January 2012

Stimulus Roundup

by Ryan Young on September 16, 2010

in Economy, Stimulus to Nowhere

Most people doubt Congress’ ability to spend money wisely. The stimulus has given them some proof:

-$800,000 for an African genital-washing program.

-$700,000 to create computer software that can tell jokes.

-$40,000 for ten trash bins.

-$1.6 million to irrigate a golf course inTexas.

-Thousands of dollars to replace – twice – a sidewalk “that doesn’t front any homes or businesses, and leads into a ditch”

-300 truckloads of oyster shells.

Bonus non-stimulus spending: “[T]he Census spent $23,000 on a totem pole in Alaska. Census representative Hector Maldonado says the agency thought it was a great idea. The plan was to increase participation in Alaska, but despite the totem pole, participation dropped in the state by two percent from the last census.”

Michigan Child Care Workers May Get their Day in Court against Forced Unionization

by Ivan Osorio on September 16, 2010

in Economy, Employment, Labor, Legal

Today, the Michigan Supreme Court ordered a lower court to explain its dismissal of a class action lawsuit challenging a forced unionization scheme for child care workers in the state. The suit. This is welcome news, since this suit takes on directly one of Big Labor’s newest efforts to expand its falling membership: expand the definition of the “public” sector.

For years, government employment is the one area in which unionization had grown at a robust pace, even as unions’ private sector numbers fell precipitously. That trend reached a tipping point last January, when the number of union members in government employment surpassed the number of private sector union members for the first time. There is no reason to expect the trend to reverse.

So, as unions continue to struggle at reviving their private sector fortunes, some are now seeking to redefine many private sector workers as government employees. In Michigan, the United Auto Workers (UAW) and American Federation of State, County and Municipal Employees (AFSCME) partnered to create a child-care worker union whose main purpose was to collect union dues from the state subsidy checks sent to child care providers who served low-income families. As The Grand Rapids Press explains in an editorial:

In 2006, the UAW and AFSCME partnered to form a union called Child Care Providers Together Michigan. The union represents and draws dues from people who care for children from low-income families. The new union members belong either to the UAW or AFSCME, depending on the part of the state in which they live.

Whatever attempts were made to inform child care providers of the pending unionization must have been feeble at best. Only 15 percent of the state’s 40,000 dues-paying providers took part in the vote-by-mail certification election that formed the union. Fully 92 percent of those voting said yes to the union. But they hardly constitute a valid majority of all the now-dues-paying members. Hopefully, the federal lawsuit will uncover how this election was allowed to occur.

The low-income clients provided a rationale — though not a legitimate one — for the forced unionization. The argument is that because providers take public money in state subsidies for those clients, they are therefore public employees. Union dues are taken directly from the state subsidies, money that should go toward child care. The UAW and AFSCME receive 1.15 percent of the subsidies, amounting to more than $1 million a year.

This also gives organized labor a good reason to support the Obama health care legislation. Expanding the definition of “public” to any public service provider who receives any sort of state support gives unions new opportunities to organize health care workers, as more of them are officially deemed ”public” employees.

An Associated Press  story sums up the absurdity of the situation this creates, with one of the plaintiffs as an example:

Peggy Mashke tends to 12 children for 12 hours a day at her home, so she was surprised to get a letter welcoming her to the United Auto Workers union.

“I thought it was a joke,” said Mashke, 50, of northern Michigan’s Ogemaw County. “I work out of my home. I’m not an auto worker. How can I become a member of the UAW? I didn’t get it.”

The current suit was filed by the National Right to Work Legal Defense Foundation; the Michigan-based Mackinac Center for Public Policy has filed a similar suit. This case deserves national attention, as unions in other states are likely to try similar schemes.

For more on public sector unions, see here and here.

California’s Insane Global Warming Initiative

by Michael Fumento on September 16, 2010

in Global Warming

What state ranks third in unemployment, second in foreclosures, has the nation’s worst credit rating, is running a $19 billion deficit — yet insists on spending billions on a greenhouse gas emissions reduction plan that can’t possibly impact global warming?

Yes, it’s California, land of the Governator, who four years ago signed a bill that will shortly begin saying “Hasta la vista, baby!” to perhaps a million jobs. Yet there’s hope the prosperity terminator can be stopped, with Prop 23 to be voted on in November.

