rate that it hardly feels like it. It’s the kind of economy in which the unemployment rate falls, not because the long-unemployed are all getting jobs again, but because so many people are dropping out of the workforce altogether.

This low rate of growth makes the burden of the welfare state greater, because we can no longer grow our way out from under its expenses. At the same time, it makes the welfare state harder to get rid of. You can’t just tell the unemployed to go out and get a job when the economy is still flopping around and gasping like a fish in the bottom of a bass boat. If we’re going to expect people to be more self-reliant, they must also have a sense of economic hope.

There are a whole range of reforms we can champion to promote renewed economic growth. These include the old-fashioned tax cuts that the reform conservatives scoff at. But they also include getting rid of a whole host of intrusive regulations. On the highest level, this would include halting and rolling back the EPA’s crusade against cheap energy. We’ve seen in the past year, for example, that the only stimulus that really stimulates is cheap gasoline.

On the lower level, it could include things like crusading against unnecessary and burdensome business licensing requirements, such as the recently overturned Texas law requiring licenses for hair-braiding, which the court found failed to “advance public health, public safety, or any other legitimate government interest.” You can say that again, about a great many laws. There is no shortage of other ideas for getting the government out of the way of growth, for the simple reason that there is no shortage of intrusive government meddling.

Or we could solve the problem from the other end, targeting taxes and regulations that make everyday goods for the poor more expensive. It is the poor, for example, who struggle to keeping their gas tanks filled so they can drive to work—which is what makes our massive gas taxes, which politicians are always scheming to increase, so scandalous. So we can make economic growth go farther by imposing fewer costs on those who are trying to provide the necessities of life.

Economic growth always shrinks the welfare state by helping more people rise above poverty and above the need for government assistance. But it also creates the conditions for bigger reductions in the welfare state. Remember that what made the welfare reform of the 1990s such a big success was a booming economy with low unemployment, a growing work force, and rising wages. So when people were required to work, they found that the private economy was open to them.

The EPA raises the cost of electricity for everyone, and this is a hidden tax on commercial activity which slows down our entire economy. If we want to get the economy moving, we have to spur our own domestic energy industry by promoting policies that increase energy production – like the Keystone XL pipeline. Economic growth creates jobs, and creating jobs should be our number one concern – get people off of government dependency.

What happens to crime rates if we punish police officers for stopping crime?

This story from Heather MacDonald in the Wall Street Journal is scary.

She writes:

The nation’s two-decades-long crime decline may be over. Gun violence in particular is spiraling upward in cities across America. In Baltimore, the most pressing question every morning is how many people were shot the previous night. Gun violence is up more than 60% compared with this time last year, according to Baltimore police, with 32 shootings over Memorial Day weekend. May has been the most violent month the city has seen in 15 years.

In Milwaukee, homicides were up 180% by May 17 over the same period the previous year. Through April, shootings in St. Louis were up 39%, robberies 43%, and homicides 25%. “Crime is the worst I’ve ever seen it,” said St. Louis Alderman Joe Vacarro at a May 7 City Hall hearing.

Murders in Atlanta were up 32% as of mid-May. Shootings in Chicago had increased 24% and homicides 17%. Shootings and other violent felonies in Los Angeles had spiked by 25%; in New York, murder was up nearly 13%, and gun violence 7%.

Those citywide statistics from law-enforcement officials mask even more startling neighborhood-level increases. Shooting incidents are up 500% in an East Harlem precinct compared with last year; in a South Central Los Angeles police division, shooting victims are up 100%.

By contrast, the first six months of 2014 continued a 20-year pattern of growing public safety. Violent crime in the first half of last year dropped 4.6% nationally and property crime was down 7.5%. Though comparable national figures for the first half of 2015 won’t be available for another year, the January through June 2014 crime decline is unlikely to be repeated.

