Commentary by Marita Noon
All of us loved less-than $2 a gallon at the pump. AAA reports: “Americans paid cheapest quarterly gas prices in 12 years” – which resulted in savings of nearly $10 billion compared to the same period last year. However, oil (and, therefore gasoline) has been creeping upward since the February low – topping $45 a barrel, a high for the year. And that could be a good thing.
While low prices at the pump have been a boon to consumers, the plunge in oil prices has been a bust for American producers.
You may not care about “big oil,” but there’s still reason to be positive about the rising prices.
There are several causes for uptick. First is the weaker U.S. dollar. As oil is traded in dollars, a weaker dollar means that it takes more of them to buy the same amount of oil.
Additionally, we are heading into a busy summer driving season and refineries are switching to the more expensive “summer blend.” The switch typically means a brief shut down for maintenance – which reduces the gasoline supply. Summer driving increases demand.
Globally, oil production is down due to a workers’ strike in Kuwait that took about 1.3 million barrels a day of production offline, and disruptions in Iraq, Nigeria, Venezuela, and the North Sea. Former investment advisor and financial writer Tony Daltorio writes: “That brought the total to roughly 3 million barrels a day that were offline.” In the U.S., according to the Wall Street Journal (WSJ), “oil production has fallen below 9 million barrels a day in recent weeks, down from a peak of 9.7 million barrels a day last April.”
These are all supply issues that can easily be eradicated with increased production – such as recently threatened by Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman. Additionally, in the U.S., reports Bloomberg: “Drilled, uncompleted wells could return 500,000 barrels a day back to the market.” The potential for increased production has many, including Daltorio, predicting a fall in price from current levels.
Consumers like lower prices, but they signal economic concerns as the price of oil is directly connected to the global economy.
In February, a Citibank strategist warned that due to the extended oil price collapse, the global economy “appears to be trapped in a death spiral.” Eric Sharpe, Publisher at Energy Ink Magazine, states: “Citi’s assessment is clear, and easy to understand: weak global growth results in continued depressed oil prices as demand weakens under over-supply.”
This is why I posit higher prices are a good thing for everyone, not just the oil industry.
Simple economics are based on a supply vs. demand formula. So far, I’ve mostly addressed the supply side. But a careful read of the forecasts indicates an increase in the demand side. Sharpe points out: “The single most important factor for the stabilization of oil prices is for demand to outpace growth which it has not done for over two years. Though demand growth is slow, it is still climbing.”
On April 23, the Financial Times reported that commodities, led by oil, rallied “on signs of stronger growth” that bolstered demand. It also referenced: “better housing and infrastructure demand after China’s economy rebounded in March.”
On April 27, in a story about the price of oil hitting “another 2016 high,” WSJ addressed the fact that the Federal Reserve officials “left interest rates unchanged.” The last time the same decision was made, the statement included language that indicated the global economic and financial conditions posed risks to their outlook. This time, that was removed – “signaling less concern about risks posed to the U.S. Economy by global financial conditions.” In WSJ, Robert Yawger, director of the futures division at Mizuho Securities USA, is quoted as saying: “The elimination of international elements in the language may mean that the market feels that the international situation is improving, and we’ll get a bit of demand from emerging markets which wasn’t there.”
Additionally, Phil Flynn, Sr. Market Analyst at the PRICE Futures Group, in his daily energy report, on April 22, wrote: “Demand is busting out all over.” He explains: “Low gas prices are causing a buying frenzy at the pump as gasoline demand in the month of March hit an all-time record high.” He continues: “it’s not just gasoline demand, it is oil demand all over. Not just here in the United States but also in China. China reported that crude-oil imports in March were up a whopping 21.6% from last year coming in close to 7.7 million barrels a day. …China’s demand for imported oil is stronger than it has ever been.” He also addressed; “the strongest ever volume increase in Indian demand.”
There is growing demand.
“The market is coming in better balance,” Jason Gammel, an analyst at Jefferies, stated, according to the WSJ. “We maintain the view that the current oversupply will flip into an undersupply in the second half of the year.”
While this is good news for the oil industry, it is also good for everyone – even though it means higher prices at the pump. If this optimistic view is correct, it means the global economy – despite the bad economic news on the American front – may be heading toward a net positive; that it is not “trapped in a death spiral.”
A growing economy needs energy and that is why higher demand – that equals higher prices – is good for everyone.
The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc., and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy - which expands on the content of her weekly column. Follow her @EnergyRabbit.
It was back to the basics once again for this once-premier regional event, which is still chugging along in its thirteenth year. What better way to celebrate the weekend of Earth Day than eating some of its tastier creatures cooked over a charcoal fire?
For the second time, though, there was no KCBS competition element. However, there was a competition wrapping up just as we arrived regarding which of the four competitors selling pulled pork had the best, along with a local craft beer pairing. Actually it sounded like a pretty good deal for $10 and it’s a pity I missed it.
There was still a pretty good food court, though, dubbed “Pig Out Alley” with some out-of-towners hawking their barbecued wares.
The guys from Smoke Shack BBQ were hard at work keeping up with demand.
There seems to be a psychological effect where the place with the longest line is thought to have the best ribs. As it turned out, Kim stayed in the Smoke Shack line for about a half-hour while I walked across the way to get mine from the former Salisbury denizen Famous Dave’s, strolling right up to the counter and ordering. Maybe that’s why their location here only lasted a couple years.
So this is what I got.
Funny thing: both Kim and I agreed that the Famous Dave’s ribs were better. Smoke Shack was somewhat pricier as well, but that comes with the territory I suppose. We could have gotten Hess’s ribs as well, for they didn’t have a long line either. But as I recall we had theirs last year, when Pork in the Park nearly failed.
Nicer weather helped with the attendance, which seemed to be improved from 2015. It wasn’t to the level of past years but perhaps they can rebuild the festival.
One holdover from 2015 was the kids court, with the row of bouncy houses.
