If Your State Has High Unemployment, Read This

Forbes Magazine posted a story last Tuesday about what has happened to the North Carolina economy. The change began in 2013 (just before we got here). At that point the North Carolina General Assembly was controlled by Republicans and a Republican was governor.

The article reports:

Unemployment insurance (UI) reform in North Carolina continues to be the gift that keeps on giving. The 2013 UI reform, made possible by the Republican-dominated General Assembly and Governor Pat McCrory, will enable $240 million in tax savings for state employers in 2016 alone, thanks to a UI Trust Fund that has grown to over $1 billion. In addition, the Tar Heel State’s 2013 tax reform bill will once again lower the corporate income tax rate, from 5% to 4% (it was 6.9% prior to 2013).

Please follow the link above to read the entire story, but here are a few of the highlights:

In February of that year, Governor McCrory signed a bill that reduced the maximum amount and duration of unemployment benefits to levels in line with those of neighboring states. This triggered the cutoff of long-term federal UI benefits being moved up by six months.

…Ironically, in his 2010 economics textbook, Krugman (Paul Krugman) expressed an opposing sentiment. “Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect,” wrote Krugman, explaining that granting more generous benefits “reduces a worker’s incentive to quickly find a new job.”

…Due to the reforms, however, the federal UI tax hikes were halted in 2014, and dropped back to standard rates after the debt was paid off last year. The result has been significant tax relief for job providers.

The second major change in 2013 was the recalibration of DES under the leadership of former state House Speaker pro-tempore Dale Folwell. Today, the call center answers 97% of incoming calls, up from a dismal 5%, and the average appeals process has been driven down to just 74 days from seven months.

…Today, North Carolina’s fiscal health is in far greater shape than it was in 2012, thanks to bold unemployment insurance reforms that will enable an additional $240 million in tax relief for state employers in 2016. For a roadmap to UI reform, states should look no further than North Carolina, where a crackdown on fraud has saved tax dollars and early debt repayment has enabled massive savings for job creators.

The numbers above are helping draw additional businesses and jobs to North Carolina. I like that, but I also wish that other states would follow our lead. The five-percent plus unemployment rate in America is a joke–the labor participation rate is dangerously low. I am hoping for all Americans to have a chance to find the jobs they want. Following the example set by North Carolina would be a step in that direction.

Misplaced Prorities

During a period of danger and unrest around the world, the Obama Administration is attempting to balance the budget on the backs of our military. Hopefully Congress has more sense than that.

Yesterday The Hill posted an article detailing some of the proposed cuts to our military. I have no doubt that there are places in our military that can be cut, but I believe that reducing the army to pre World War II levels is not wise. I also believe that reducing benefits to soldiers who have been at war for almost thirteen years is also wrong–not to mention the veterans of previous wars whose benefits will be cut.

The Hill reports:

Lawmakers, as well as groups that represent veterans and the military, accused the Pentagon of balancing its pocketbook on the backs of soldiers and their families.

“We know the Defense Department must make difficult budget decisions, but these cuts would hit service members, making it harder for them and their families to make ends meet,” said Paul Rieckhoff, the founder and CEO of Iraq and Afghanistan Veterans of America (IAVA).

Coupled with a 1 percent ceiling on pay hikes and assuming a 5 percent annual increase in housing costs, the Military Officers Association of America estimated an Army sergeant with a family of four would see an annual loss of $1,400. An Army captain would lose $2,100, it said.

The group said those figures doesn’t account for other costs that would affect military families, such as increased prices at military commissaries because of another budget proposal and an increase in healthcare fees for military family members. 

Meanwhile, on August 29, 2013, the New York Times reported:

Paul Krugman and others attribute essentially all of the SNAP spending growth to the depressed economy. They have the general direction right – a more depressed economy will cause unemployment and antipoverty programs to spend more – but have missed the single largest factor increasing program budgets: program rules that are more generous now than they were in 2007.

Veterans benefits, Supplemental Security Income, Medicaid and Temporary Assistance for Needy Families all experienced a depressed economy, too, but they somehow managed through it without doubling their spending. Veterans benefits increased the most among these – 49 percent beyond inflation and population growth – compared with 110 percent for SNAP. (These data, which exclude administrative costs, can be found in the Bureau of Economic Analysis’ National Accounts Table 3.12.) Even state unemployment benefit spending, which is directly linked to layoffs in the economy, increased “only” 24 percent beyond inflation and population growth. (The italics are mine)

We are taking money away from people who have earned it and giving it to people who have not. Admittedly, we have to take care of the poor, but we have created a system that encourages poverty–not discourages it.

