Pension Promises to State and Local Bureaucrats Are a Ticking Time Bomb

October 17, 2016

Interestingly, these pension bombs aren’t limited to just Blue states.

International Liberty

America’s main long-run retirement challenge is our pay-as-you-go Social Security system, which was created back when everyone assumed we would always have a “population pyramid,” meaning relatively few retirees and lots of workers.

But as longevity has increased and fertility has decreased, the population pyramid increasingly looks like a cylinder. This helps to explain why the inflation-adjusted shortfall for Social Security is now about $37 trillion (and if you include the long-run shortfalls for Medicare and Medicaid, the outlook is even worse).

But Social Security is not the only government-created retirement problem. State and local governments have “defined benefit” pension systems for their bureaucrats, which means that their bureaucrats, when they retire (often at an early age), are entitled to receive monthly checks for the rest of their lives based on formulas devised by each state (based on factors such as years employed in the bureaucracy, pay…

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(Video) Pop Quiz: Can government run the economy?

August 8, 2016

Okay, it’s a trick question. The answer is “yes” and “no.” Yes, the government has the power to regulate almost all the economy (especially since the horrific Wickard v. Filburn case).

But it is also an emphatic “no,” because government rarely does a good job. In fact, government regulation often does more harm than good. A much better alternative is to let the economy run itself in a free market.

For Prager University, Steve Forbes explains why:

Now put down your pencils, close your exam books, and turn them in as you leave.

Class dismissed.

(Video) Lemonade Stand Economics: a basic lesson for progressives

July 22, 2016

When writing about the minimum wage or Obamacare, I’ve often made the point that, in the face of government-imposed higher costs, businesses have few choices:

  • Pass the cost on to the consumer by increasing prices
  • Reduce costs by cutting back on labor (reduced hours, automation, &c.)
  • Accept a smaller profit margin
  • Or just say “screw it all” and go out of business

The following video from Prager University makes a similar point, using that American icon, the kid’s lemonade stand, as an example:

Progressives take note. This is a lesson you need to learn.

By the way, those evil oil companies the Left likes to rail at? Their average profit margin is just above six percent. You know what industry has a larger profit margin? Law firms. They net on average a whopping 30 percent.

Maybe the government should regulate law firms? smiley thinking

Italy’s Fiscal and Demographic Death Spiral

July 5, 2016

An overly generous welfare state combined with demographic decline. There’s a recipe for national collapse.

International Liberty

European economic analysts are paying too much attention to the United Kingdom and too little attention to Italy.

Yes, the Brexit decision is important, and the United Kingdom is the world’s 5th-largest economy so it merits attention to see if there are any speed bumps as it escapes from the slowly sinking ship otherwise known as the European Union.

But one of the other passengers on that doomed ship is Italy, the world’s 8th-largest economy. And if the UK merits attention because of uncertainty on its way to a brighter future, then Italy should be getting five-alarm focus for its festering economic crisis as it descends into chaos.

Part of that crisis is quasi-permanent stagnation, as illustrated by this map showing changes in per-capita economic output since 1995.

To state that Italy is the slow student in the class is an understatement. There’s been a two-decade period with…

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(Video) Fossil Fuels, the Greenest fuels

May 15, 2016

In the Environmentalist Left’s rush to condemn the use fossil fuels and bring us all to a renewable, sustainable Paradise, they forget the good that fossil fuels have done in making possible a modern world that is far cleaner, healthier, and more prosperous than ever before. For Praeger University, Alex Epstein of the Center for Industrial Progress is here with a reminder:

Of course, many of us remember terrible smog problems in major cities, such as my own Los Angeles as recently as the late 80s. Heck, here’s what it looked like in the 1950s:

*cough* *hack*

*cough* *hack*

So, yeah, fossil fuels used with poor technology were a problem. But the tech has gotten better and the air (and water and land) has cleaned up, thanks in part to reasonable regulation.

But Green and other environmental radicals (and the companies that benefit from government-subsidized “Green” tech sales) aren’t satisfied with “reasonable.” They want to eliminate fossil fuels for a number of reasons: economic self-interest, political ideology, and even a near-religious utopianism.