Read about how incredibly bad the legislation is and how the state foisted it on an ignorant (not stupid) public in my new article, “California’s Jobs Terminator” at Forbes.com.

CEI in Europe: Travelblog 5–Sulejow, Poland

by Nicole Ciandella on September 16, 2010

in CEI Projects, Coalitions & Outreach, International

When we left Portugal for the Language of Liberty camp in Poland, we left a wine country for a vodka country. At the supermarket near the campsite in Sulejow, Poland, our host stands in front of several shelves of vodka and tells us what the difference is between each brand. He also picks up a large jar of pickles. “To eat with vodka,” he explains.

But the students at the camp aren’t very interested in drinking. Most are between the ages of 18-23. Over half of them are male. Some of them don’t drink at all. The ones who do drink have a small glass of vodka as they grill kielbasas over the campfire.

For these students, drinking alcohol is not an activity unto itself. It’s a part of their culture. They grow up with it. They take it for granted.

One can’t help comparing their drinking habits with the habits of the average American college student.

The Polish government is not completely laissez-faire in regulating the sale and consumption of alcohol. The minimum drinking age is 18. Many cities have open-container laws. Recently the government banned the serving of alcohol before and during the recent state funerals for the victims of the Katin plane crash.

But the Polish students laugh when I ask if the government enforces the drinking age. Teenagers here are not arrested for drinking. Parents here are not threatened by child services for giving alcohol to their kids.

If the United States government wants future American youths to drink less (or drink differently), they have only to look to European models. Liberalization — not criminalization — is the answer. Here in Poland, a country known for its production of vodka, the youth is completely unimpressed by the idea of drunkenness. One night on the beach at the edge of camp, some of the teachers ask the students if they know any icebreaker games like the drinking games freshmen play in American universities. The Polish students are confused. They don’t know what drinking games are.

Tricks Against Trade

by Fran Smith on September 15, 2010

in International, Trade

Public Citizen’s Global Trade Watch is up to its tricks against trade again.  Noted for its past expertise in destroying the Seattle WTO negotiations, the group is now taking a new stance against free trade agreements (FTAs), though not by their usual rhetoric that they cost jobs and a “race to the bottom.”  Their new approach is that FTAs actually lower exports. The group just published a “study” purportedly showing that exports to countries that have free trade agreements with the U.S. showed less export growth than did exports to countries that don’t have FTAs.

I guess they are saying that even though these pacts lower tariffs and other trade barriers on many goods and services–making U.S. products and services cheaper for trade partners to import–they have a negative effect on U.S. exports.  A bit counter-intuitive, but theirs is not to reason why — Public Citizen states that quite clearly — but to show that past and, of course, future trade agreements will harm rather than help the U.S. economy.

“It is beyond the scope of this paper to explore in detail why the United States has had lower export growth with FTA partner countries: the central point is that the claim that export growth to FTA partners has been higher than export growth to non-FTA partners is not supported by the actual U.S. government trade flow data.”

In a quick perusal of the 42-page report, what I found most interesting is that the FTA countries were listed in numerous charts and graphs, but nowhere could I find a listing or a mention of which non-FTA countries were included in the analysis.

Isn’t that a somewhat basic analytic flaw — to have specifics about one group you’re analyzing and to use aggregate numbers for the group you’re comparing?

Here are a few more quick observations on the study.  Nowhere do the authors discuss other factors that might explain lower exports than expected in FTA countries.  What was happening in the specific countries?  Could the fact that Mexico had a devastating currency crisis in 1994 — right when the North America Free Trade Agreement went into effect — have anything to do with their diminished ability to import goods and services from the U.S.? After all, Mexico’s GDP declined approximately 7% in 1995.

Also, is China included in the non-FTA countries? If so, then that country’s phenomenal growth over the past 10 years would almost by itself affect the results.  In 2009, China had an 8.7 percent GDP growth rate and imported $69.6 billion of goods and services from the U.S.  The global financial crisis affected U.S. exports to China much less than those to other important markets feeling the brunt of the economic downturn.

In addition, of the top ten countries in terms of U.S. exports, only two have free trade agreements with the U.S. But, of course, since we don’t know which countries Public Citizen used for its “non-FTA” group, there’s no way of knowing if some or most of the top ten were in the list or of analyzing their economic conditions.