It was actually a pretty good arrangement, as they separated the kids zone from the beer tent and other adult areas. It wasn’t like you couldn’t hear the band, which was wrapping up as we got there.
According to the entertainment page of the PitP website the band was Delta Spur, a country cover band. Since I’m not into country, they didn’t do a lot for me until they ended the show with some Lynard Skynard (that one I recognized.) But it looks like quite a few were into them.
One thing new they were trying was Balloonville, where you could check out these balloons and perhaps take a (tethered) ride in one, for a price.
I would have to say that this year’s rendition is improved over last year’s, but whether it can turn the corner without the competition element remains to be seen. It’s worth noting that most of the banners various rib vendors use to commemorate their victories are several years old – seems that the number of these competitions have waned as tastes move away from everything barbecued and onto other culinary options. Perhaps someone somewhere has a banner that brags about winning Pork in the Park, but that’s not happening this year.
But if you don’t mind paying a little extra for some good ribs, this isn’t a bad place to bring the family if you’re around Salisbury. They have the kids’ area so the little ones can blow off steam and it’s only $3 to get in for the adults. It’s a beautiful day on Delmarva as well – aside from some rain yesterday afternoon, they lucked out with the weather. You have until 5:00 today.
So come on out and see if we can make it bigger and better for 2017.
Over the last few years I have seen the American worker become more and more an endangered species. Sure, there are jobs out there but fewer and fewer of them involve making stuff. Last month the Alliance for American Manufacturing (AAM) glumly noted that manufacturing jobs were off an astounding 29,000 in March. As AAM’s Scott Paul noted:
With 29,000 manufacturing jobs lost last month, it is clear this issue isn’t going away anytime soon. China’s massive industrial overcapacity, currency manipulation, and our growing China trade deficit continue to tip the scales, and it’s laid-off U.S. factory workers who pay the price. That’s not right. American manufacturers can outcompete anyone in the world, but they need a level playing field.
As I have pointed out before, AAM is an outgrowth of the steel industry, particularly the steelworkers’ union. So their perspective leans toward protectionism to a point where they regularly accuse China of cheating us on trade through both currency manipulation and their “dumping” tons of steel on the market. One Illinois steel worker they quoted put the latter charge thusly:
For the past 38 years, I’ve been a steelworker at U.S. Steel Granite City Works in Granite City, Illinois.
I’m proud of the work my 2,000 colleagues and I do at the mill. We produce a high-quality product that’s used in automobiles, construction and energy exploration. In one case, we even made a grade of steel for a major automaker that no other mill had been able to produce!
But right now we need your help.
Because of unfair trade, 1,500 of my coworkers are currently laid off. They don’t know when they’ll be called back – or even if they’ll be called back.
Granite City isn’t the only place coping with layoffs. More than 1,000 people who work at the U.S. Steel Fairfield Tubular Operations in Alabama are laid off. Nearly 350 folks at U.S. Steel Keetac in Minnesota also are out of work, as are hundreds of people at facilities in places like Colorado and Oregon.
All told, more than 13,500 steelworkers are facing layoffs - and the list is growing.
We’re facing an unprecedented onslaught of dumped steel from countries like China, which is producing way more steel than it can use. That steel is heavily subsidized by China’s government, which also doesn’t require its companies to abide by strict labor or environmental laws. China needs to get rid of its steel, so it dumps it into our market at a rock-bottom price.
That’s not fair to American steelmakers and workers, who compete in an open market.
And steelworkers aren’t the only ones who deal with the burden of unfair trade.
I can’t stop anywhere in town without being asked about the layoffs. When so many workers are forced to tighten their belt, it impacts everyone - from restaurants to grocery stores to retail.
Fair trade groups such as the Manufacturers for Trade Enforcement now oppose China’s possible ascension to a “market economy” for trading purposes by our Commerce Department, while AAM also questions China’s effect on our national security as steelworkers lose their jobs:
Plant closures, mass layoffs, and the loss of key technology and manufacturing know-how are sure to follow unless we act.
Moreover, with the loss of U.S. steelmaking capabilities comes a dangerous dependence on these same potentially hostile foreign governments to supply the steel products necessary to equip our military, respond to disasters, and modernize our increasingly fragile infrastructure.
This has actually been a concern for several years. In some respects the concerns about steel parallel our oil crisis, when we lost the ability to supply our own needs and became vulnerable to OPEC’s embargoes in the 1970s. Having lived through that as a child and seeing how it affected our economy, I have issues with the greatest country in the world becoming such a disposable society that we forget how to be self-sufficient. We should have never put ourselves in a position where, for so many of those devices and conveniences that make our lives easier and promote commerce, we depend on a nation that points missiles at us.
That’s not to say everything is bad news, though. As Bryan Riley shows in the Daily Signal, foreign investment in America far outstrips what we invest overseas. And while it’s true Carrier is moving 2,100 jobs from Indiana to Mexico, Riley argues that the net effect will be less as foreign automakers Toyota, Honda, and Subaru are adding a total of 1,600 jobs around the state. Riley adds:
While Carrier has been called “greedy” for moving to Mexico, no one in Indiana is calling Toyota, Honda, or Subaru greedy for choosing to invest in the United States.
In total, over 2 million American manufacturing workers are employed by foreign-owned companies. And while American companies have invested over $700 billion in foreign production facilities since 2000, foreign-owned companies have invested over $1.3 trillion in the U. S. manufacturing operations during the same time frame.
The result: a $614 billion manufacturing investment “surplus” for the United States from 2000 to 2015.
Granted, the year 2000 may have been an artificial and arbitrary deadline considering the exodus of manufacturing jobs from our shores began decades earlier, but there are thousands of Americans who work for foreign-owned companies in all sectors – heck, most people who drink a non-craft beer are supporting American workers toiling for a foreign-owned conglomerate.
