Reader Warning, this may be a long one! Please be patient. No sound bites here!
In his speech today, President Obama, once again called for congress to pass his jobs bill – NOW!. The President stated that if they do not pass his jobs bill, which he views as perfect – without any flaw – and will, in his opinion, inevitably return us to prosperity, then the American people, who he states are overwhelmingly on his side, will harshly judge the republicans who are simply resisting for idealistic reasons. He implied that the American people are tired of the republicans looking out for millionaires and billionaires. He chose his words very carefully to imply that the Solyndra loan was the result of the prior administration’s programs – that he doesn’t own this one. In doing so, once again he uses language to obscure this administration’s role in this specific loan. A loan that was denied by the prior administration and recommended by his own administration as not ready to be funded – but yet was funded anyway!
If one were to challenge the Presidents statement based on the inference inherent in the phrasing and timing of the language he used, his administration will seek the cover that was carefully crafted into this statement. Jay Carney likely will respond, “that is not what he said…” “What he said is that the “loan program” was begun under the prior administration…” Continuing with the obfuscation, the President then presents “his” argument that this program is designed to make America competitive again. As he makes this statement it is phrased so that he now owns this ideal of making America competitive. He would like us to believe that now “He” is making America competitive again. But is he?
He also repeated his mantra that, we need to make education more accessible and affordable and make sure every American goes to college. His Education tzar, Arnie Duncan, in a recent radio interview, stated, that it is the U.S. governments responsibility to “provide a cradle to career assurance!” Is it?
In his speech he goes on to state that they are funding these loans to subsidize industries in order to get us “competitive” in a world where we no longer can compete. He continues to state that we can’t compete against China who “subsidizes” their industries. But if you talk to the manufacturers in China, as I have, – who the President claims the Chinese communist government is subsidizing – they will laugh at this assertion. Again if you dig below the Presidents rhetoric, or if you challenge him on this statement, you find again that his words have been chosen most carefully. The President’s administration will tell you that what he means is that China, through its Central Bank, is unfairly manipulating its currency. Why, because they refuse to artificially inflate their currency, and overpay or over-benefit their workers to become uncompetitive in the one world economy?
In a whitepaper published by McKinsey & Company – September 14, 2011, written by Lowell Bryan, Sven Smit, and John Horn; They state that the current economic fundamentals remain unfixed. Some of their main points include:
- Even if the developed governments, including the U.S. government, had been able to pass greater stimulus measures earlier – including isolating toxic assets – this would not have fixed the longer term fundamentals.
- The recent focus on debt ceilings in the U.S. and the sovereign debt crisis in southern Europe has also overwhelmed the public debate and shifted away from the failing economic fundamentals.
- In the U.S., the downward trend in labor participation has become pronounced.
- Structural economic fixes are needed such as;
- Stimulating private investment and savings
- Undertake an orderly de-leveraging of households (i.e. get Americans to stop borrowing and start saving – the exact opposite of what we are doing)
- Increase participation of labor (production level jobs) in the economy (as opposed to middle-level management and non-producing jobs)
- Reform long-term entitlement programs and tax policies to reduce the uncompetitive economic cost structure of American Businesses
- Reform education to produce more skilled labor
- Reform legislation to simplify and speed commercialization of innovation
- Rebuild failing infrastructure.
Like the Affordable Care Act, the President wants us to force congress to pass this legislation quickly before, as former speaker of the House, Nancy Pelosi, said we can read what is in it. More importantly, it is not the reading – but the understanding of whether or not this will work. The President is becoming very long on his implied -“trust me” plans. He seems to either not recognize, or not care, that the majority of Americans no longer trust him or his advisers as their track record is putrid at this point.
While the focused effort at fomenting insurrection based on converting class envy into class warfare is getting quite a bit of play in the main stream media, it is not really playing in Peoria, or Winnemucca. How will Americans feel if this concerted effort to stir up hate and discontent in the willingly disenfranchised boils over into a true insurrection?
The Presidents Jobs Bill, is being resisted, not because of republicans love for millionaires and billionaires or a reliance on them for campaign funding. All of our professional political class (republicans AND democrats) loves, courts, and whores themselves to the so called millionaires and billionaires. The bill is being resisted because most economists – outside of the presidents supporters – and good common sense find serious flaw with much of the underlying logic of his plan. Further, history, including very recent history, shows that many of these approaches are not addressing the fundamentals and do not work.