What could the cause of this be? Well, it’s the backlash against police officers who defend themselves from assault by criminals who attack them:

Since last summer, the airwaves have been dominated by suggestions that the police are the biggest threat facing young black males today. A handful of highly publicized deaths of unarmed black men, often following a resisted arrest—including Eric Garner in Staten Island, N.Y., in July 2014, Michael Brown in Ferguson, Mo., in August 2014 and Freddie Gray in Baltimore last month—have led to riots, violent protests and attacks on the police. Murders of officers jumped 89% in 2014, to 51 from 27.

The state’s attorney general, Eric Schneiderman, wants to create a special state prosecutor dedicated solely to prosecuting cops who use lethal force. New York Gov.Andrew Cuomo would appoint an independent monitor whenever a grand jury fails to indict an officer for homicide and there are “doubts” about the fairness of the proceeding (read: in every instance of a non-indictment); the governor could then turn over the case to a special prosecutor for a second grand jury proceeding.

This incessant drumbeat against the police has resulted in what St. Louis police chiefSam Dotson last November called the “Ferguson effect.” Cops are disengaging from discretionary enforcement activity and the “criminal element is feeling empowered,” Mr. Dotson reported. Arrests in St. Louis city and county by that point had dropped a third since the shooting of Michael Brown in August. Not surprisingly, homicides in the city surged 47% by early November and robberies in the county were up 82%.

Similar “Ferguson effects” are happening across the country as officers scale back on proactive policing under the onslaught of anti-cop rhetoric. Arrests in Baltimore were down 56% in May compared with 2014.

But there’s more – there’s also leniency towards property and drug crime, and criminals are getting the message:

As attorney general, Eric Holder pressed the cause of ending “mass incarceration” on racial grounds; elected officials across the political spectrum have jumped on board. A 2014 California voter initiative has retroactively downgraded a range of property and drug felonies to misdemeanors, including forcible theft of guns, purses and laptops. More than 3,000 felons have already been released from California prisons, according to the Association of Deputy District Attorneys in Los Angeles County. Burglary, larceny and car theft have surged in the county, the association reports.

“There are no real consequences for committing property crimes anymore,” Los Angeles Police Lt. Armando Munoz told Downtown News earlier this month, “and the criminals know this.” The Milwaukee district attorney, John Chisholm, is diverting many property and drug criminals to rehabilitation programs to reduce the number of blacks in Wisconsin prisons; critics see the rise in Milwaukee crime as one result.

Yes, this is what happens with the leftist mainstream media and the Democrats who run big cities like Baltimore, Ferguson, New York, Cleveland, Seattle, etc. get together and decide that they are more opposed to police officers than they are to criminals. If we as a society choose to intimidate and persecute the police for doing their jobs, then crime goes up. What’s my counter to this? Well, it might be time to start thinking about moving out of big cities, especially ones that are run by Democrats. I just don’t see how this is going to get fixed in the near-term, given that Obama rolled back welfare reform, and welfare is what causes women to have children before they get married. Fatherless children are more likely to become criminals. The decline of marriage and family that everyone seems to be celebrating as “tolerance” will just make more delinquent children. So, just when we most need the police (since we insist on attack marriage with welfare, no-fault divorce and same-sex marriage) we are actively working to undermine them.

But that’s not all I am seeing that troubles me. I see a lot of support for amnesty, and that means a lot more Democrat voters in the future, especially in states with a high concentration of illegal immigrants. Not only that, but there are problems of underfunded pensions at the state level, and the trillion dollar student loan bubble, and the problem of continued funding of entitlement programs like Social Security. And of course we have the $10 trillion that the Democrats added to the debt, and the problems in so many countries in the Middle East, like Iran, Iraq, Libya, Yemen and Syria. The whole Middle East is on fire, and this is bound to affect us as our defense spending declines.