Still, we should be doing all we can to promote the old-fashioned art of making things here. There were millions of families around the country (including mine) where there was only one breadwinner (Mom stayed at home) who could still achieve middle-class status because they made good money while creating the products America needed. (In my dad’s case it was concrete block and other cement products. That plant has long been out of business, sadly.) Now that’s all but impossible, as the norm has become two-earner families who can barely keep up with expenses, living paycheck to paycheck. By the time I was in high school, our family was one of those, too.
Perhaps the boom times of the last half of the twentieth century were bound to come to an end sometime, but we should be doing our best to bring them back by allowing workers and companies to create and enhance the value of raw products as much as possible. To use a simplistic example of building a car: we create value for iron ore by extracting it somewhere in the upper Midwest, add value by shipping it by ship down the lake to a steel mill in Indiana, further enhance it by processing it into steel there before shipping it again via truck or rail to a Toledo auto plant, then create even more value by its becoming the fender to a new Jeep, which again is placed on truck or a railcar to deliver to your local dealer. Each step in the process creates a little bit more value from that chunk of rocks once buried underground to the new Wrangler sitting at the dealership, meanwhile helping to create a better standard of living for hundreds of employees in the process.
But somewhere a few decades back we decided it was cheaper to have someone else do it – iron ore from one of a host of countries may or may not be processed there, but it goes to Japan or Korea and they build the cars. Granted, their success led them to put assembly plants here in America but I’d like to keep the process more in-house where we can.
Just because there’s a global economy doesn’t mean we in America have to settle for second best. But it does mean America needs new, fresh leadership that believes in American exceptionalism and wants to create the conditions where we can once again prosper.
By Cathy Keim
Editor’s note: This piece began life as a comment to the Refugee Resettlement Watch blog which eventually became a post there. Cathy has taken this opportunity to revise and extend her remarks, adding it to her occasional series on immigration.
The (slightly reworked) title comes from Refugee Resettlement Watch‘s Ann Corcoran.
When I talk to people about the hit that American citizens are taking by companies hiring immigrants, both legal and illegal, they always come back with the statement that the American citizens do not want to work, have a poor work ethic, are not dependable, etc. My guess is that this might well be the case because we have paid people to not work, making it an option with no stigma attached.
In the past, it was terrible to be on welfare or unemployment. Remember the movie “Cinderella Man”? The lead character, heavyweight boxing champion James J. Braddock, returned to the government office and paid back the welfare money when he could finally earn enough money to feed his family. That was during the Great Depression less than one hundred years ago.
My fear is that the government has done such a good job of destroying the working class family by introducing welfare which required that the man not be in the household that we now have a deeply embedded culture of single parent families, drifting children, and no concept of a work ethic. The result is employers using the lack of work ethic as an excuse to not hire Americans, but to go for hard-working foreigners.
Remember that the employers have tax benefits involved in hiring foreigners. Also, the foreigners cannot argue with the employer because if they lose their job, then they must go home if they are here on the H-1B or H-2B visas. If they are illegal, they have no recourse. This makes for a diligent, compliant workforce.
The employer doesn’t have to pay higher wages, so the taxpayer picks up the additional social costs due to low-paying jobs. The schools have to educate in many languages, the hospital ER takes care of the sick, and subsidized housing is swamped. The costs of absorbing huge numbers of foreign workers are not small.
When a school system has to hire scores of ESL teachers to handle the influx of non-English speaking children, the taxpayer is paying for that. When the hospital has to hire translators to be able to understand their patients, then the citizen absorbs that cost. When the city zoning codes are overwhelmed with twenty or more unrelated people living in a house, then the neighborhood suffers. When remittances are sent back to the homeland to the tune of millions of dollars, then our economy suffers.
When Mexico and other countries send us their poorest, they remove the pressure to improve their own society by exporting their problems to us.
In addition to all of these problems, the local community suffers the double hit of paying unemployment/welfare to their own citizens and all the social costs associated with reducing people to a dependent class.
The employer pockets the extra earnings gained by paying lower wages and collecting tax benefits. In the case of hiring refugees, the employer gets to feel good about himself for helping people fleeing oppression. Perhaps some of our employers should try to feel good about helping fellow Americans have a job that will enable them to break out of the cycle of dependence.
We can thank our elites in DC for the many bad decisions that have led to this disaster that has taken several generations to reach its current epic proportions. A final blow is that the lack of worth that comes with being a non-working dependent class leads to additional social problems.
My hypothesis is that the current heroin epidemic that the government is trying to stem can be linked back to the broken family and jobless lifestyle of our formerly working-class citizens. I know that heroin is ravaging children from all classes, but it is particularly bad on the people that have no hope and see no way out.
Being hungry is a powerful motivator to work. Our Pilgrim forefathers tried to use the community approach when they first arrived in the New World. They almost starved. Once they switched to each family having their own land and raising their own crops, they were much more successful.
I realize that the switch to using our own citizens to work instead of being unemployed would be a painful transition for the employers and the employed. The government would have to remove itself from the process and let people in the local community work this out.
The minimum wage laws forced upon us by the government reduce the entry-level jobs that teenagers once used to learn how to work. In fact, we are going to lose more fast food entry-level jobs as the industry moves to automated ordering to bypass the minimum wage laws.
The H-2B visa workers have reduced the summer jobs for our teens. Something as simple as starting school after Labor Day weekend could enable more teens to fill the summer job needs of the tourist industry.
We have sedentary teens that could use some lawn work to build muscle and slim down. Instead, we import foreigners to cut grass.
The short-term benefits are obviously working as we increase our visa limits and bring in more refugees, despite not being able to vet them for safety issues. But what are the long term issues?
We should be preaching the joys of independence, not depending on the government to support us. We should be encouraging our youth to work hard rather than think that college is going to provide a cushy job. That expensive degree is more likely to be a weight around their neck due to the loans they took out than to help them have access to a good job.
The need for limited government intervention is never more obvious than in our current skewed employment numbers. Crony capitalism is not free enterprise. The UN choosing refugees for us and big business depending on cheap labor that is essentially a new form of indentured servitude is not what America needs.