The Kaiser Excuse
The Solyndra loan is one that this administration, the President, and the Vice President, own lock-stock-and-barrel! The prior administration had clearly and distinctly passed on this “so-called” investment. Upon arrival in DC, and after some very in-judicious meetings with the lead investor – and big Obama bundler – George Kaiser; the administration decided not to simply revive this investment opportunity, but to expedite it and use it as a major public relations asset for both the Vice President and the President.
Now that this issue has blown up in the face of the President, his press secretary has characterized the meetings between George Kaiser and the President as discussions on his “non-profit ‘family foundation'” gifts program. Once again they use carefully constructed phraseology to obscure the issue. In this seemingly simple statement, most Americans will draw the connection to the Kaiser Family Foundation. The Kaiser Family Foundation is a venerated non-profit known for its tremendous philanthropy and commitment to health care and the primary legacy of Henry J. Kaiser.
Houston we have a problem! George Kaiser is no relation to Henry J. Kaiser nor is he connected in any way to the Kaiser Family Foundation. He does have a family foundation, and he is a big contributor to charities including his Tulsa Community Foundation. It is perhaps simply convenience that the administration chose this term to refer to his meetings and our own bad judgement to draw the conclusion that it was not “the” Kaiser Family Foundation – our bad!
All Jobs Are Not Created Equal in Fixing the Economy!
As the President is pushing his Jobs Bill he is really pushing Union jobs. He is speaking about infrastructure, make work jobs. Yes, it is true the infrastructure in America is in disrepair and needs to be rehabbed but this does not translate into making America competitive.
In his lecture to America this morning, he stressed the need to make us competitive again in the new world economy which he strongly supports. We clearly need to become competitive again. And it is also very clear, that we are not competitive with China, Singapore, Taiwan, India, Hong Kong, Malaysia, Mexico, and many other nations around the world. But will Union jobs and government subsidies really bring us back to being competitive? The short answer is, no! Looking at the U.S. Economy on the whole, taking tax money from the U.S., in any form, and passing some of that money back to companies to lower their specific costs or to provide incentives to people in America to buy their products does not make America any more competitive to the rest of the world. It is just a zero sum game.
Think of this as your own piggy bank. You have ten pennies in the bank. If you pull 5 of them out of the bank to give to your friend to buy a stick of gum from you (that you paid three cents for) and you put them back in your piggy bank. You still have only ten pennies in that bank. Yet, you not only did not make a profit on the gum, you lost three cents overall. This is the same shell game. Lets take a look at some more realistic numbers.
The cost per man-hour to build a car varies widely in the world and even here in the U.S. No matter whether you are building a luxury car or an inexpensive bare bones vehicle, the cost per man-hour is relatively the same. It is the number of man-hours, and the price of the basic materials that changes the total cost of the car. If you look to Detroit, the estimated costs for labor are approximately $85.00 per man-hour to make a car in this shining star of American manufacturing (at least according to the current administration). If you look to Japan the per man-hour cost averages about $46.00. If you look to Alabama, where some Japanese car manufacturers have moved their manufacturing the cost is about $28.00. And some estimate the cost in India, at $18.00. Is it any wonder that Detroit cars are not competitive in the world market? And why the difference between Alabama factories and Detroit? Can you say Unions?
Now I am not against unions – nor am I against union workers. Unions have done some very good things historically for America’s labor pool – particularly related to dangerous employment conditions and mistreatment. But Unions have also done some very bad things, perhaps knowingly, to America’s ability to compete in a one world market.
To coin a phrase, this is something we are “fundamentally” ignoring! Our problem with being labor competitive comes in two basic areas:
- We have almost no natural labor pool left
- The labor pool we have costs way too much compared to the rest of the world.
There are other things that impact our competitive position in the world like, we no longer produce much in the way of raw materials, much of our business is based on middle-man transactions. And most of what we produce at the higher costs are sold at home doing little to reduce the steadily increasing trade deficit. While these things are also very important, let us hold them for a later article. The intent of this article is to focus on jobs and labor and the Presidents increasingly unfathomable position.
Why no labor pool?
