Tag: economy

California’s Attack on Gig Work Predictably Drove Workers Out of Jobs

California’s attempt at forcing gig workers to become traditional employees backfired by driving many of those workers out of their jobs.

In the wake of a new law (Assembly Bill 5) that was intended to reclassify many independent contractors as regular employees, self-employment in California fell by 10.5 percent and overall employment tumbled by 4.4 percent, according to a study released Thursday by the Mercatus Center, a free market think tank housed at George Mason University. In professions where self-employment was more common, the effects were more dramatic, and in some fields employment declined by as much as 28 percent after A.B. 5’s implementation.

Meanwhile, researchers Liya Palagashvili, Paola A. Suarez, Christopher M. Kaiser, and Vitor Melo reported finding no increase in the number of employees classified as full employees. In professions where there was an uptick in traditional employees receiving W-2 wages and benefits, those increases were not large enough to cancel out the number of self-employed workers who left jobs.

“These results suggest that AB5 did not simply alter the composition of the workforce as intended by lawmakers,” the four researchers wrote. “Instead, our findings suggest that AB5 was associated with a significant decline in self-employment and overall employment in California.”

That could have significant implications for the Department of Labor’s (DOL) recently announced attempt at duplicating California’s policy across the rest of the country.

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State Governments Promised Private Companies More than $10 Billion in Subsidies Last Year

Governments often make deals with private companies, offering generous subsidies to encourage development in their respective states. The year 2023 was unfortunately no exception.

According to a new report from Good Jobs First, a watchdog group that tracks economic development deals, 16 states promised more than $10 billion to private companies last year. The group counted 23 “megadeals,” which it defines as any agreement involving at least $50 million in subsidies to a private company.

The most spendthrift state was Michigan, which agreed to shell out $2.73 billion for three projects, including $1.7 billion to Ford Motor Company, the single largest economic development deal in the nation last year. The Center for Economic Accountability, a Michigan-based think tank that opposes corporate welfare, previously named the Ford subsidy 2023’s Worst Economic Development Deal of the Year.

Economic development subsidies are often sold with the promise that the state will recoup its initial investment in the form of greater tax revenues, as the development projects spur economic growth. Michigan Gov. Gretchen Whitmer pledged that the Ford project “has an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan’s economy are anticipated to be created for every new direct job.” A multiplier of 4.38 would be extraordinarily high, and a much more realistic number would be closer to 1.5 or 2.

When broken down by the number of jobs the subsidies are supposed to directly create, the math is still unfavorable. Michigan’s $1.7 billion investment, intended to “create 2,500 good-paying jobs,” works out to a staggering $680,000 per job, for which state taxpayers would be on the hook. (Ford has since announced it would be “re-timing and resizing some investments,” which included paring back its project in Michigan and lowering its job creation goal to 1,700).

Good Jobs First noted in its report that 18 of the deals announced last year included “job creation targets,” for a total of 34,928 jobs promised. When compared against the amount of state funding promised in return, though, that works out to an average subsidy of $262,800 per job.

Among the other most egregious examples on the list, Amazon received property tax exemptions worth $1 billion over 15 years for its Oregon data centers. At the time, Good Jobs First noted that Amazon—which recorded $4.3 billion in profits and $524.9 billion in revenue last year—”hasn’t said how many jobs it will create, but the program under [which] the tax breaks were approved requires just 10 jobs per project.”

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Protectionism Ruined U.S. Steel

Few people, and even fewer senators, would blink an eye at the news that the 690th most valuable company in the United States was being sold.

Unless, as is the case, that company happened to be named “U.S. Steel.”

In response to last month’s news that U.S. Steel would be purchased by Japan-based Nippon Steel, a bipartisan group of senators—including Sherrod Brown (D–Ohio), John Fetterman (D–Penn.), Josh Hawley (R–Mo.), Marco Rubio (R–Fla.), and J.D. Vance (R–Ohio)—have condemned the decision. The three Republicans have gone a step further by formally asking the Biden administration to block the deal because it represents a supposed threat to national security. As a political matter, the reactions to the sale of U.S. Steel have served as a nice reminder that the impulse to intervene in the private affairs of publicly traded companies runs across both major parties.

As a matter of economic policy, however, those senators have completely missed the point. More government intervention is not going to save U.S. Steel. Indeed, decades of protectionist policies seem to have contributed to its downfall.