The easy fix of importing cheap labor may seem like a good idea, but the price we are paying as a nation is not cheap and not easy. It is time for a moratorium on immigration across the board while we sort out these issues.
Originally I was going to add some of these items to my “odds and ends” post but decided to promote the idea to a post of its own. I have a lot of things which I can neatly tie together.
It’s now been a decade since America’s economy even grew at a 3% rate, as Rick Manning pointed out a few weeks ago. While he lays a lot of the blame for what he later termed an 8.9% ”real” unemployment rate on government regulation and policy, other industry groups like the U.S. Business & Industry Council (USBIC) and Alliance for American Manufacturing (AAM) point the blame squarely at China. First is USBIC President Kevin Kearns:
Can anyone doubt that America’s trading relationship with Beijing is a one-sided, one-way catastrophe for the American economy? Our massive trade deficit with China represents a constant outflow of jobs and productive capacity to a country that refuses to play by the rules of world trade. It’s been 15 years since China joined the World Trade Organization. There can be no doubt that America’s experiment in so-called ‘free trade’ with China is a miserable failure.
AAM’s President Scott Paul:
Now we have even more evidence as to why voters are deeply concerned about China and its impact on the American economy. Our trade deficit with China in 2015 again surged to record levels, and that helps explain the struggles we’ve seen in manufacturing recently – particularly in critical sectors like the steel industry.
The 29,000 factory jobs gained in January is good news, but it’s certainly no indication of an upward trend. Many dangers persist, including a strong dollar, China’s economic weakness, and its massive industrial overcapacity. It strikes me as an inopportune time to be pushing a Trans-Pacific Partnership that is projected to cost America more than 121,000 factory jobs, according to the Peterson Institute of International Economics.
So just how do we compete? There’s no question that 40 years of buildup and advantages accrued by foreign competitors in the areas of lower wages, lack of regulation, and outright cheating more than make up for the millions of dollars in shipping costs required to ship cargo across the Pacific to the American consumer market. The relics and ruins of our Rust Belt convey the depth of the opportunities squandered. If we can’t beat them on price, we have to beat them on quality and be smarter than they are.
One thing I’ve noticed about the Senate race is that several GOP candidates are focusing on the manufacturing sector as a ticket to the state’s prosperity. For example, Rich Douglas had this to say the exodus of jobs to Mexico and about his platform:
Ten thousand jobs lost in Maryland alone. That’s what Texas businessman Ross Perot meant when he predicted a “giant sucking sound” of U.S. factories moving to Mexico after Congress approved the North American Free Trade Agreement (NAFTA). If elected to the U.S. Senate from Maryland in November, I will work to bring them back.
The “sucking sound” was real. In the mid-1980s I lived and worked in Ciudad Juarez, Mexico, across the river from El Paso, Texas. The Juarez of my memory is a vast collection of big-box factories in the desert, bearing well-known U.S. names. Jobs lost from the U.S.
Citizens with a path forward to jobs, homes, and a future remain in school, avoid drugs, do not riot, and keep their unborn children. Maryland needs factories and jobs. A way to attract them is to send the right people to Congress. What sets me apart from the rest of the Senate field? Experience and scars earned in markets where U.S. ethics are mocked. Experience with U.S.-imposed hurdles to U.S. exports. Experience with the human cost of free trade.
But Douglas is not alone. It turns out fellow candidate Chrys Kefalas is a vice-president at the National Association of Manufacturers, which again is urging people to be manufacturing voters:
Notes Kefalas on his social media page:
I’m all about manufacturing more jobs in Maryland and the U.S. And that means fighting so that companies like Under Armour and small businesses can bring more jobs to Maryland. I will.
Adds yet another Senate hopeful, Dave Wallace:
Many will remember when Marylanders proudly made steel, Chevys and many other quality products and enjoyed a prosperous life. Today our infrastructure and job prospect are crumbling, and high taxes and regulations are driving away the jobs and investments we need.
While this is a promising beginning, Wallace remains short on details. But it’s better than nothing, as I’m not finding where the other major candidate, Kathy Szeliga, addresses manufacturing at all.
Actually, I take that back. Nothing is better than this mess that punishes achieving businesses and expands the government’s role at a time when they need to stand down and let the market grow. Remember, doing it this way has led to a “lost decade” of slow-to-no economic growth.
Since this part of the state isn’t dependent on government jobs to survive – but could use an economic shot in the arm to diversify from the poultry and tourism industries – it seems like we would be an ideal location to be the place to make things. The cost of living is fairly decent, the area is nice, and there are a lot of people who are willing to put in a little bit of elbow grease to get things moving. All they need is for the state to let them compete, and even though a Senator doesn’t necessarily guide state policy he or she can lead by example.
One little piece of Larry Hogan’s FY2017 budget proposal caught my eye, but I want to begin with a little reaction to the State of the Union show from my favorite manufacturing advocacy group, the Alliance for American Manufacturing and its president Scott Paul:
President Obama cited economic progress in his State of the Union address, and he also noted the need to address income inequality. If he wants to address this, he need look no further than manufacturing, which had its worst year in 2015 since the Great Recession.
While the president was right to highlight economic progress, he missed an opportunity to address some of the core concerns that are holding back manufacturing. Yes, manufacturing has added nearly 900,000 jobs over the past six years, but that represents less than 40 percent of the factory jobs lost over the recession. Only 30,000 jobs were created in 2015.
Keep that in mind as you read on, particularly the income inequality part. So I noticed a particular piece of news today, and after a bit of searching I found that Baltimore Sun writer Erin Cox included this in a story on Hogan’s tax plan:
Hogan also proposed granting a 10-year corporate tax income break for manufacturing companies new to the state who open in Western Maryland, Baltimore and the lower Eastern Shore, areas where unemployment is dramatically higher than the rest of the state.
“We’ve lost 28 percent our manufacturing base because other states were stealing our manufacturers,” Hogan said. “It was like spearing a fish in a barrel. It was too easy. We’re trying to bring back the manufacturing base because there are a lot of hard-working people in the heartland of Maryland who want to work.”
