Thoughts for Labor Day

I think it’s appropriate to focus on jobs for Labor Day.

The good news is that employers did add new jobs last month. Unfortunately they didn’t add nearly enough to make a dent in unemployment. Even as private employers are adding positions, cash-strapped state and local governments have had no choice but to cut them. Drowning government in the bathtub sounds great until you realize there’s lots of things government does to make the private sector possible.

The flipside of employment is, of course, unemployment. Real unemployment is much higher than the “headline” number. That’s because the number you hear on the news doesn’t include people who have given up on jobs, people who went back to school because there’s no jobs/to get training/hoping the market will be better when they graduate, part time workers who would rather work full time, etc.. Of course, it’s also alarming how long many of the unemployed have been unemployed.

It doesn’t help matters that the current administration thinks they can create jobs by encouraging companies to borrow money. Banks are still being stingy and real property is no longer something with which truly small businesses can secure loans. Besides, what bank in their right mind is going to lend money to some unemployed guy who figures he can start his own business?

We’re one of the only modern countries with no maternity leave, no mandated sick leave, and no guarantee of health care (merely an upcoming mandate that we pay the profitable insurance companies that created our unaffordable system). We also trail every modern nation when it comes to vacation time. Heck, some people have to fight for their lunch break!

Let’s hear it for Labor this Labor Day.

Acute Angle: Looks like the Review Journal is going to actually sue Sharron Angle for copyright infringement!

In closing: any prison term can turn into a death sentence; why people believe lies; fired for being paid so little she qualifies for food stamps; advice for college freshmen; Enron exec to stay in prison during appeal (good!); this is not good; Thank you, Digby, for saying what I’ve said for years, If Social Security is running out of money, how is less money supposed to fix it??; parents’ worries vs children’s actual risks; Abigail Disney on the Estate Tax; VW wants to be #1; on debt; I wouldn’t treat a dog this way; “Moby Dick with Dragons“; on racism, bad neighborhoods, and the news; and Mac Vs. PC.

Senate Republicans Acting Like Toddlers

Or, Senate Decides its Just Fine to be a Wholly Owned Subsidiary of the Fortune 500 and Special Interests.

Seriously. The Senate voted 57 to 41 on largely party lines to defeat what Harry Reid called “a bill whose principles both parties once supported and that 9 in 10 Americans want us to pass,” despite the fact that none other than the Supreme Court encouraged Congress to clarify the law on required disclosure of political donations.

Color me disgusted. They are in effect saying “NO! I want candy for dinner and you can’t stop me!”

Now don’t get me wrong, I think the disclosure requirements shouldn’t have loopholes for the NRA or unions. Then again, I honestly think you should have to demonstrate that you can actually legally vote for a candidate to give them money! Still, this act was a lot better than nothing. And as for Senator Snowe’s criticism that it was written too fast? How quickly she forgets how fast the mammoth pile of legislation known as the PATRIOT Act was passed. Where were her objections to swift legislative answers to problems then? Oh yeah, buried under a blanket of largely unfounded fear that the terrorists were going to try to get us again any moment now.

Got a Republican Senator? Remember come November.

In Closing: Goldman shows us where the money went; next time somebody talks about how great it would be to gamble invest Social Security money in the stock market, remember these 10 stock market myths from, of all places, the Wall Street Journal; No, I do not want bacon in my martini!; Susie‘s right again; “The Special Inspector General for Iraq Reconstruction says the US Department of Defence is unable to account properly for 96% of the money.”; employees becoming as mercenary as their bosses (no wonder); housing consolidation; “Document Leak May Hurt Efforts to Build War Support” (no really? D’ya think??); open letter to Lindsay Lohan from the ACLU; Angle Update; health insurance and small business; and a pile of big yellow dinosaurs that won’t die.

The Latte Economy

Please bear with me as some issues are simplified for clarity and length.

The American Economy has evolved a lot in the 234 years since the Declaration of Independence. We’ve been an agrarian economy. At times our economy has been driven by various commodities such as gold or steel; in fact, it is still widely thought that Nevada became a state because the Union needed a source of silver (and electoral votes) during the Civil War.

By the end of the 19th century, the ground was laid for the United States to become a real economic superpower. Instead of relying foodstuffs and commodities that were in some ways an accident of being a physically huge nation, worked by a growing workforce with plenty of ambitious immigrants buying into rhetoric of a “land of opportunity”, manufacturing came to the forefront. At the same time, the Gilded Age gave way to the Progressive Age; the standard of living rose for the working class not because the Tycoons were philanthropic, but because workers demanded things like living wages and the 40 hour work week that some of us still enjoy today.