Along with the focused drive, since 1972, by the banks and government to get us to stop saving and start spending, and the modification of the push to foster credit based purchasing, we have also been purposely closing trade schools and tech centers and redirecting those who would have gone into the skilled labor category to go to college. We are now a nation that does not value the base laborer. The person who creates valuable goods and services with their own hands has been left in the dust and become a second class citizen in a nation of college educated plumbers, welders, carpenters, cabinet makers, taxi drivers, and fast food managers. I have repeatedly seen companies requiring a college degree for many professions like basic sales that should be more reliant on people skills simply to reduce the number of applications. Most of the top sales people I have know in my career were without a college degree. They learned their skills at the school of hard knocks. I saw at least one such individual rise to one of the top sales positions in one of the top tech companies. He almost single handedly took this company from a start up spin out to one of the premier producers in its class. In the end he was displaced by a policy decision that now required all executives to have a college degree. It is no coincidence that within a few years they fell from favor in the market. In some cases “book learnin'” does not compensate for real in the market experience.
While it is emotionally fulfilling to know these people have gone to college and perhaps studied the teachings of Confucius, or the writings of Chaucer; but has this made them better plumbers of has it just added to the expense of training them and increased their expectations and lifestyle and driven up their cost structures? Is there value to them from this education? Of course there is, but is there really value economically to America in their labor role? No, it is in fact an unnecessary expense economically. Please remember I am not making a moral judgement here and I am not saying people who choose to, or end up forced to, practice a trade should not be allowed to go to college. I am simply pointing out that this may not be the best economic solution for our world competitiveness problems.
While America has fostered the “everyone goes to college” mantra, closed its labor and trade schools and become dependent on immigration, legal and otherwise, to provide the required base level workers; places like Singapore still track a large percentage of their youth into labor and trade related programs. Only a select few get stimulated to go to college. Is this better morally? Who knows, let the philosophers sort that out. But economically, they are one of the countries kicking our asses, and we can’t blame that on the “subsidies of communism.” By the way, kids that really want to go to college can choose to do that in Singapore, they are simply encouraged to go into trades and they venerate their trade workers and laborers.
So why is the President fostering class warfare, cradle to career assurance, union based infrastructure jobs and subsidizing industries to be competitive in the one world market? Come to think of it why is the President such a supporter of this one world view?
To start with, who is this guy we elected? Was he a prominent businessman? No! Was he a skilled civic executive? No! Was he a well know economic theorist? No! Was he a person who was well schooled in international relations? No! Was he an accomplished leader of any sort? No! Well Maybe, if you consider he was elected as a state senator and then as a U.S. senator – in both capacities he quickly focused on the next step of his career but he had few accomplishments other than electability.
Look, I am not saying President Obama is incompetent! I am pointing out that in the related experience he has little to qualify his views on this subject or to make some of the decisions that he appears to be making. He is in fact relying on others to tell him what to do and these others, like most of our professional political class are corrupted by hidden agenda.
The President was trained as a community activist. He apparently was very good at that. What is the primary tool of a community activist? It is to disrupt the status quo by using class envy as the pivot to foment unrest. By convincing those that have less, that the ones that have more have attained it to their detriment. In propagating this issue they gain the leverage, the power, to force changes. These forced changes do not come about because they have been derived based on reason, due diligence and careful consideration. They are forced into the stream based solely on the emotion of the moment. Good community activists can get the minority so agitated that even the mere mention of due diligence or careful consideration becomes more evidence of the supposed evil intent of those who have more.
So why are we surprised to see this now? And more importantly, why are we so blind to the real implications and the lack of focus on the economic fundamentals? Could it be that another fundamental issue that is failing us is our education system? McKinsey seems to think so, but I am not sure their reason coincides with mine or perhaps yours.
Additionally, our President has aspired, in fact worked hard, to become part of our professional political class. He has in fact obtained the pinnacle of this class. By doing so, he has assured that his future is taken care of by, and on the backs of, the same people that elected him to this office. He is beholding to all that got him elected in the first place and is further constrained in his actions by those he will need to get himself reelected. As I have said before in a prior article “Our Professional Political Class: An Island Cannot Rule a Continent!“, his currency is votes, and he appears willing to pay all of our collective equity in order to continue to gain these votes.
I started this essay with the supposition that Unions and Immigration are two sides of the same coin. While it has taken me much longer than normal to come back to this point, I feel in this case the preamble was both necessary and poignant. Further, I think that the preamble is where we will find solutions – if we really want to solve this.