How to respond to this? I think having earnings and savings is key, and maybe trying to move away from areas that are likely to have high crime, and strains on state and local budgets from illegal immigrants, pension obligations, etc. I really have no answer to the student loan bubble, the entitlements, the debt and the foreign policy threats. What I am doing is focusing on earning money (through work) and saving it by restricting spending on luxury items, e.g. – travel, fun, etc.

Is Obama’s economy as good as the mainstream media are telling us?

This article from CNS News was tweeted by GOP presidential candidate Carly Fiorina.

The economy is not good
This economy is not good (click for larger image)

It says:

The federal government taxed away more money, spent more money and ran a bigger deficit in the first half of fiscal 2015 than it did in the first half of fiscal 2014, according to the Congressional Budget Office.

“The federal government ran a budget deficit of $430 billion for the first half of fiscal year 2015, CBO estimates–$17 billion more than the shortfall recorded in the same span last year,” the CBO said in its Monthly Budget Review for March 2015, which was published April 8. “Both revenues and outlays were about 7 percent higher than the amounts recorded in the first six months of fiscal year 2014.”

Keep in mind that these deficit numbers are for half a year. In 2007, George W. Bush was running a deficit of $160 billion for an entire year.

And we’re being taxed more, too:

The biggest source of additional tax revenue for the federal government was the individual income tax. In the first six months of fiscal 2014, Americans paid the federal government approximately $585,000,000,000 in individual income taxes. In the first six months of fiscal 2015, Americans paid $642,000,000,000 in individual income taxes—an increase of $57 billion (or 9.7 percent) from fiscal 2014.

What’s the long-term forecast?

The Wall Street Journal has it:

Question: “How close are we from seeing entitlement programs like Medicare, Medicaid, and Social Security come into direct conflict with defense spending priorities? Defense spending is almost 20% of the Fed budget and nearly 60% of discretionary spending. Current cost of health care and an aging population are strong indicators this could happen sooner than later.”

Zumbrun: “I’d say we’re already seeing it now. As Nick noted above, the CBO projects that mandatory spending and spending on interest will climb, but that defense and nondefense discretionary spending will be squeezed. Anyone who doesn’t want to see that happen in the next decade needs some combination of higher revenue, much faster economic growth, or cuts to entitlement programs.

“The budget deal known as sequestration squeezed down both defense and non-defense discretionary spending. If, instead, everyone agreed it was okay to cut entitlements (which they obviously don’t), you wouldn’t have needed to squeeze that down. So I think it’s fair to say these things are already in conflict.”

Question: “Debt as long as partnered with productivity is no problem. From the looks of it, the U.S. might fall as an economy, but is now the time?”

Timiraos: “That’s a good point. One thing that’s a little bit troubling, however, is that estimates of the potential output of the U.S. economy have been revised down. What does that mean exactly? Instead of growing at a 2.7% rate from 2014-18, it now says the economy will grow at a 2.5% rate. That doesn’t sound too bad, but over time, it adds up.”

Question: “The U.S. has so far been capable of keeping its cost of borrowing at a remarkably low level. What about in the long term where it seems likely that servicing the debt will eat up a larger and larger percentage of government expenditures in an age of slowing growth?”

Zumbrun: “There’s actually decent reason to believe that if the economy slows down a lot then interest rates will stay very low. That’s basically the situation in Japan, right? They’re mired in decades of low growth, driven by aging demographics and a central bank that was really timid for a long time, but as a result of their permanently stagnant economy, interest rates are incredibly low. In the U.S., one scenario like this is known as secular stagnation.

Wow, if our economy starts to look like Japan, that will not be good. They have massive deficits, zero economic growth and a looming demographic crisis (few young workers, many older retirees). It’s a very bad situation that’s being masked by low interest rates and massive, massive borrowing.

The Brookings Institute agrees

Lest you think that this is just the conservative take on this, here’s the leftist Brookings Institute, writing about it just last week.

