Economic Policy Institute

Odds and ends number 89

Call it the final culling of the election mailbox, and not a moment too soon. Yet again we dispatch with stuff in anything from a few sentences to a few paragraphs.

One effect of the Trump presidency has been a resurgence in manufacturing, which has pleased my old friends at the Alliance for American Manufacturing to no end. “Any job losses – and there have been very few actually documented – as a result of tariffs are being more than offset by the strength of the factory economy,” said AAM’s president Scott Paul in reaction to September’s job numbers. But with even better numbers in October (32,000 new jobs vs. 18,000 in September) Paul was a little more greedy:

It’s good news that factories hired 32,000 new workers in October. If there is any employment impact from tariffs or retaliation, it’s being more than washed away by the overall strength of the manufacturing economy. That said, tariffs alone aren’t going to keep manufacturing strong.

We need to see structural economic reforms in China, a better deal for workers through fairer trade agreements with Mexico, Canada, Japan and the European Union, as well as a renewed effort to crack down on exchange rate misalignment and manipulation.

It’s a start on the 3.4 million jobs claimed to be lost to China by the (left-leaning) Economic Policy Institute in a recent report.

But my question for Scott would be how much effect he believes the dismantling of the regulatory state on Trump’s watch has helped the situation. AAM seems to focus more on the aspect of trade and less on the other areas where we labored at a competitive disadvantage, but that could be a product of its union background. Interestingly enough, a recent survey AAM commissioned was bullish on President Trump and his effect on manufacturing in America – far more than Congressional Republicans or Democrats.

President Trump may have good reason to be bullish himself after what was described by my friend Rick Manning at The Daily Torch as “One of the best job reports imaginable.”

250,000 more jobs created in October alone, in spite of the impacts of two major hurricanes. The unemployment rate rests at 3.7 percent, the lowest rate since 1969, the year Neil Armstrong walked on the moon. More than 4 million jobs created since Donald Trump became President, with more than 1,000 manufacturing jobs created each day during October and nearly 300,000 overall in the Trump time in office. And when it comes to where the rubber meets the road – in the paycheck – America got a raise over the past year which exceeded the inflation rate. That’s right, a real raise year-over-year for the first time in nine years.

Despite the Left’s insistence that this election is about the accused rapist Brett Kavanaugh, supposedly pro-Trump criminals who mail inert bomb-like devices or savagely butcher defenseless worshipers at a Pittsburgh synagogue, or the overreaction to the forthcoming caravasion, they are all desperate diversionary tactics to take the voters’ minds off of their fattened bank accounts since Trump took office.

And speaking of the caravasion, a little digging by Hayden Ludwig of the Capital Research Center has found one key American sponsor of the effort, the infamous “Puebla Sin Fronteras” (People Without Borders). That group is but a small part of a tangled web Ludwig details in his stateside investigation. On the other end, writer and former CIA operations officer Charles Faddis asserts:

Yet, already what has emerged shows that far from being a campaign for the rights of oppressed peoples (the caravan) is a deliberate, pre-planned effort on the part of socialist enemies of the United States to damage American prestige and to embarrass American allies.

Perhaps this is why the caravasion’s rumored arrival as a late “October surprise” has now been pushed back as the first wave has hit some turbulence.

A much earlier surprise was the arrival and successful ballot access of an unaffiliated candidate in our Maryland U.S. Senate race. Neal Simon continues to be on my radar as we reach the final day of the campaign.

It began in early October when a poll touted by his campaign came out, putting his support at 18 percent. See if you can follow this:

Despite common misconceptions from the press, including The Washington Post, about a lack of support for unaffiliated candidates, 54 percent of voters said they will consider an unaffiliated candidate for U.S. Senate; 56 percent of Democratic respondents also said they would consider an unaffiliated candidate; 30 percent of undecided voters lean to Simon. In comparison, only 4 percent of undecided voters are leaning towards Cardin and only 3 percent are leaning towards voting for Republican candidate Tony Campbell.

I actually asked the campaign for the crosstabs (since it was an unreleased part of the overall Gonzales Poll) and they never responded. I say unreleased because:

Neal Simon’s campaign purchased three rider questions on the Gonzales Maryland Survey conducted from October 1-6, 2018. The campaign purchased the questions because the polling firm had not planned on including the Maryland U.S. Senate race in its poll.

I’m certain they have had internal polling all along as well. The U.S. Senate race is definitely one of the topics I’m going to discuss in my postmortem, in part because of this claim:

Gov. Larry Hogan today announced that he has cast his vote for Maryland’s U.S. Senate seat for unaffiliated candidate Neal Simon.