“Arguably, US Steel has been a disappointment since the day it was formed,” writes Brian Potter, a senior infrastructure fellow at the Institute for Progress, in his Construction Physics Substack newsletter. “The company’s large size made it unwieldy to manage, and it was late to every major advance in steelmaking technology of the last 100 years, from continuous rolling to the basic oxygen furnace to the minimill….As far as I can tell, no major steelmaking technology over the last century came out of US Steel.”

Though U.S. Steel enjoyed global dominance in the aftermath of World War II, in no small part because the war had wrecked large portions of Europe’s and Japan’s industrial bases, it was already on the decline by the 1960s and early 1970s. After Nippon—the company now poised to buy out what remains of U.S. Steel—surpassed it as the world’s largest steel company in 1971, U.S. Steel responded “not by trying to improve their operations, but by demanding government protection from ‘unfair’ foreign trade practices,” writes Potter.

Thus began a 50-plus-year effort by the federal government to prop up U.S. Steel. Those interventions have taken many forms, including “hundreds of import restrictions; tens of billions of dollars in state, local and federal subsidies and bailouts; exemptions from environmental regulations; special ‘Buy American’ rules just for integrated steelmakers like U.S. Steel; and federal pension benefit guarantees,” wrote Scott Lincicome, vice president of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, in a 2021 rundown on how protectionism had failed American steel companies and their employees. Even before President Donald Trump slapped 25 percent tariffs on nearly all imported steel, about half of all anti-dumping tariffs imposed by the federal government were aimed at various types of foreign-made steel, according to Lincicome.

What has all that government aid done for U.S. Steel? Today, the company makes about one-third as much steel as it did in the mid-1950s and employs about 10 percent as many people as it did during its heyday. U.S. Steel was dropped from the S&P 500 in 2014 and ranked as the 690th most valuable company based in the United States before the Nippon purchase was announced. As Potter notes, that means U.S. Steel ranks behind the Texas Roadhouse steakhouse restaurant chain and employs around the same number of people as Chewy, the online pet care delivery service.

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‘Severe revenue decline’: California faces a record $68 billion deficit — here’s what is eating away at the Golden State’s coffers

California is dealing with a revenue shortfall partly due to a delay in 2022-2023 tax collection. The IRS postponed 2022 tax payment deadlines for individuals and businesses in 55 of the 58 California counties to provide relief after a series of natural weather disasters, including severe winter storms, flooding, landslides and mudslides.

Tax payments were originally postponed until Oct. 16, 2023, but hours before the deadline they were further postponed until Nov. 16, 2023. In line with the federal action, California also extended its due date for state tax returns to the same date.

These delays meant California had to adopt its 2023-24 budget before collections began, “without a clear picture of the impact of recent economic weakness on state revenues,” according to the LAO.

Total income tax collections were down 25% in 2022-23, according to the LAO — a decline compared to those seen during the Great Recession and dot-com bust.

“Federal delays in tax collection forced California to pass a budget based on projections instead of actual tax receipts,” Erin Mellon, communications director for California Gov. Gavin Newsom, told Fox News. “Now that we have a clearer picture of the state’s finances, we must now solve what would have been last year’s problem in this year’s budget.”

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EVERYONE LOVES A GENEROUS GOVERNMENT UNTIL THEY HAVE TO PAY FOR IT

Governments, like individuals, can spend liberally with great generosity, or they can be frugal. Everyone receiving government money loves the state’s free-spending generosity, as it is “free money” to the recipients.

But there is no such thing as truly “free money,” a reality discussed by Niccolo Machiavelli in his classic work on leadership and statecraft, The Prince, published in 1516. In Machiavelli’s terminology, leaders could either pursue the positive reputation of being liberal in their spending (not “liberal” in a political sense) or suffer the negative reputation of being mean, i.e. miserly, tight-fisted and frugal.

Machiavelli pointed out that the spending demanded to maintain the reputation for free-spending liberality soon exhausted the funds of the state and required the leader to levy increasingly heavy taxes on the citizenry to pay for the state’s largesse.

Once we examine this necessary consequence of liberal spending, it turns out the generous government is anything but generous, as it is eventually forced to impoverish its people to support its spending.

It is the miserly leader and state that is actually generous, for it is the miserly leader / state that places a light burden on the earnings and livelihoods of the citizenry.

As Machiavelli explained, taxes and the inflation that comes with free spending both rob everyone, while the state’s generosity is a political process that necessarily distributes the largesse asymmetrically:

If he is wise he ought not to fear the reputation of being mean, for in time he will come to be more considered than if liberal, seeing that with his economy his revenues are enough, that he can defend himself against all attacks, and is able to engage in enterprises without burdening his people; thus it comes to pass that he exercises liberality towards all from whom he does not take, who are numberless, and meanness towards those to whom he does not give, who are few.