They say:

Debt figures tell part of the story. When the Great Recession hit, the federal debt was equal to about 40 percent of GDP. But to fight the recession, Congress enacted an $800 billion dollar stimulus bill. Stimulus spending, combined with already enacted spending and tax policy, resulted in four years of trillion dollar deficits. As a result, the debt ballooned to 78 percent of GDP in 2013, almost twice the pre-recession level. The annual deficit is now declining at a stately pace, but by 2016 it will begin increasing again, and by 2020 under CBO’s alternative fiscal scenario, we will once again return to annual deficits above a trillion dollars, thereby once again greatly increasing the national debt.

Oh come on – Obama says that he saved the economy, and everyone in the mainstream media agrees.

Did he?

What’s the word for our fiscal situation? Stunning? Shocking? Desperate? In recent testimony before the Senate Budget Committee, Boston University Economics Professor Laurence Kotlikoff, in effect, told the Committee that all of these terms are pathetically inadequate to describe our true fiscal situation. In compelling testimony, Kotlikoff argues that the federal fiscal situation is much worse than the CBO estimates let on. The reason is that CBO’s debt estimates do not take into account the full financial obligations the government is committed to honor, especially for future payments of Social Security, Medicare, and interest on the debt. He asserts that the federal government should help the public understand the nation’s true fiscal situation by using what economists call “the infinite-horizon fiscal gap,” defined as the value of all projected future expenditures minus the value of all projected future receipts using a reasonable discount rate.

If you’re going to be retirement age around 2030, you’d better do two things right now – first, don’t expect any help from the Federal government. I don’t care if you paid into their Ponzi scheme redistribution programs – there is no money for you there. Second, if you’re working till you’re retired, then expect the government to raise taxes even more on you.

Would you expect secularists to care about the next generation when this is the only life they have? I would not. Ideas have consequences.

Right-to-work states gained jobs three times faster than forced union states

Gallup poll on right-to-work, August 2014
Gallup poll on right-to-work, August 2014

This is from economist Stephen Moore writing in Investors Business Daily.

He writes:

Wisconsin is poised this week to become the 25th “right-to-work state,” ending forced unionization and allowing individual workers to decide if they want to join a union or not.

The Wisconsin Senate just recently passed right-to-work, and our sources in Madison say that the House, which is controlled by Republicans, will enact a similar law in the days ahead.

Republican Gov. Scott Walker, a leading presidential candidate, is sure to sign the bill when it gets to his desk. “This isn’t anti-union,” insists Walker. “It restores worker rights and brings jobs back to Wisconsin.”

Some 3,000 liberal protesters stormed the Capitol in Madison over the weekend to reverse the momentum for the new law. This isn’t Walker’s first dust-up with union bosses. Four years ago, nearly 100,000 activists grabbed nationwide headlines when they protested his reforms in Wisconsin’s collective bargaining process with public employee unions.

If the new law passes, Wisconsin would join two other blue-collar, industrial Midwestern states — Michigan and Indiana — to recently adopt right-to-work. “If you had told me five years ago that right-to-work would become law in Indiana, Michigan and Wisconsin, I wouldn’t have thought it was even remotely possible,” says economist Arthur Laffer.

Laffer and I have conducted substantial economic research showing three times the pace of jobs gains in right-to-work states than in the states with forced union rules that predominate in deep blue states such as California, New York and Illinois.

In the 2003-13 period, jobs were up by 8.6% in right-to-work states, and up only 3.7% in forced union states. Most of the southern states, with the exception of Kentucky, are right-to-work

Many auto jobs in recent decades have moved out of Michigan and Ohio and into states such as Texas, Alabama and South Carolina, due in part to right-to-work laws in Dixie.

But as union power recedes in the Midwestern states, many of the region’s governors see factory jobs returning to their backyards. “Right to work is already lowering unemployment in Indiana and causing a manufacturing revival here,” says Gov. Mike Pence.

Companies are more attracted to right-to-work states, and that means more jobs become available.