To be quite honest, that would not surprise me. Maybe it’s a quid pro quo, as Simon earlier said:

I’m happy to announce my endorsement of Gov. Hogan today for another term as Maryland’s governor. From cutting taxes and fees, to investing in education and cleaning up the Chesapeake Bay, Gov. Hogan has accomplished a lot for Marylanders. And he’s done it by working across the aisle to find common ground. Instead of sowing divisiveness and conflict for cheap political points, Gov. Hogan has stayed true to his promise to govern from the center. He’s a true model for how to get things done.

Of course, according to the iVoter Guide, Neal Simon is a liberal.

It was a couple years ago that I first mentioned the group, which was asking for prayer:

Pray for unity and peace. Our country is deeply divided. Christians must truly start loving our neighbors as ourselves so that there can be a spiritual awakening. Now is not a time to gloat but to turn our hearts continually toward God so we can be examples of His love and work toward reconciliation and unity. Pray for all nations, as a new stage is being set both nationally and internationally.

A couple weeks ago I found out they had expanded their iVoter Guide to Maryland – alas, this time only for federal races. But it’s a well-documented source to help you through the clutter, especially all the clutter caused by an estimated $5.2 billion in spending this time.

Yes, you read that correctly: five point two billion, with a “b” dollars. (I think half of that was spent on mailings to my house.) From OpenSecrets:

While Republican candidates are raising funds at record levels, the huge uptick in spending is driven primarily by unprecedented Democratic fundraising. Democratic candidates are projected to spend more than $2.5 billion this cycle, while Republicans are expected to spend approximately $2.2 billion.

Democratic House hopefuls have raised more than $951 million, crushing their Republican opponents’ $637 million haul. Things are closer in the Senate – $513 million to $361 million – but Democrats are still ahead.

Gee, do you think they’re a little upset that Hillary couldn’t close the deal?

Last but not least is something from a woman basically forgotten in the 2018 race. Available online election results for the Comptroller’s office over the last 32 years show that only one Republican has ever exceeded 40 percent of the vote: Anne McCarthy was the last woman to run as a Republican nominee back in 2006 and received 40.8% of the vote in the election that elevated Peter Franchot to the job. Twelve years later he faces another woman, but one who has been severely underfunded from the start because Franchot has the advantage of a healthy relationship across the aisle with Governor Hogan.

So when you receive an e-mail appeal from Anjali Phukan saying “Franchot is in the pocket of special interests and here’s proof!” you think to yourself, that’s nice, but perhaps that vein should have been mined back in March. And it’s too bad because this is interesting:

I believe at least 29 entities overcontributed (to Franchot), questioning the validity of over $354,000 in donations. The biggest overcontributor gave about $140,500 (David Trone via RSSI, Total Wine, and other related entities). There was a court case in September 2016 for this matter, but Franchot only returned $62,000. Other overcontributors looked like the entity name was typed slightly different to be perceived as a different person for donating over the limit without triggering reporting system red flags, others looked like a primary entity was using small business(es) owned by a donor, for donating over the limit without triggering reporting system red flags.

I have noticed this on a number of financial reports over the years: a donor name may be typed in slightly differently or the address is incorrect – a case in point: there are campaign finance reports out there which have my address in Ocean Pines for some strange reason, perhaps because someone read a long list of names and addresses incorrectly and put line 62’s name with line 63’s address and never bothered to change it in the system for awhile afterward until it was pointed out. It happens.

But the system is only as good as its reporting because the software appears to keep a running total for each contributor. If a name is spelled differently that resets the system, so let’s say I wanted to be devious and donate $12,000 (twice the legal limit) to a candidate. If I found an old check at an old address and told the treasurer to spell my name “Schwartz” (a common error, trust me) I just might be able to get away with it unless someone audited the account later. And then I could say it was an honest mistake – I just forgot I maxed out to the candidate already. (Either that or I can just set up multiple LLCs, which seems to be a time-honored avoidance technique, too.)

Anyhow, it’s a good point but unfortunately far too little and far too late. Phukan will be hard-pressed to beat 30% today, and it may be a good test to see how loyal Republicans are to their straight ticket. I can tell you that I will not be, but where I depart is for me to know and you to maybe find out at some later time.

Let’s put this election cycle to bed. Pray for the best possible results.