What they fail to see (or see but won’t admit) is that their “solutions” are uneconomical (wind and solar just can’t make it in the market place without government’s thumb on the scale, for example), corrupt (remember Solyndra?), or keep people in less developed countries from achieving a better life for themselves in the form that they want. (Insufferably paternalistic, when you think about it.)

Sure, eventually we’ll want to transition away from fossil fuels, but that will happen only when genuinely economically sustainable (remember that word?) alternatives come along that provide us with the same benefits at at least the same cost.

Until then, we need fossil fuels. So let’s keep some perspective.

Failing State: $15 minimum wage drives clothing manufacturer out of Los Angeles

April 17, 2016
"But at least we won the election! Obama!!"

“But at least we raised the minimum wage! Yay, Jerry Brown!!”

In my posts on the minimum wage and the Left’s push to raise it ever higher, I’ve tried to point out one key truth: Labor is a cost of doing business that businesses have to account for. When costs go up, these firms have only a few choices:

  1. They can pass on the cost to the consumer, risking the loss of customers’ business.
  2. They can cut labor costs by reducing hiring, cutting back hours, laying off employees, and automating.
  3. They can decide the reduced profit isn’t worth it and close shop, costing all employees their jobs.
  4. They can move out of the jurisdiction, probably costing local employees their jobs.

The government of California recently decided to raise the state’s minimum wage to $15 an hour by 2022, an increase of 50% from today’s state-mandated rate. At the bill’s signing, the Governor said the measure didn’t make “economic sense.” (1)

One employer, at least, agrees with him:

Los Angeles was once the epicenter of apparel manufacturing, attracting buyers from across the world to its clothing factories, sample rooms and design studios.

But over the years, cheap overseas labor lured many apparel makers to outsource to foreign competitors in far-flung places such as China and Vietnam.

Now, Los Angeles firms are facing another big hurdle — California’s minimum wage hitting $15 an hour by 2022 — which could spur more garment makers to exit the state.

Last week American Apparel, the biggest clothing maker in Los Angeles, said it might outsource the making of some garments to another manufacturer in the U.S., and wiped out about 500 local jobs. The company still employs about 4,000 workers in Southern California.

“The exodus has begun,” said Sung Won Sohn, an economist at Cal State Channel Islands and a former director at Forever 21. “The garment industry is gradually shrinking and that trend will likely continue.”

When San Francisco raised the city’s minimum wage, a beloved bookstore closed shop because the cost of business had grown too high. Seattle has lost 700 restaurant jobs because the restaurant industry’s thin profit margins cannot support a $15 minimum wage.

And it’s not just current workers who are harmed: low-skill or unskilled youths looking for that first job are going to discover its harder to find one. Not only will fewer jobs be available out of the limited pool of funds set aside for hiring, but employers are going to want more for their money: employees who already have skills, who require less training. The unskilled 17 year old looking for his or her first job is going to be a lot less attractive.

Great work, legislature and governor, activists and union leaders.You’re driving businesses out of state, costing people jobs, and making it harder to find work. Well done.

They say the road to Hell is paved with good intentions. In this case, that road runs through Sacramento.

RELATED: Moe Lane notes that AA was bleeding cash from paying already-uneconomical wages.

(1) I leave it to the reader as an exercise to determine why a governor would sign a bill he says make no economic sense. Or, you can read the article.


French President Approaches Cliff, Steps on Accelerator

January 19, 2016

France has been dirigiste since Louis XIV centralized all power under him, and the French leadership has been trapped in that intellectual straitjacket ever since. The idea of lowering the burden of government and letting market forces work is probably inconceivable to President Hollande — and most of his people.

International Liberty

When I wrote back in 2012 that France was committing fiscal suicide, I should have guessed that President Hollande would get impatient and push for even more statism.

Sure enough, the BBC reports that France’s President has a new plan. The ostensible goal is to reduce unemployment, but the practical effect is to expand the size and scope of government.

President Francois Hollande has set out a €2bn (£1.5bn) job creation plan in an attempt to lift France out of what he called a state of “economic emergency”. Under a two-year scheme, firms with fewer than 250 staff will get subsidies if they take on a young or unemployed person for six months or more. In addition, about 500,000 vocational training schemes will be created.

Needless to say, if subsidies and handouts were the key to job creation, France already would have full employment.

In reality, real jobs are created

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