Here is Congressional testimony from James Sherk, senior policy analyst in labor economics at The Heritage Foundation. I really recommend bookmarking this article. Even though it is very long, it is up-to-date and comprehensive. I am linking to it because he responds to objections to right-to-work laws raised by unions.

Do right-to-work laws hurt the middle class?:

Union Strength and the Middle Class. Unions and their supporters frequently claim the opposite: that unions helped build the middle class and weaker unions hurt all workers—not just union members. To make this point they often juxtapose the decline of union membership since the late 1960s with the share of income going to the middle class. The Economic Policy Institute did exactly this when criticizing the possibility of RTW in Wisconsin. These comparisons suffer from two problems. First, the absolute standards of living for middle-class workers have risen substantially over the past generation. Inflation-adjusted market earnings rose by one-fifth for middle-class workers between 1979 and 2011. After-tax incomes rose at an even faster pace. Middle-class workers today enjoy substantially higher standards of living than their counterparts in the 1970s.

Secondly, these figures conflate correlation with causation. During the time period EPI examined union membership correlates well with their measure of middle-class income shares. Extending the graph back another two decades eliminates this correlation. U.S. union density surged in the late 1930s and during World War II. It peaked at about a third of the overall economy and private-sector workforce in the mid-1950s. During this time period America had few global competitors. From the mid-1950s onward global competition increased and U.S. union membership steadily declined. Between 1954 and 1970 union density dropped from 34.7 percent to 27.3 percent. Unions lost over a fifth of their support in just over a decade and a half.

During this period middle-class income and living standards grew rapidly. No one remembers the 1950s and 1960s as bad for the middle class, despite the substantial de-unionization that occurred. Over a longer historical period changes in U.S. union strength show little correlation with middle-class income shares. Liberal analysts come to their conclusion by looking only at the historical period in which the two trends align.

Do right-to-work states have lower wages?:

Unions Argue RTW Hurts Wages. In the same vein, unions argue that RTW laws lower wages. As the Wisconsin AFL-CIO recently claimed:

These anti-worker Right To Work laws just force all working families to work harder for lower pay and less benefits, whether they’re in a union or not. The average worker makes about $5,000 less and pensions are lower and less secure in Right to Work states.

This statement contains a degree of truth: average wages in right-to-work states are approximately that much lower than in non-RTW states. This happens because right-to-work states also have below-average costs of living (COL). Virtually the entire South has passed RTW, but no Northeastern states have passed an RTW law. The Northeast has higher COL and higher average wages; the South has lower living costs and lower wages.

[…]All but one right-to-work state has living costs at or below the national average. All ten of the states with the highest COL have compulsory union dues. Analyses that control for these COL differences have historically found that RTW has no deleterious effects on workers’ real purchasing power.

Recently the Economic Policy Institute has claimed that workers in RTW states make 3 percent less than workers without RTW protection, even after controlling for living costs. Heritage replicated this analysis and found that EPI made two major mistakes: it included improper control variables and did not account for measurement error in their COL variables. These mistakes drive their results. Correcting these mistakes shows that private-sector wages have no statistically detectable correlation with RTW laws. The supplement and the appendices to this testimony explain the technical details of this replication. Properly measured, RTW laws have no effect on wages in the private sector.

Although the history of unions shows that unions were a valuable and necessary check on the power of greedy corporations in times past, today unions are using the dues they collect from workers to elect Democrats. The vast majority of political contributions made by the big unions go to Democrats.

Here’s one example, using the Service Employees International Union numbers:

Service Employees International Union
Service Employees International Union

(Click for larger image)

So if you oppose what Democrat politicians are doing, it makes sense to free workers from being forced to pay union dues for causes that are against their values. The average rank-and-file member of a union does not share Democrat values on things like abortion and gay marriage, in my opinion. Why should they be forced to pay union dues that go to elect politicians who oppose their values?