Henry Ford, racist and antisemitic man that he was, did have a flash of genius when he decided to pay workers enough that they could buy his product, and enough time off to enjoy using it. Not only did it increase the number of potential buyers, he found that employee turnover plummeted. Other employers and competitors had to follow suit, and America now had quality finished goods to export.

At some point, “American” manufacturers realized that they could have their products made in countries with lower labor costs, put it on a boat to the United States, and still make more money selling it here, even if they had to discount the price a little bit! They could pull this off at least in part because even if they were paying a wage that was above the local average, it was still cheaper than American labor as they weren’t paying for retirement benefits or health insurance plans, they weren’t paying any payroll taxes or workers comp insurance on those employees, and things like environmental laws or worker protection laws were almost non-existent. To top it all off, desperate third world nations were sometimes willing to make financial incentives to build a factory and create what they saw as jobs of the future. International treaties such as NAFTA sped this process along. The best part of this was that the people at the top made more money, which in turn gave them more power.

But don’t worry about the factories closing, American students were told, you don’t really want to work in a dirty, smelly, dangerous factory all day, do you? No of course not! There is a future for you in information and service! See all these new computers? Somebody has to run them, and write programs in languages like COBOL or FORTRAN for them. Somebody has to figure out where all this information we are creating is, so there will be a need for people like research librarians and file clerks. And hey, worst case scenario, somebody still has to flip burgers and sack groceries.

Of course the problem with a lot of that “information economy” work is that it can even more easily be farmed out overseas. You don’t even have to get a finished product shipped back; just upload it to the server and it doesn’t matter whether it was compiled in San Francisco or Calcutta. Sure there are issues that come up with language and cultural gaps. Oops and I guess they don’t really have even similar data protection laws. But hey, it’s cheap.

And producing cheaper goods and services, we are told, is just the only way they can compete and give us the low low prices the American consumer demands. Of course there’s little talk about the reason the American consumer demands it: his wages just don’t go as far as they used to go.

So we don’t produce very much in the way of goods anymore, very little of the stuff you use every day is “Made in America, even if you wanted to buy American made products you can’t, the only thing we really export is money, at times we don’t even have a trade surplus in foodstuffs anymore, industrialized nations are busy plundering Africa for diamonds and rare minerals, construction is off sharply due to the real estate crash, and even those high-tech information jobs we were promised were the future are really some other country’s future.  That leaves us with what is cheerily called a “service economy,” because “service” is the only thing you can’t do just as well from a thousand miles away.

And some unknown portion of this “service economy” is actually an underground economy of work performed at below minimum wage, with little thought to workplace safety, often by undocumented immigrants who fear deportation if they speak up. Frustratingly, in addition to some “conservatives,” even some “liberals” and “progressives” say we “need” these laborers. After all, they tell us, who do you expect to mow our lawns, pick our produce, and clean our floors, duh.

What does that leave for Americans who want a “living” wage at a legal job? A short list of “opportunities” such as the small number of professions that can’t be done from overseas (e.g., doctor, lawyer, nurse, teacher), selling goods imported from overseas, the grocery business, the hospitality industry, and food service. So I call the “service economy” more of a “latte economy”; at least Starbucks has employee benefits.

The thing is that we can’t really sustain a whole economy on that. We can’t run a country on selling one another lattes and Chinese made shoes forever. To have a vibrant and durable economy, we have to make something tangible that won’t all too soon be gone.

To get out of this economic mess, we must make things in this country that last, that people want, that people can afford, and that people in other nations might conceivably want. Somewhere out there are Americans with ideas about what those could be, but they are stymied by a lack of funding, and a system rigged against production and anyone who wants to play by the rules. But it’s going to take more than some tax breaks; that only helps when a business is profitable enough to owe taxes already. And it’s going to take more than lip service about government contracts; you have to be big enough to complete such a contract before you can get one. It’s going to take a leveling of the playing field so that start-ups can get working capital, develop products, and compete.

The Latte Economy must be replaced by something sustainable if the United States is to continue as a viable country. We can’t continue to export our money forever; at some point we will run out.

Nice of him to notice, and Economic Bonus Round

I am glad to see someone with a high profile speaking out on this, and I sincerely hope other journalists start talking about it.

Now, about that economy.

The nicest thing I can say about the United States economy right now is that unemployment isn’t as bad as it is in much of Europe. Our economy lost jobs last month — and only partly because some of those temporary Census workers were let go — but the really awful part is that the number of workers went down. It isn’t that we had an abnormal number of people die or retire or anything like that, it’s just that over a half million people gave up on trying to find work. And that’s why the official unemployment rate went down.

Of course, if you just happen to have the right set of highly technical job skills, there are plenty of jobs. But — as Jill so ably points out — somehow or another businesses don’t think they should actually have to train employees to use very specialized equipment. I guess they are waiting for the “Qualified Employee Fairy” to stuff resumes under the door.