Since we have all but eliminated our labor class through the closure of trade schools, technical schools, and primary production industries (like farming, fishing, mining, oil and steel) and attrition through the aging of our population. We have created a false expectation that everyone should go to college and our economy can not only absorb the expense but also have appropriate jobs available for these college graduates who all expect to be doctors, lawyers, Indian chiefs etc. – anything but “common laborers.”
We are left with no where to go but immigration to find those willing to work in the jobs we don’t want and at wages we can afford to pay, and still find you college educated plumbers willing to buy America’s goods and services. We have unions who are, by their own claims – their own mantras, only looking out for the workers not American competitiveness. But many of the workers they increasingly represent are not laborers but middle managers and low level executives. The Unions, it appears, are dead set against immigration to solve the labor dilemma and they are dead set against relying on one world competitive wages as it would decimate the wages of the working class and the resulting stream of dues the leadership survive on.
Caught in the middle is the President. If our hypothetical coin is a quarter, then the President represents the low grade copper core. On one side he has the silver representing the unions, the silver on the other side – immigration. He can actually solve neither and have the solution be in the best interest of Americans. He is left with obfuscation, and diversion. He is in crisis mode as his pole numbers collapse. And in crises he is falling back to the tried and true tool-set of community activists world wide – class warfare. We cannot count on this President, nor this congress, to solve this one.
In the end if we don’t solve it – we will all suffer! At least he has acknowledged, that we are not competitive in the one world economy. That is a step. Not a step for the President, who can’t see or refuses to see the real implications of what he is advocating. It is a step in that it take one more vague disingenuous argument off the table. It takes the recently repeated ad nauseaum statement that “we are the most competitive nation in the world” – off the table.
We, now recognize that we need to become competitive again or we lose to those throughout the rest of the world who are willing to do the menial, tough, hard, exhausting jobs that we wont. We also recognize that most of the rest of the world will do the jobs that we are actually willing to do for far less than we will! . Until we begin to again rebuild primary production and manufacturing in America, and are able to staff the jobs with workers that are willing to not only do the job efficiently, but also at a pay rate that allows the American production to be cost competitive in the one world economy, we will fail. No amount of robbing Peter to pay Paul, to build it, or buy it in America, will bring us back to successfully compete with those that will do what it takes for less.
America has an inordinately long row to hoe to get back to where we were. We need to discontinue myth building, and begin to focus on the pragmatic. We need to reject the community activist play book of class envy – come – class warfare and focus on resetting expectations. We need to retrain many workers in production level jobs. We need to review our educational policies and reopen trade schools. We need to change the mind-set that everyone should go to college. Not everyone should go to college. Sending everyone to college lowers the standards of a college education and in the end lowers the value of education in general. It is not necessary to get a good base education through the end of high school if everyone is also going to go to college. Also, after we send these kids to college they expect to be pad at rate commensurate with their education and its expense/investment. We need guidance counselors to again guide students into the most appropriate occupations.
Finally, we need to venerate the workers in America – the laborers in America. We need to reduce the occupation of these required labor jobs by those expensive, excessively educated and overly trained persons with people appropriately costed and trained. We need to once again elevate the community value of the individuals that convert the raw materials to valuable products, who convert their raw talent and effort to desired commodities. We need to have the unions and all groups, cartels, associations and members to recognize that unless we begin to put our nations ability to compete ahead of entitlements, grants, gifts, gimmes, and subsidies, we will become yet another backwater on the road of history.
I will leave you with this final thought.
It has been estimate that over 1/2 of all Americans receive at least 50% of their compensation directly or indirectly from the federal government or government sponsored programs. By 2016, it is also estimated that this number will grow to a whopping 65% of the population receiving over 70%. Our combined trade deficit since 1972 is almost $12 trillion. In other words, we have purchased from the rest of the world $12 trillion more than we have sold to them. How long can the business, that is the United States of America, continue to take in so much less than we sell. This has been the case since prior to 1972, and in order to survive we simply increased the $500 billion in total currency then to over $16 trillion today. But our piggy bank is empty, since most of this newly created currency has just gone to pay, by today’s numbers, 50% of the population 50% of their wages so they didn’t really notice there was a problem and the professional political class could continue to get their votes.
As Hot-Rod Swales said to me one day in 1965, “It do make you think – don’t it?”