The profligate state and leader fail, for their resources are squandered.

We have not seen great things done in our time except by those who have been considered mean; the rest have failed. A prince, therefore, provided that he has not to rob his subjects, that he can defend himself, that he does not become poor and abject, that he is not forced to become rapacious, ought to hold of little account a reputation for being mean, for it is one of those vices which will enable him to govern.

Machiavelli understood that the positive reputation generated by profligacy decays as quickly as solvency. Everyone loves getting “free money” from the state until the bill comes due: the decay of purchasing power (i.e. inflation), higher taxes and fees, and the ever-increasing burdens of interest to be paid on soaring state debts that squeezes out all other spending.

And there is nothing wastes so rapidly as liberality, for even whilst you exercise it you lose the power to do so, and so become either poor or despised, or else, in avoiding poverty, rapacious and hated. And a prince should guard himself, above all things, against being despised and hated; and liberality leads you to both. Therefore it is wiser to have a reputation for meanness which brings reproach without hatred, than to be compelled through seeking a reputation for liberality to incur a name for rapacity which begets reproach with hatred.

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Has A “Silent Depression” Already Started In The United States?

The Biden administration and the corporate media are telling us over and over that the economy is just fine, but the term “silent depression” has been going viral on TikTok.  Housing, vehicles, food and just about everything else that we spend money on is far more unaffordable today than it was during the Great Depression of the 1930s.  A realtor in Florida named Freddie Smith posted a video on TikTok with some absolutely startling numbers about the cost of living in the United States today, and that is what started the “silent depression” trend…

TikTok user Freddie Smith, a realtor based in Orlando, posted a video in September claiming that the U.S. economy is in what he calls a “Silent Depression.” In the video, which has amassed nearly 800,000 likes, Smith compares the average 2023 salary and basic costs to those of the Great Depression to highlight the growing cost-of-living crisis in the country.

“If you look back to the Great Depression, the house was only three times the average salary. Now, it is eight times the average salary,” Smith said. “The car was 46% of the salary, the car today is 85% of the salary. And here’s the craziest part, the rent was 16% of the average salary, it is now 42% of the average salary.”

Of course he is right on target.

There is a reason why 62 percent of the country is currently living paycheck to paycheck.

The cost of living has become incredibly oppressive for most Americans, and nobody can deny that reality.

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62 Percent Of Americans Live Paycheck To Paycheck And The Bottom Of The Economic Food Chain Is Already Collapsing

Thanks to a soaring stock market, the wealthy are feeling very good about things right now, but the rest of the country is really hurting.  Homelessness is rising at the fastest pace ever recorded, the number of children that are suffering from hunger is rapidly growing, and more than 60 percent of all Americans are living paycheck to paycheck.  The mainstream media continues to insist that the economy is in good shape, but how can that possibly be true if nearly two-thirds of the entire nation is just barely scraping by?  According to brand new numbers that were just released, the percentage of U.S. adults that live paycheck to paycheck has actually increased by 4 percent just since the month of March…

  • Sixty-two percent of adults in December said they live paycheck to paycheck, up from 58 percent in March.
  • Forty percent of consumers living paycheck to paycheck have super-prime credit scores.
  • Fifty-seven percent of consumers who own credit cards are living paycheck to paycheck.

Yikes!

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Narrative vs. Reality

As the march towards election day 2024 approaches, the narratives that define the election season take shape now. The current battle is over the economic narrative. Journalists and pundits are disturbed that Americans do not realize how things are better today than they were in January of 2021. Why can the plebeians not see the contorted statistical truth? This is part of the failed return to normalcy narrative that was the sales pitch in 2020, but it is one that the managerial class is not a monolith on and this makes the most loyal regime elements upset. This gap between message and reality on the ground is an issue and will be a growing issue as the regime is desperate for legitimacy.

In the complex tapestry of political regimes, the manipulation of economic statistics stands as a formidable tool for those seeking to maintain a facade of stability and control. China’s statistics have been mocked for years as detached from reality or unreliable in an effort to sell to Chinese citizens and potential foreign clients that everything is growing fast. The CCP has delivered to millions, but maybe not as fantastic as they proclaim. We can see the intricate interplay between questionable legitimacy and the strategic concealment of recessions, unraveling the motives behind such actions and their profound implications for both governance and the governed.

