The stock market reacted favorably this morning when it was announced that the number of people on payrolls fell by 36,000 in February, better than the 50,000 loss expected by economists. The unemployment rate held steady at 9.7%, also slightly better than expected.
Another indicator that may have received less attention is the 15-Week unemployment rate—the percent of the labor force that has been unemployed for 15 weeks or longer and is still looking for employment. In December, 2007 this statistic stood at only 1.6%. In February, 2010, it was 363% higher at 5.8%. This, after three “stimulus” bills during the time frame is proof that the idea that we can “spend our way out of recession” is for the birds. In fact, after rising the astronomical 363%, the rolls of those unemployed 15 weeks or more has only declined by 147,000 since it peaked in November of 2009 at 8 million 976 thousand people looking for work.
The longer-term 15-week unemployment rate is most often used to detect the level of economic pain being felt in the economy. Equally important though, this statistic reveals the percent of the workforce whose skills are eroding by not being put to use. People unemployed for 15 weeks or longer are becoming less employable as time goes by. Skills deteriorate when not put to use. Therefore the chart below is alarming.
“Stimulus Bill” spending crowds out the private sector. There are more government jobs competing with private market jobs and it is not a level playing field. The government jobs are paid by the taxpayers regardless of whether their employers run them prudently because it can operate at a loss indefinitely until the government goes bankrupt and the federal spigot must be turned off. Jane Businesswoman in the private sector though has to remain profitable and compete.
Another problem with “Stimulus Bill” spending is that many workers hired by the government are paid Davis Bacon wages, which are artificially high. Therefore fewer workers can be hired, contributing to longer-term unemployment.
The solution to fighting longer-term unemployment is to put more money in the pockets of small business owners. This can be done through tax cuts such as by:
- Permanently repealing the Death Tax which keeps business from expanding and growing.
- The government should provide assurance that small business owners aren’t going to be hit with a per-worker health insurance tax.
- The tax on dividends should be abolished so that larger companies can hire with the money they now use to pay higher dividends to shareholders.
- The corporate tax rate of 15 to 38 percent should be lowered to 15 percent across the board so jobs are no longer lost overseas to other countries that have lower corporate tax rates.
Until policies such as these see the light of day, it will be nighttime in America—the unemployed will suffer and their skills deteriorate.
Yesterday, the European Commission published a paper which looked at the U.S. mandate requiring scanning of 100 percent of the U.S. bound cargo containers. The July 1, 2012, deadline for implementation is drawing nearer, and U.S. trading partners are beginning to get engaged. The conclusion of the report – that the 100 percent mandate is the wrong course for the global supply chain – is dead-on in its assessment.
The European Commission is nervous of this mandate for the same reasons Americans should be. It’s costly-and even more so because most of the foreign ports do not have the right infrastructure in place to do this kind of blanket screening. This places an even larger burden on the private sector as it attempts to do business.
The need for such a mandate was originally couched in the idea that the supply chain, and therefore cargo containers were not secure. Yet, as I put out in a recent paper, the current risk based model for container security can and does work well to spot threats in the global supply chain. Sure, more could be done to make these efforts better and more expansive-but nothing about this approach is inherently flawed. Under the new approach, however, it will be more difficult to get goods from point A to point B-a problem which the European Commission aptly recognizes will directly affect consumers.
Concerns over the turn to 100 scanning have largely fallen on deaf ears inside the United States. Members of Congress aren’t engaged on the issue or are scared that repealing such a mandate would make them look bad on security. At the same time, trading partners are more and more frustrated over 100 percent scanning-seeing it at best as a trade impediment, and at worst, straight out protectionism.
The European Commission isn’t exactly a free market champion. But it doesn’t take a dyed-in-the-wool capitalist to realize that this mandate is bad for the global economy. The global and U.S. economies are already bleeding-why should Congress shoot another bullet?