It’s also worth pointing out that the SBA is running out of money again, which means it will be even harder for small businesses to get money to ramp up operations and create jobs. I am no supporter of the SBA — everyone I’ve ever known that has ever talked to them has ended up with an application for a second mortgage — but this is crazy.

So when all is said and done, I think that more than being “still in the gravitational pull of the Great Recession” and perhaps headed for a “double-dip recession,” it is more intellectually honest to say that from the standpoint of the typical American, there is no recovery: we still aren’t finding jobs, we still are having trouble paying the mortgage, we are still declaring bankruptcy at an alarming rate. Fine, maybe our largest corporations are still making plenty of money, but without the American consumer having money in pocket to buy goods and services, GDP growth can only be somewhere between shaky and an illusion.

In Closing: Uncle Shelby; turns out the kids are bored and not learning the things they should; on the newly revised dietary guidelines; fun with Google auto-complete; biggest banks in the world (and the ones that don’t exist anymore; and please, please drive safely this weekend.

Shorties Todd

Well, “free” does appear in the title: someone is suing FreeCreditReport.com for charging them a monthly fee for credit monitoring in order to get that “free” credit report.

How can payrolls and the unemployment rate both go down at the same time?“: More than you want to know about how those figures are manipulated and tortured.

Data bears out common sense: Layoffs are often very bad for the companies that make them. Not only are there severance costs and bad morale (duh), it’s harder to hire back good people when market conditions improve.

Speaking of employment: The President is still of the opinion that small business hiring can and must get us out of this recession. Specifically, he said “Government can’t create these businesses, but it can give entrepreneurs the support they need to open their doors, expand, or hire more workers.” And what does he want to do about it? He wants to expand a couple of SBA programs designed to help well established businesses that already have debt. You know what would really help small businesses? Leveling the playing field with large businesses when it comes to taxes. Dave’s point is that only profits get taxed, which benefits large companies rather than small ones; tax cuts benefit big businesses while shafting the government that needs taxes to run. But let’s face it, Joe’s Hardware Shop has no leverage with city hall, but Wal-Mart can threaten to open in the next town over unless it gets tax breaks.

5th Amendment takes a beating: apparently the Obama Administration reserves the right to assassinate Americans overseas with “special permission.”

Makes me wonder why I bother to pay my mortgage: Here’s your real “phantom inventory,” banks refusing to foreclose on homes where the owner is well over a year in arrears. People are paying credit cards ahead of the mortgage now, which makes sense in a way. Financial planners have always said to pay down your high interest rate debts first! And, well, if the mortgage company is unlikely to foreclose, what incentive is there to pay?

Shackleton’s Whiskey: it’s been freed from ice near the south pole, and sent off for analysis and hopefully recreating lost liquor formulas.

Speaking of drinking: did you know that a 7-11 Double gulp is twice the size of what your stomach should reasonably be able to hold? And, at 64 oz, it’s the equivalent of 8 servings of soda.

And speaking of serving sizes: the FDA wants to crack down on misleading serving sizes on nutrition labels. You know, the ones that say a bowl of cereal is 2 servings, or 6 chips is a serving?

Glad to see someone holding the banks accountable: Cuomo has filed a lawsuit against B of A and several of it’s executives, charging that they hid information from shareholders and lied to the Feds to get bailout money.

And last but not least: a lesson about inflation.

Stay warm and dry, wherever you are.

A Rock, a Hard Place, and a Pyramid

Today I saw an interesting pair of articles. First, it seems that many of our unemployed and underemployed neighbors are starting their own businesses. That really is good news, because some small percentage of those businesses will eventually be employers. It’s really hard to run a business even in good times, and these people are to be commended for their ability to take a lemon of a situation and try to make some lemonade.

But there’s bad news. Banks have collectively pulled a thousand million dollars of funding from small businesses last November alone. Here’s a great quote, emphasis mine:

The 22 banks that got the most help from the Treasury’s bailout programs have cut their small business loan balances $12.5 billion since April, when the Treasury began requiring them to file monthly reports on the tally. The banks’ total lending has fallen 4.6% in that seven-month period, to $256.8 billion.

As Wall Street megabanks return to health — and celebrate with lavish bonuses — President Obama and his administration have been pushing financiers to help spur a Main Street recovery. Small business owners are still reporting difficulty finding banks willing to extend the credit they need to launch, run and grow their ventures.

So to review: more small businesses and less money being lent to them. That is a recipe for failure. These are not the sorts of businesses that can generally get venture capital, and these business owners certainly can’t get home equity loans right now. And frankly, all too few of us have anything in the way of savings.