Hogan’s manufacturing tax amnesty would extend to employees of those businesses. Workers earning less than $65,000 a year would be exempt from state income taxes for a decade.
So let’s say XYZ Widgets opens a manufacturing plant in Salisbury. Not only would they get a tax break from the state of Maryland for a decade, so would the workers who make less than about $30 an hour be exempt from paying Maryland state income tax. (This would probably come as a refund once the taxpayer files his or her return.) I will cheerfully admit this goes against my grain of not supporting targeted tax cuts – particularly since it’s micro-targeted to maybe a few thousand taxpayers at most over the ten-year period – but it is an idea for the hopper that could be successful.
In fact, it extends a practice of states and municipalities granting a tax abatement to chosen entities to convince them to set up shop there. We have enough of a knowledge base now to see how these programs work for large-scale employers such as automotive assembly plants – here is one example from South Carolina, where BMW set up shop over two decades ago.
The other fly in the ointment, though, is determining what happens when the decade is up. Surely it’s the hope of Hogan and his economic development team that these companies would stay, but if not it’s the problem of his successor. My suspicion is that this program will maintain the exemption for the workers, because let’s say you’ve put your ten years in at XYZ Widgets and have become accustomed to that big state refund check. When those sands run out there will be a lot of upset taxpayers who just saw their state tax bite increase by up to $3,000 depending on income and deductions.
There’s also the question of timing. If we are to assume that the 10-year clock begins to tick for a company when they set up shop, we may see a cottage industry of new employers taking advantage of workers who are on the eighth or ninth year of their term of employment and hiring them on. Not only does the new employer poach skilled labor from the older competitors, the older companies won’t have the incentive of being able to work tax-free anymore. Conversely, a blanket starting date means that the program will work well for years 1 through 5, then begin to peter out unless extended.
And then there’s the job creation aspect that Scott Paul and AAM touch on above. Oftentimes with the use of tax incentives a manufacturing job isn’t so much created as it is transferred from somewhere else, and this particular proposal is specific to companies new to the state. So we may see a zero-sum game being played, particularly in Western Maryland and the Eastern Shore as companies simply move a few miles from Delaware, Pennsylvania, or West Virginia to take advantage with many of the same workers staying on. Locally, we will see this in reverse as Perdue moves some of its operations in the next few years just across the state line to Delaware – it makes Delaware’s bottom line look a little better and takes a little bit from Maryland, but the workers are just driving a different distance and will stay in this area. (Those who live in Maryland and work in Delaware, though, will have the joy of filling out two state tax returns.)
Overall, this is an interesting idea but there are a number of ways I’ve already found to play devil’s advocate with it. Lord knows ours is a region of the state which could use an economic shot in the arm, though. I still think the complete elimination of the corporate tax (which is also discussed briefly in the South Carolina study I referred to earlier) is the better play as a job creator overall.
And lastly, I’m sure Democrats will be whipping up their base in the Capital region by pointing out they’re not included in this deal. I guarantee that if this program works for the areas with high unemployment there will be a bill within the first year or two adding the rest of the state to the mix (in the interest of fairness, of course.)
Since it’s not clear what the vehicle for attempting to bring about this change will be, I can’t track this proposal to see just what progress it makes. Perhaps it will create a split in the majority party since Baltimore City will be a beneficiary and they’ll back the Republicans who follow the governor to see this through with a narrow victory.
One of the talking points that Salisbury mayor Jake Day has continually made about bringing jobs to Salisbury is that we need to improve our quality of life. Perhaps I’m oversimplifying the argument, but if we have a quality of life attractive to younger workers they will come here and create the jobs – or so the thinking goes.
So it was interesting that a few weeks back I received an e-mail from a company called LawnStarter. The reason I received it was that I have used business-related survey data from Thumbtack.com in the past and this entrepreneurial outfit had created something they called their Quality of Life Index. (Naturally, the company specializes in assisting lawn care startups by bringing customers and businesses together.) As a state Maryland ranks 13th out of 50, but the lone metropolitan area considered (Baltimore) ranked 73rd out of 101. (We in Maryland surely had assistance from 9th-ranked Washington, D.C. though.)
You may ask how they come up with this index – well, let them explain it:
The index is based on six quality-of-life factors analyzed by LawnStarter and borrowed from The Economist — GDP (economic output) per capita, average life expectancy, divorce rate, unemployment rate, geographic location (latitude) and male-female income equality. The Economist considers these factors to be good barometers for quality of life.
Based on some of the factors cited I suspect Salisbury would be near the bottom of the city list. However, they may not be at the very bottom because the lowest seven cities (and nine of the bottom ten) share one of two things in common:
- They are in California (Sacramento, Riverside, Fresno, San Bernardino, and Stockton) or
- are in close proximity to Lake Erie (Buffalo, Toledo, Cleveland, and Detroit)
Memphis is the outlier to that group, with Detroit occupying the 101st and bottom position.
However, Salisbury doesn’t have a particularly high GDP per capita or low unemployment rate, nor is life expectancy that great compared to other places. As a state Maryland is certainly aided by its close proximity to Washington, D.C. but Baltimore’s far lower rating may be closer to the conditions we have to endure here. It could be argued that our area has several of the same pitfalls that plague inland California (Sacramento, Stockton, et. al.) – chronic high unemployment in an area best known for agriculture due to a temperate climate. The agricultural base contributes to the low per capita GDP while the high unemployment eventually manifests itself in a shorter life expectancy thanks to crime and lack of preventative health care.
Short of a Bill Gates suddenly showing up and showering the area with wealth, these factors will remain common to our area. Unfortunately, the few assets we seem to have are difficult to leverage into productive careers. Most of our more lucrative jobs have to do with health care and government as opposed to STEM-based or manufacturing positions, which add more value and GDP. The exceptions to this are having the headquarters of Perdue in Salisbury and the Wallops Island NASA complex; while the latter is a government installation there are a number of private companies which use their facilities. While it’s almost 50 miles away, Salisbury is the closest city of reasonable size to the remote installation on Virginia’s Eastern Shore.