Despite what I consider are considerable problems with this report, it’s bound to be used by the anti-trade forces arming themselves for future battles on the pending FTAs with South Korea, Colombia, and Panama.  Betcha too the report will be used in the lead-up to the November elections, as trade-bashing seems to be becoming one of the defining Democratic issues.

San Francisco’s Mayor Opposed to Alcohol Tax

by Michelle Minton on September 15, 2010

in Health and Illness, Legal, Nanny State, Personal Liberty, Regulation

It isn’t often that we get to praise politicians, but cheers to San Francisco Mayor Gavin Newsom who vowed to veto plans for an increased alcohol tax. The tax “would add about 3 cents to a 12-ounce bottle of beer, 4.5 cents to a 6-ounce glass of wine and 3.5 cents to a drink containing 1.5 ounces of hard liquor.”

The so-called “charge for harm tax,” as it has been dubbed, would be a fee levied on alcohol wholesalers and distributors. It was proposed by John Avalos, a member of San Francisco’s Board of Supervisors in order to recoup the estimated $18 million a year San Francisco spends supposedly dealing with alcohol-related problems as well as to cover health care costs.
The proposal won approval with the Board of Supervisors on Tuesday, but Newsom believes a “charge for harm” would do more harm than good, saying, “Pursuing this likely illegal new fee in this economic environment will impact thousands of businesses, cost jobs and put San Francisco at a competitive disadvantage with every other county in California.”

First, Newsom is right. This proposed tax is bad for the city and the state’s economy.

California’s wine and alcohol industry is a healthy and vital parts of the state’s economy. This, unfortunately, means it is a prime target for politicians who would rather raise taxes than cut spending.  But, while  the proposed tax may temporarily fill the coffers, it will result in those wholesalers and distributors charging restaurants, vineyards, and breweries and ultimately, consumers more.

This will result in fewer establishments, fewer jobs, less tax revenue for the state in the long-run.

Wine and beer production provide the U.S. with over 2 million jobs and represent around $60 billion in taxable wages. In California, a state known for its wine production, the stakes are particularly high. The wine industry in California provides tax revenue (about $15 billion in state and federal taxes) as well as bringing in tourists (about 20 million a year) who pour money into other parts of the economy.

The effects of increased taxes on wholesalers and distributors will ripple through the entire industry.

Second, if they charge for the harm alcohol does, are they going to pay for the benefits it also provides?

Alcoholic beverages have long been demonized in this country for the “social ills” associated with those who abuse the product. However, there are just as many if not more positive effects of alcoholic beverages that most do not consider when choosing to apply discriminatory taxes to the industry. Moderate alcohol consumption is widely associated with decreased risks of various age-related medical problems such as coronary heart disease, stroke, cancer, and cognitive disorders like dementia and Alzheimer’s disease, and a new study indicates that alcohol consumers have lower risk of rheumatoid arthritis.

Studies also show that social interaction is more important to ones health than quitting smoking or losing weight. While it isn’t a requirement, much of modern social interraction is organized around the consumption of alcohol: drinks after work, dance clubs, football games and beer, a backyard barbeque. Alcohol isn’t necessary for social interaction, but there’s a reason they call it the social lubricant.

The point is, alcohol doesn’t make stupid people do stupid things. If someone chooses to get drunk and behave in a risky way, that is their choice and no fault of the farmer, bar, or retailer who sells them the bottle.

Whether the net effects of alcohol consumption are negative or positive, it shouldn’t be the government’s role to apply discriminating taxes one industry because it deems the effects “undesirable.”

Note: image via wortblog.blogspot.com

Clearing the Way for High-Tech Jobs

by Ryan Young on September 15, 2010

in Deregulate to Stimulate, Economy, Regulation, Tech & Telecom

Over at RealClearMarkets.com, my CEI colleague Ryan Radia offer some ideas for how to create more high-tech jobs. Our main points:

-Do more with less. This often involves cutting workers who aren’t productive enough to offset their wages. Sounds like bad news. But it’s actually crucial to job creation. That’s because in the long run, automation frees up resources — and employees — for new opportunities.