At the heart of this deceptive play lies the inherent connection between economic performance and political legitimacy. A regime faced with doubts about its mandate to govern may resort to fabricating economic indicators to project an image of prosperity. By doing so, it seeks to bolster public confidence, portraying itself as a capable steward of the nation’s well-being. At this point in American history with the gulf between the ideology of the governing class and nearly half of its internal subjects, delivering on prosperity is a major support for their continued rule.

One primary motive for such manipulation is the fear of unrest and dissent. A government with questionable legitimacy understands that economic downturns can serve as potent catalysts for public discontent. A recession brings with it rising unemployment, falling incomes, and a general sense of insecurity. By concealing the true extent of economic challenges, the regime attempts to maintain a semblance of normalcy, suppressing the potential for mass protests or calls for political change. Americans know the federal government will jail those who walk around the Capitol during a riot, but could they throw thousands more into jail for basic protests.

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Man In Charge of Inflicting Pain on U.S. Economy Indicates He Might Finally Be Satisfied

The chairman of the Federal Reserve announced Wednesday that he was satisfied by what he had seen. At the latest Federal Open Market Committee meeting, Jerome Powell effectively said that he believes the worst of the country’s inflation crisis is likely over, meaning that he was ready to end the era of simultaneous rising prices and interest rates, which has made buying everything from food to homes more expensive while also encouraging mass layoffs.

Prices aren’t likely to return to pre-pandemic levels ever again, at least across the board. But Wall Street doesn’t care much about that, and it pulled out the champagne and started celebrating like it was the 1980s. The Dow Jones Industrial Average hit a record high, and so many other numbers went up that Bloomberg described it as the “the best Fed day across assets in almost 15 years.” Treasuries, currencies, bonds, you name it, it probably went up. 

The vibe on CNBC is being described as “giddy.”  “We’re having a party,” Charles Schwab’s chief fixed-income strategist told Bloomberg. “JEROME’S IN THE HOUSE,” one giddy member of the Wall Street Bets community posted alongside a meme of the Fed chair printing cash. 

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The Crippling Economic Costs Of Green Energy Subsidies

The green energy subsidies in the Inflation Reduction Act (IRA) have been justified by the Biden Administration as a booster of U.S. economic growth and jobs.  But when the subsidies are tallied and the overall impacts evaluated, the IRA is a job and economic growth killer. 

Under the IRA, the lion’s share of subsidies will be paid to wind and solar developers.  The subsidies will not expire until electric industry carbon emissions fall by at least 75% below 2005 levels, after which they will gradually decrease.  Even the most optimistic forecasts prepared by the U.S. Energy Information Administration (EIA) show that this will not occur until at least 2046.  Thus, the subsidies for wind and solar will continue unabated for decades.  In total, the subsidies will far exceed what the U.S. government spent in today’s dollars to combat the Great Depression.

The single largest subsidy is the federal investment tax credit (ITC).  Most wind and solar projects will be able to claim a minimum 30% ITC, plus be eligible for an additional 10% credit if the projects rely on domestic manufacturing for components.  

The EIA’s optimistic forecast projects about 900,000 megawatts (MW) of solar photovoltaics, 350,000 MW of onshore wind turbines, and 24,000 MW of offshore wind by 2046.  If all of this generation is built, it will result in direct ITC subsidies totaling between $500 billion and $1 trillion, depending on construction costs.  The greater the costs, the larger the subsidies.  Although wind and solar proponents still claim costs are falling, the reality is the opposite.   Offshore wind developers, especially, are clamoring to renegotiate contracts they signed previously, including guaranteed price adjustments for increasing costs, and relaxing the domestic content requirement so they can claim the additional 10% ITC.

Despite spiraling deficits – almost $2 trillion in the fiscal year that ended this past October – green energy subsidies will be financed with still more government debt.  With the increase in interest rates to normal levels, financing costs will soar, adding an estimated $500 to $800 billion to the bill costs, almost as much as the subsidies themselves. 

The envisioned spending and subsidies for green energy, several hundred billion dollars annually just for wind and solar generation, will distort energy markets.  First, they will crowd out more productive private investment in the energy sector and reduce the resources available for more efficient forms of generation, especially small modular reactors.  Second, as the deficit increases further, higher interest rates will crowd out private investment in more productive private sectors of the economy.

Along with the Administration’s push to “electrify” the economy, such as higher vehicle mileage standards that act as a de facto mandate for electric vehicles and proposed bans on natural gas appliances, the result, as has been experienced in Europe, will be soaring electricity prices.  Those higher prices will reduce economic growth and employment, far more so than the green energy investments can boost it.  Although the subsidies will benefit wind and solar developers, but the overall economic impacts for the country will be crippling.

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