But those two entities need to be joined by many others to truly bring a better quality of life to Salisbury. To use a good local analogy, it’s like a chicken-and-egg question: does the quality of life come from good jobs or do jobs spring from a good quality of life? I believe the former is true, while our mayor seems to side with the latter. Over the next few years, we will see who is correct in our local case.
There are news stories that turn out to be much ado over nothing, and recently the Salisbury community has been roiled by such a story. To some, it’s a scandal and an outrage that our little community will once again be denied…a Cracker Barrel.
For some unknown reason, ever since I have moved here it’s been the dream of some for that restaurant chain - which has over 600 locations around the country including those on Kent Island and Rehoboth Beach - to open one in Salisbury. In general, the company opens their locations within sight of a major highway, so the first rumor was that there would be one built where the old Zia’s was torn down just north of the junction between U.S. 13 North and U.S. 50, which is perhaps the true crossroads of Delmarva. That interchange is close by the Centre of Salisbury, a regional enclosed mall.
After the former Zia’s parcel went by the boards (to become the location for a second Chipotle restaurant in Salisbury) the attention and gossip turned to a vacant parking lot outside the Centre of Salisbury in front of a shuttered J.C. Penney store. But that option has also been rejected thanks to one of the anchor tenants at the mall, according to this published report. Thus, local residents are up in arms.
I don’t make a living as a restaurant critic, but in my Ohio days I had eaten at Cracker Barrel perhaps a half-dozen times because I lived relatively close to the junction between I-75 and the Ohio Turnpike (definitely major highways) and there’s a Cracker Barrel close by that exit. While my ex liked it, to me Cracker Barrel was nothing special – unlike Buffalo Wild Wings, for which I was thrilled when they finally made it here from Ohio. (Admittedly, BWW has lost some of its charm since it went national - I go back to when it was called BW-3.)
It also amuses me that there are people who are pining for Cracker Barrel to come in on the one hand, but lament that there are no good local restaurants to eat at. Obviously Salisbury has a large enough market base that dozens of national and regional chains are located here, but they mainly tend to congregate around the Centre of Salisbury or Salisbury University. Located in other parts of town, particularly downtown, are a number of local business we’re continually being told we need to patronize. “Shop local,” everyone says. So why do we need a Cracker Barrel?
Of course, the answer is obvious since there’s apparently a pent-up local demand for average food and overpriced knick-knacks. But to go on for the better part of ten years? People were excited to get a Famous Dave’s here, but that folded up in short order.
If you ask me, the best spot for Cracker Barrel (or similar tourist-driven enterprises) is the parcel of land close by Perdue Stadium that was once slated for mixed-use development before the Great Recession tried to wipe the local economy out. It’s already annexed into the city, infrastructure can be added easily, and the site has major highway access and visibility. Another possibility is a parcel farther west on U.S. 50 recently purchased for development, according to the Daily Times.
Whatever the case may be, in the interim those who really like Cracker Barrel will have to drive an hour or more to get their fix.
After doing this the last two years one would think I would be an expert at dissecting what will go on over the course of a year, but in this case my crystal ball is a little bit cloudy. Perhaps that’s because things are looking up for a change.
I went to the state Department of Labor, Licensing, and Regulation website and downloaded some figures which reflect great job creation news - particularly in the latter half of this year. Since June, Wicomico County employment figures are running between 1,300 and 1,800 jobs higher than the corresponding month of 2014. Conversely, in 2014 we never ran more than 753 jobs ahead of 2013 and by the end of last year we actually had fewer employed than the year prior. That downturn carried into this calendar year but by March we had turned the corner.
The growth in the latter half of the year was reminiscent of the boom period of 2004-06, when Wicomico County routinely gained 1,000 or more jobs in every month year-over-year.
So the question will be whether county revenues begin to increase. Unlike the boom of a decade ago, which was fueled by a rapid increase in property values that later translated into increased tax collections, this upturn doesn’t come with rapidly appreciating property values. And there are plenty of bills for the county to pay – two new schools with a third one now placed into the pipeline as well as new facilities for the Board of Elections, increased mandates for education spending and environmental cleanup from the state and federal governments, respectively, and a call from the city of Salisbury to assist them more with fire protection expenses through a more equitable revenue sharing. Certainly it appears that any new money has a number of hands reaching out for it.
Another question regards how well two relatively new leaders will work with each other. It’s fortunate that both County Executive Bob Culver and Salisbury Mayor Jake Day spent a little bit of time on the legislative side of things because it will help them understand the process the other has to go through to get things done. If there’s one thing we have learned from Culver, though, it’s that he’s a man of action who always seems to have a to-do list of improvements he’d like to see. It’s more autocratic than bureaucratic on the county side of the Government Office Building these days. Initial impressions of Day seem to be similar, although he’s made much less of an impact on taking office than Culver did insofar as personnel decisions are concerned.
But there are two key issues regarding education that will be out of Culver’s hands. One is the fate of the elected school board, which is now up to the Maryland General Assembly. The other is the new superintendent that will take over the county schools sometime in 2016. The Board of Education begins the selection process after the holidays – by the way, the county Republican Central Committee will be called upon to retain or replace two GOP members of that body this summer.
Getting around may become a little more difficult next fall as well, as the state will begin replacing 11 bridge decks on the U.S. 13 bypass. It’s a project that’s not supposed to impact summer traffic in 2017 but won’t be complete until 2018.
In comparison to previous years there doesn’t seem to be anything particularly contentious on the horizon - with the possible exception of the proposed large-scale chicken farms Radical Green is already up in arms against - which probably means we’re going to have an interesting year. If we can keep up the pace of job creation, though, eventually the local economy will get back to where it was a decade ago and prosperity takes care of a lot of problems.