-Hiring new employees means jumping through countless regulatory hoops. According to a 2005 study by economist W. Mark Crain, compliance costs average $5,282 per employee at large companies. Small businesses pay $7,647 per employee. Some of those resources could have been spent hiring more employees. Over-regulation causes unemployment.

-Politicians can’t create jobs. But they can help to foster better conditions for wealth and job creation. Regulations cost businesses and consumers $1.17 trillion last year alone. Congress should roll them back. Some companies fear potential clampdowns on their businesses. Congress should leave them alone. Some failing businesses are eating up resources that could be better used elsewhere. Congress should stop bailing them out.

One Way to Create High-Tech Jobs

by Ryan Young on September 14, 2010

in Economy

My colleague Ryan Radia and I recently sent this letter to The New York Times:

Editor, New York Times:

Catherine Rampell’s September 7 article, “Once a Dynamo, the Tech Sector Is Slow to Hire,” mourns the recent decline in U.S. data processing jobs. She blames much of the decline on the automation of previously tedious tasks.

May we suggest one way to get those jobs back: No more automation. Ban the use of computers for data processing. Imagine how much information flows through today’s global economy in an average day. Computers handle most of the load. That costs millions of jobs.

The effects would reverberate far beyond the tech sector. The paper, pen, and pencil industries would also boom.

Companies are dead-set on doing more with less. True, that creates more jobs in the long run by freeing up resources — and employees — for new ventures. But if only they would consider doing less with more, they could create more data processing jobs.

Ryan Young and Ryan Radia
Competitive Enterprise Institute
Washington, D.C.

The Dead Weight Loss of Union Disputes

by Ivan Osorio on September 14, 2010

in Economy, Employment, Labor

At Reason Hit & Run, Tim Cavanaugh provides a good observation on the ongoing dispute between the powerful Service Employees International Union (SEIU) and its breakaway local, National Union of Healthcare Workers (NUHW), which entered a new phase yesterday, as voting began at Kaiser Permanente facilities in Northern California, for workers to decide whether to be represented by SEIU, NUHW, or no union at all.

NUHW president Sal Rosselli, who used to head SEIU’s affiliate in Oakland, has loudly complained of the SEIU national leadership’s efforts to forcibly merge his local with a scandal-ridden Los Angeles-based local. He’s got a good point. However, as Cavanaugh points out, in terms of the broader economy,  SEIU and NUHW are essentially fighting over the deck furniture on the Titanic.

[I]t’s not clear how having more choice in union leadership decisions would do much to end the exploitation of the proletariat. The more time you spend choosing between Rosselli and [SEIU President Mary Kay] Henry, the less time you have to, maybe, build some value for the people who pay you 100 percent of your income (not counting moonlighting), or even check out Craigslist to find a better job.

Even worse, your union dues may actually hurt your future job prospects, as they go to help elect and reelect politicians who support economically destructive policies intended to keep unions afloat.

For more on the SEIU-NUHW dispute, see here and here.

For more on SEIU, see here and here.

Scholarships to Study Free-Market Ideas

by Brian Simpson on September 14, 2010

in Odds & Ends

National University of La Jolla, CA has a limited number of scholarships available for three online, undergraduate courses that focus on free-market economics and the philosophical foundations of capitalism. These scholarships are being funded by a grant from the Charles G. Koch Charitable Foundation. The scholarships cover the full tuition for the courses plus the application fee to NU. These courses can be taken from anywhere in the world, as long as one has access to the internet. The courses incorporate live chat sessions in which the professor and students interact in a virtual classroom, much as they would in a traditional classroom. For descriptions of these courses, go to the following links:

ECO 401 – Market Process Economics I

ECO 402 – Market Process Economics II

ECO 430 – Economics and Philosophy

To apply for one or more of these scholarships, send your name, transcripts from your high school or university, and an essay of no more than 750 words discussing why you believe you deserve a scholarship and your future education and career plans to Dr. Brian P. Simpson. He can be contacted at:

Email: bsimpson@nu.edu

Mail: National University
11255 North Torrey Pines Rd.
La Jolla, CA 92037.

Notes: There is no deadline for these scholarships; applications will be accepted until all have been awarded. The next time the courses will run is in the spring of 2011 To receive the scholarship you will have to apply to National University and enroll in the course(s). If you have any questions, please contact Dr. Simpson.

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