In May 2013, this chart appeared at The Blaze:

Guess How Many More Americans Are on Food Stamps Now as Compared to 10 Years Ago

As usual, the Obama Administration is punishing the producers and encouraging non-producers to continue not producing. Cuts should be made to both the administration of our food stamp and welfare programs and those receiving aid, and these programs should be redone to encourage work–not poverty. President Obama has undone the welfare reforms that President Clinton put in place during his administration. Those reforms resulted in a decrease in the welfare rolls. We need to bring those reforms back and examine those programs before we begin cutting military benefits.

Just a note. I don’t appreciate it when the President and members of Congress refer to Social Security and Medicare as entitlement programs. The government set up those programs and has been willing to take money from people who work to support them for many years. If they are entitlement programs, then the people who work should not be required to pay into them. As long as the government is taking money from working people with the promise of eventually giving it back to them, these are not entitlement programs.

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Some Wisdom Regarding The Fiscal Cliff

Marc Thiessen posted an article at the Washington Post on Monday which provided a way forward for the Republicans in the budget debate.

Mr. Thiessen states:

So what should Republicans do? Resist the call for a down payment, and insist on real tax reform as the price for any new revenue from limiting deductions. If both sides can’t agree on such reforms this year, they can do it next year. The Post reports this morning that “with tax rates set to rise automatically in January . . . Democrats say they have little incentive before then to cut a deal that falls short of their revenue goals. That means going over the cliff, at least for a short time, remains a possibility, they say.”

If Obama and the Democrats want to take us over the fiscal cliff, let them lead the way. Once the Bush tax cuts expire, every American will pay higher taxes — which means the pressure for tax reform on both sides will be even greater. By contrast, if Republicans give away the revenues from deductions and loopholes today, they will alleviate that pressure and have no revenues left to pay for a simpler, fairer, pro-growth tax code next year.

Guy Benson at Townhall.com has a different approach that also might work:

Short on good options, here’s one play GOP leaders might be able to make to regain some of the high ground and throw the White House back on its heels: Embrace Simpson/Bowles.  President Obama established a bipartisan debt commission with great fanfare in 2010.  Its leaders were Alan Simpson, a former Republican Senator, and Erskine Bowles, President Clinton‘s former Chief of Staff.  The panel was tasked with engineering a solution to right America’s fiscal ship.  In the end, they produced a set of recommendations that received the blessing of a majority of its members.  The commission’s blueprint drew a fair amount of criticism from conservatives, but was roundly blasted by liberals.  Liberal malcontents like Paul Krugman torched the plan with noteworthy ferocity.  The president shelved the recommendations, and they’ve been collecting dust ever since.

Bringing back Simpson/Bowles is not a great idea, but it is a good starting point for the debate.  Simpson/Bowles calls for a 3-to-1 ratio of real spending reductions to tax increases and caps federal spending as a percentage of GDP at 21 percent. This is a great place to start.

The thing to remember here is that it is not in the interest of Washington bureaucrats to cut spending at all–their power comes from growing the budget. Unless the Congress and the President are backed into a corner with no escape route, they will not cut spending. They will pledge to cut spending down the road, but it will never happen. Going over the fiscal cliff or passing Simpson/Bowles may be our best options at this time. Elections have consequences. Until we elect people who actually want to cut spending, spending will not be cut.

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The Little Engine That Could

Most of us grew up hearing the story of the little engine that could–the train that made it up the incredibly steep mountain despite being small and seemingly insignificant. In today’s economic news we have another little engine that could.

Investor’s Business Daily posted a story yesterday about the economic success story of the small country of Estonia. Paul Krugman posted a short article in the New York Times on Friday stating:

Jörg Asmussen is Germany’s man at the ECB, which means that what he says matters. Here’s his speech in Riga earlier this week, asserting that the Baltic experience shows that austerity and internal devaluation actually do work. Notice that his evidence comes entirely from one year of fairly fast growth after an incredible decline. So it’s important to say that this proves very little.

One of the things to note about many liberals is that when the facts disagree with their theories, they dismiss the facts as irrelevant. Anyway, Estonian President Toomas Hendrik Ilves responded to Mr. Krugman’s comments with a number of tweets (follow the above link to Investor’s Business Daily to read some of them), but the facts tell the true story.