Tomorrow I shift my focus to the state as a whole.
By Cathy Keim
Second in an ongoing series.
I am using my prerogative to switch to a different immigration topic because a friend sent this Breitbart article and pointed out that Rep. Andy Harris is on the list, as is Senator Barbara Mikulski. As I mentioned before, immigration is such a broad subject that one cannot cover all the angles in just an article or two.
I actually wrote to Andy Harris about the Strengthen Employment and Seasonal Opportunities Now (SEASON) Act (H.R. 3918) back on November 12. I saw him later that day at the Kathy Szeliga event and I asked him about his support for this bill.
He stated that the Obama administration had changed the regulations about the H2B visa program and HR 3918 was merely to return things to the way they were done previously, adding that employers needed the foreign workers to do these jobs that Americans will not do. I asked about the families of H2B workers and he said that they were not allowed to bring their families with them.
But I checked on the United States Citizenship and Immigration Service (USCIS) website and it clearly states that:
Any H-2B worker’s spouse and unmarried children under 21 years of age may seek admission in H-4 nonimmigrant classification. Family members are not eligible for employment in the United States while in H-4 status.
So I must disagree with the Congressman’s assertion. My concern was that if the families enter with the worker, then they will most certainly have an impact on the local economy as the children enroll in school and utilize other social services.
The H2B visa worker may be a boon for the employer, but the rest of the community is underwriting the social service costs for the cheap labor. In addition, we are paying the welfare costs of our unemployed citizens who could be working instead of a foreign worker. The taxpayer is picking up the tab in every direction while the employer is improving his profits.
The employers complain that Americans won’t do these jobs, but it is likely that they would do them if they were paid a fair wage. The employers utilize the H2B visa program to bring in foreign workers to keep the wages depressed.
According to the Society for Human Resource Management:
In a separate final rule, the departments unveiled the methodology for determining the prevailing wage that must be paid to H-2B workers.
The Economic Policy Institute’s (vice-president Ross) Eisenbrey expressed disappointment that the rule allows alternative wage surveys to set the prevailing wage. “Employers only use these alternative surveys to ensure that they can pay their workers the least possible amount, rather than using credible and reliable survey data compiled by DOL,” he said, pointing to the seafood industry as an example as having used private wage surveys to justify “paying their H-2B workers wages near the federal minimum wage for grueling work like crab-picking, rather than the higher average wages paid across Virginia and Maryland for similar work.”
Here is a link to information about the changes to the H2B visa program that were put into effect in April of this year.
I also asked Mike Smigiel, who is running against Andy Harris for the First Congressional District seat, for a statement about HR 3918. Smigiel said:
With our real unemployment numbers over 11% and the workforce participation at one of its lowest levels in years we clearly have a workforce that is hard pressed to find employment. The most vulnerable sector of the workforce are youth, legal immigrants, and those with a high school education or less. Record numbers of Americans are living in poverty and surviving on food stamps, it is hard to fathom that Congress would expand the H2-B program to an all time high.
What Congressman Harris failed to address is the fact that those here on the H2-B program can bring their spouses and families in under the H-4 visas. Do you think that the spouses and children of those coming in under the H-4 visa program are not going to be working, going to school, getting sick? These associated costs will be additional burdens upon our already strained economy.
Our first obligation should be to helping our unemployed and underemployed citizens by providing this most vulnerable sector of the workforce work training and providing incentives to employers to hire citizens for the jobs.
It is disingenuous of Congressman Harris to sponsor this legislation since just a few months ago he voted to prohibit American poultry, beef or pork producers from listing the country of origin on their products. This does not benefit the consumer or farm workers but makes it easier for large farming corporations to take their operations overseas where labor is cheaper and there are fewer regulations placed upon their farming operations. Their products can then be sold in the US without any notice that they were not raised here. So thanks to Congressman Harris we may be eating Chinese chickens with American companies’ names on the product.
Once again, I would encourage you to pick up your phone and call Congressman Andy Harris and Senator Barbara Mikulski and ask them to not support HR 3918. Let’s put our own citizens back to work.
Earlier this week the Tax Foundation released its annual State Business Tax Climate Index. Despite Governor Hogan’s insistence on improving business climate and efforts to adopt some of the Augustine Commission’s reforms, Maryland once again has the dubious distinction of being a bottom-10 state.
Yes, that sickening orange color tags us as a state to avoid insofar as business taxes are concerned. In truth, we’ve only dropped one spot from the 2015 index so while we could have made a few minor improvements other states are improving at a faster pace. (Maryland seems to tread water – over the last four years we have oscillated between #40 and #41.) Moreover, we still lag behind all of our neighbors with Delaware again leading the region. The First State maintained its #14 ranking.
There is one important caveat to Maryland’s decline which could push them out of the bottom 10 next year. Late last month Governor Hogan announced a significant cut in the unemployment insurance tax, which is one of the factors (albeit the least-weighted) the Tax Foundation uses to determine its rank order. But other states are trying to push the envelope more quickly by reducing corporate and individual tax rates, something Maryland has talked about but not acted upon. (The Tax Foundation’s weighting process is explained on page 16 of their full report.)
While reducing regulations doesn’t always require legislative approval, the tax nut is a harder one to crack. The requirement to balance the budget means that revenue no longer extracted from corporations and small businesses alike can’t be used for profligate spending. At a time when government getting an increase that’s less than expected brings screams about draconian cuts from the left side of the aisle, heads truly explode when less real money is allocated. Even if you get 97 cents when you used to get a dollar, liberals act as if you just shot their unicorn with a scary-looking AR-15.
There’s a reason I bring up 97 cents as a particular figure. According to the state’s FY2016 budget, the corporate income tax accounts for 3% of the revenue; thus, eliminating it entirely would mean a corresponding budget cut. (We’ll leave aside the obvious competitive benefit to the state, which would eventually attract more business and increase revenue via other means such as income and sales taxes.) While it’s true that having a poor corporate tax ranking doesn’t completely eliminate the good – Delaware’s #50 ranking in corporate taxes only drags its overall rank to #14 – eliminating the tax would make it plain that Maryland is indeed “open for business.”