But wait, there is one kind of business opportunity that doesn’t require lots of capital outlay. Start-up fees are generally small and ongoing costs modest. Some of these opportunities don’t even require the small business owner to carry inventory. I am talking about multi-level marketing, or MLM for short. I’ve been offered multiple “opportunities” in the last 6 weeks, including cold calls, so it’s heavy on my mind.

Disclaimer: my parents used to be Amway distrubutors, and I am an Independent Beachbody Coach. I will be sitting for the ACE Certified Personal Trainer exam next week, and to be honest Beachbody makes a  number of complete in-box programs that are good fits for roughly 90% of people. If you’ve considered getting into P90X or another workout program (I can help you pick one if you want guidance), I sure would appreciate if you would order through me instead of the phone number in the infomercial.

Here’s how it works. Jane Businesswoman signs up and probably gets a starter package of whatever it is that the company sells. She is encouraged to sell this product to people she knows — the bigger your sphere of influence, the better your chances. Depending on the company/product, she may place orders as she sells merchandise, she may stock popular items, she might be able to give out samples (in fact she may be encouraged to buy sample packs and give them out as a marketing tool). But the real money is in getting other people to sign up to be her “downline”. Once she has Susie and Laura Businesswoman working in the system, she gets a cut of what they sell too. Jane will even get a cut of the people Susie and Laura someday sign up. And hey, if one of those people only orders stuff for personal use, Jane still gets a piece of the action.

The only thing that keeps this from being a pyramid scheme is that there is an actual product, and to make money somebody has to be buying it. Often the product is something that gets used up — soap, vitamins supplements, etc — so theoretically Jane, Laura, and Susie should all have repeat customers who come back to buy more on a regular basis. And because they all make money on the product, they are extremely enthusiastic about it.

Most of these plans have a couple of fatal flaws in my mind, which I can encapsulate in two questions: If this product is so great, why isn’t the company trying to get it into stores? and If your business is so great, why do you want to sell it to me instead of keeping the profits for yourself?

What it boils down to is that most of these companies are offloading their marketing costs onto their family of Businessmen and Businesswomen. When is the last time you saw a TV ad for most of the companies on this list? [Notice something? At least Beachbody does marketing for me!] If you know who most of these companies are, it’s only because somebody you know tried to sell it to you. Marketing campaigns are expensive. Hiring professional salespeople and sending them to retailers to get placed in stores is expensive. Putting Jane and her friends to work hawking product isn’t just cheap, it turns an expense into income! Sure, it costs the parent company a bit of theoretical profit to run this way. But they make up for it by turning their independent contractor sales staff into zealots who will buy anything the company makes.

I won’t bore you further, but if you want to know more about how such companies work, there’s these guys.

In closing: lines for peasants but services for the rich; weird scholarships; Japan Airlines files for bankruptcy; more on job creation; is anybody really surprised that the FBI broke the law to get some phone data?; already up to 4 bank failures this year; bankers don’t get it; most of them will turn out to be insolvent; and talking to children about disasters.

Silent Night, Deadly Shorties

Merry Christmas! Here’s a little Christmas history for you.

Ok, let’s start off with obligatory items on health insurance reform. The Senate has officially voted on the accursed thing. Here’s the rational case for kill the bill, and push back in conference. The real problem is that this, like many bills, is so long that nobody knows what’s in it, even the Senators.

I have a soft spot for education. Here’s an item on schools that work.

Surely the economic worst is behind us. So saith the President. Unfortunately, he thinks small business is going to lead us out of this mess. That can’t happen as long as banks won’t lend to small businesses (or will only make home equity loans to them), and certainly won’t happen if that small business can’t get affordable health insurance for its owners and employees — who will all be required to have “mandated” insurance under the new bill. Maybe what we really need is some manufacturing, instead of pretending we can build an economy on selling lattes to one another.

Go ahead and tackle that kid, but don’t do any science! You might get hurt! Yeah, maybe we have gone a little wacky on the safety thing (oops, unintentional football joke!). But the point is well taken that the Dangerous Book for Boys isn’t, and most kids aren’t doing any real science in school for fear of lawsuits.

What a great idea! Boy sees problem. Boy asks why problem exists. Boy comes up with solution. Food banks for pet supplies!

SHHHHHHH! Most censored news stories of the year.

Must be nice. Fannie and Freddie’s CEOs are taking home 7 figure paychecks this year. Where do I send my resume?

Schneier on the Predator Drone hack. Short version, it’s not that big a deal. Find out why!

And last…

I think he’s on to something: The grand unifying theory of progressive frustration.

Sorry for anybody who was disappointed that I didn’t cover the Emperor’s birthday. I had net outages yesterday.