The article reports:

Estonia did the opposite of what Krugman prescribed over three years, and as a result shook off recession and returned to high economic growth. It now stands like a colossus disproving Krugman’s policy prescriptions.

America, on the other hand, has been following Mr. Krugman’s advice for three years. What have we got to show for it? Results matter.

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Fear Mongering For Fun And Profit

Yesterday’s Washington Examiner posted an editorial by the newspaper staff on the practice of using fear to block Republican attempts to cut the federal budget.

The editorial states:

“To be a little melodramatic, the budget would kill people,” New York Times columnist Paul Krugman recently told CNN about House Budget Chairman Paul Ryan’s Path to Prosperity. “No question.” With the Federal Emergency Management Agency’s disaster relief fund set to run out of money Thursday, and with none of the federal government’s 12 appropriations bills signed into law so far, you can expect a lot more melodramatic quotes like this one in the coming weeks.

Oddly enough, when faced with a Congress that was not going to give it more money, the Federal Emergency Management Agency (FEMA) discovered that it actually did have enough money to finish the fiscal year.

The editorial reminds us that sixteen years ago, when the Republican Congress was debating welfare reform, Bob Herbert in the New York Times warned its readers that welfare reform “would hurt many people, would kill some and would help no one.”

The editorial at the Washington Examiner reviews the history:

Herbert could not have been much farther from the mark. Two years later, after President Clinton had signed welfare reform into law, New York Times journalist Jason DeParle reported that “welfare rolls have fallen more than 40 percent in three states that have been among the most energetic in urging recipients to work: Oregon, Wisconsin and Indiana. And caseloads have declined by 25 percent or more in 16 other states.” DeParle’s article said nothing about people dying in the streets of Portland, Milwaukee or Indianapolis.

Please follow the link to the Washington Examiner editorial for more examples of using fear to avoid reducing the size of the federal government. The cure for fear is knowledge, and it is time for American voters to understand the negative impact on America of an ever-increasing government.

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Why Texas And Rick Perry Are Being Attacked From Many Directions

"The Honorable Rick Perry (front right), ...

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The establishment Republican party does not want Rick Perry to run against President Obama in 2012–that is illustrated by the recent buzz about Paul Ryan or whether Sarah Palin would run. The Democrat party (and the liberal media) do not want Rick Perry to run–that is illustrated by recent attacks on both Texas and Rick Perry. For example, on August 22, Paul Krugman wrote an article in the New York Times about the low wages in Texas and the fact that job growth should have been better than it was.

He stated:

First, the debate over the alleged Texas miracle is not over whether Texas is in fact a miserable failure. All the critics need to show is that Texas is not in fact the miracle Perry claims. And it isn’t.

Second, defenders of the miracle claims seem remarkably unwilling to confront the key argument. People like me point out that Texas has not, in fact, been immune to the recession. Since there’s a long-term shift of population and jobs to Texas, you’d expect job growth in Texas to be higher than in the rest of the country even in a recession, and the key question is whether that growth has been sufficiently high to keep up with population — and it hasn’t.

Well, the Texas Public Policy Foundation begs to differ. They posted a rebuttal to one of Mr. Krugman’s attacks on the Texas economy. In their rebuttal, they point out:

 It’s a better bet that almost 1.9 million people have fled New York and Massachusetts over the last decade because they couldn’t find a job in those states, and that many of them came to Texas because there were jobs here for them because of our model of gover­nance incorporating low taxes and spending, a predictable, low level of regulation, and a sound civil justice system—with minimal federal interference.

From this perspective, the Texas Miracle is that Texas’ unemployment rate is only 8.2% after a net inflow of 781,542 job seekers and their families have come here looking for work. Not to mention the demand for work created by international migration and normal population growth. While New York’s 8% unemployment rate come after 1.5 million people left the state.

The Texas Model has led to strong economic growth for our state, and it can do the same for the entire country.

What are these attacks about? Under Rick Perry, the State of Texas has instituted tort reform. The state has also recently passed a law that requires the loser in a lawsuit to pay the court costs. Needless to say, this prevents a lot of unnecessary lawsuits and makes less work for lawyers.

These are the three top groups that contributed to the Democrat party in 2010:

 Candidate Committees     $58,923,992

 Retired                               $33,819,391

 Lawyers/Law Firms          $29,914,538

Rick Perry is a threat to both the Republican establishment and the Democrat party. His election would put tort reform nationwide on the table and might even result in a more reasonable court system.

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