Eliminating the tax would also eliminate what’s become an annual debate about combined reporting. Proponents of its adoption, mainly Democrats, claim large businesses are not paying their fair share because they use the accounting trick of claiming their income arises from low-tax states. They may make actual profit in Maryland but don’t report it because they have operations in other. more tax-friendly states. The most recent iteration of the idea came last year, with the tradeoff that would have eliminated filing fees for small (less than 10 employee) businesses. In that respect it was a money-loser for the state; however, the research showed in better economic times the effect would be beneficial to state coffers.
Interestingly, Salisbury has a new mayor that epitomizes the opposite end of the chicken-and-egg approach: last week in the Salisbury Independent, Jake Day was quoted as noting:
“Economic development isn’t what it used to be,” he said. “It includes more activities. It’s now about culture. About quality of life issues. The arts and people. Parks, bike trails, bike lanes. And if you don’t get those right, don’t even talk about workforce development and industry and business development efforts, because you have to have those things to attract anyone.”
This portion of Delmarva boasts a lot of natural beauty along its rivers and coastlines, a well-regarded university, and a proportionate share of arts and culture. Perhaps the traditional bricks-and-mortar manufacturing or legacy service industries won’t come to Salisbury, but it’s been obvious over the last ten years that the beauty, academics, and culture isn’t exactly making this a hotbed of economic activity either. There needs to be a more balanced approach to development because it takes a fair amount of money to create and maintain parks, bike trails, and bike lanes – particularly if the money is granted from the state as it often is. We may be competitors to certain other urban areas around the state, but development somewhere else in the state or even another state, depending on the grant source, is paying the lion’s share for the bike lanes to be installed here. (In some cases, local gifts have helped.) Funding will also be required to maintain parks and develop new ones like Pirate’s Wharf along the Wicomico River.
There are thousands who have moved here over the decades as adults, and for the most part they came here for one of two reasons: they came to school or they came for a job. And if they came for school, there’s no guarantee they will stay if jobs or entrepreneurial opportunities aren’t available.
Simply put, Maryland has a long way to go in overcoming the poor reputation they have for growing and attracting businesses. It’s a lot easier for those on the Western Shore to prosper when there’s a ready-made source of confiscated wealth in close proximity. (If all those people had to find honest work Maryland would be just like West Virginia, with high unemployment. Because it’s well away from that honey pot of confiscated largess, the lower Eastern Shore already is in that same high-joblessness boat.)
I learned the other day that the Augustine Commission determined 1/4 of Maryland’s GDP comes from the federal government. If we can rightsize the federal government over the coming decades, Maryland will be negatively affected in what would be of overall benefit to the nation. It’s time to wean our state off the opioid of living off the federal employees and make strides in diversifying our economy. For that reason, making our state more business-friendly simply has to occur.
Political junkies know the first Friday of the month will generally bring the unemployment rate and job creation numbers from the previous month. As of Friday, the government told us we were at 5% unemployment for the first time since the Bush years, when economists talked us into a recession. (This was back when tepid job growth actually increased the unemployment rate. Of course, people blamed the president at the time.)
Be that as it may, though, there were no net manufacturing jobs created during the month, a fact which concerned pro-manufacturing organizations like my old friends at the Alliance for American Manufacturing. To quote their president, Scott Paul:
Underneath the euphoria over a good topline employment number is this fact: Manufacturing hasn’t gained a single net job since January.
That’s terrible news for our economy. The effects of China’s industrial overcapacity can be seen in waves of layoffs in American steel, aluminum, and other manufacturing sectors. This weakness in factory hiring comes at a very inconvenient time for the proponents of the TPP, which analysts predicted will widen our record manufacturing trade deficit. (Emphasis in original.)
Regarding the TPP, the U.S Business & Industry Council (USBIC), an advocacy organization for small businesses, said in a statement that the TPP is full of “special deals” for multinational businesses. USBIC president Kevin Kearns:
The TPP is anything but the free trade agreement it purports to be. The use of the term ‘free trade’ is simply a codeword designed to attract the support of Congressional Republicans who lurch zombie-like to support anything so labeled, without examining the fine print.
A real free-trade deal could be written on a single sheet of paper, with commitments to remove all tariffs and non-tariff barriers of any kind.
Over at the National Association of Manufacturers (NAM), writer Linda Dempsey demanded a thorough review of TPP’s provisions. All this makes it clear that manufacturers are wary about the effects of this trade deal. I also covered some of the other potential pitfalls on Friday for my weekly Patriot Post piece, which leads me to wonder: just who the heck is for the deal?
Well, actually, NAM is part of a broad coalition of business interests seeking the deal, which makes it less of a Main Street vs. Wall Street issue and mote of a tug-of-war between union interest in protectionism and businesses after free trade. But one question worth asking (as Kearns does) is why we need over 5,000 pages of agreement to clear the trade docket? One can also ponder what benefits we really get as the largest partner by far – it’s not a coalition of equals by any stretch of the imagination, although depending on the source the per capita GDP has been measured slightly higher than ours for partners Australia and Singapore.
If there was ever a case where the devil is in the details, this may be the one. I noted in Friday’s article that time is not of the essence – the 12 nations have up to two years to ratify the agreement, with only 6 (one being the United States) being enough to enable it under certain conditions. (It boils down to we have veto power, and Japan also might depending on the direction of its GDP compared to the dozen as a whole. The Japanese are close to the 15% of total TPP GDP needed to sink the deal if they don’t pass it. By the way, we have a roughly 65% share so we are by far the biggest frog in this little pond.)
The concept of free trade works best among equals. Unfortunately, there aren’t many peers at the level of the United States so you get the complexity of the TPP, which I won’t dare profess to understand. Just on gut instinct I think the acronym KISS is in order here but when it comes to modern government it seems we can only weave tangled webs.