Report: High wages aren’t the issue with manufacturing

As you surely know, I have taken an interest in rebuilding manufacturing within our nation in general and this region in particular. While much of our local economy takes the form of manufacturing in an agricultural sense, either through grain farming or its primary purpose of assisting in the raising and processing of chickens, the advantages to the local and national economy if America began to make things again is beyond dispute.

So when I was sent a link to a manufacturing report by the union-led Alliance for American Manufacturing (AAM), I wanted to see what the perspective would be. Up front, it was clear that the AAM had their eggs in one basket.

“American factory workers are the solution, not the problem,” said Alliance for American Manufacturing President Scott Paul. “Instead of scapegoats, America needs a manufacturing strategy. That strategy should be built on balancing trade, investing in our infrastructure, enhancing our training programs, and rebuilding our innovation base.”

This report, with the lengthy title “Exchange rate policies, not high wages, are why U.S. lags China and Germany in export performance,” comes from the liberal Economic Policy Institute (EPI). Paul’s interpretation of the report:

“The idea that high wages in the manufacturing industry are causing job losses is common, but incorrect,” (report author Robert E.) Scott said. “Pushing manufacturing jobs into the low-wage, non-union south is a race-to-the-bottom strategy that should be rejected. Instead, we need to fight currency manipulation by countries like China and take a page from Germany and Europe to rebuild American manufacturing.”

His is a truncated summary of the last bullet point solution offered in the EPI report:

The strategy of pushing manufacturing into the low-wage, nonunion southern states is a race-to-the-bottom strategy that should be rejected in favor of high-road strategies: fighting currency manipulation and doing more to rebuild American manufacturing, taking a page from the German and European models (with supply-side policies that benefit and support the manufacturing sector, including increased spending on research and development as a share of gross domestic product; support for “stakeholder capitalism” in which boards of directors include an equal number of representatives of workers and managers; and heavy investment in training and job creation).

Obviously there is a certain appeal to some of getting back to the conditions we had circa 1960, when American manufacturing was the undisputed heavyweight champion of the world, workers brought home a salary that could support a family while Mom stayed home to take care of the kids, and Big Labor had its own corner of the political table. Five decades later, we have ceded that crown to China for a number of reasons. But I don’t think currency manipulation is the primary reason.

The EPI’s worry that manufacturing jobs are flocking to the “low-wage, non-union south” is in and of itself a tacit admission that wages and benefits are an important factor in site selection. China got to be a manufacturing leader because they have a very inexpensive workforce of semi-skilled laborers – the same sort of workforce that illegal aliens bring to the table in this country, although it depresses wages here in a different manner. Given the equality of other factors nationwide such as the federal regulatory regime and abundant cheap energy, those who do site selection tend to choose the places where they can get the biggest bang for their buck.

By the same token, willing local governments which assist these manufacturers with providing new infrastructure and greenfields for development tend to have more success than those urban areas with problematic old systems and brownfields that require remediation. But that’s not the only reason nice plots of available land sit empty in regions of the country outside the South.

Here in Maryland, we are saddled with a state government that refuses to even consider right-to-work legislation and has gone out of its way to punish large non-union employers. A decade ago when I began this site, the largest state issue was the (so-called) Fair Share Health Care Act and whether the Maryland General Assembly would override Governor Bob Ehrlich’s veto, which they did. The bill was narrowly tailored to affect just one employer: Walmart. And while correlation is not causation, the fact a proposed Walmart distribution center in Somerset County was placed on a continuing hold was blamed on the unfriendly climate for non-union businesses in Maryland. (The bill itself was later struck down in court as an ERISA violation, something I thought improper at the time.)

If you assume my overall argument is in favor of this “race to the bottom,” you’re forgetting a simple fact: a little bit of something is better than a whole lot of nothing. There are many paths to prosperity our nation, state, and city have available to us but it seems to me the best one is where we add value to the goods and services everyone needs. This is why our chicken industry succeeds, since we take that which is available to us to raise and process chicken for a world market and have developed an expertise that competitors have a hard time matching. Granted, not everyone in the industry makes a ton of money but that’s a function of the value placed on chicken by the market. Chicken is a very useful food product but people also like and can choose beef, pork, seafood, or vegan as well. On the other hand, there’s a reason oil is called “black gold,” to use another useful commodity for an example. The resource has a very high value thanks to its functionality, relative scarcity, and lack of alternative products.

America as a whole needs to again become the place where the most value is added, and once we get there we will all succeed because of it. (That will be the point where trade takes care of itself as well.) Back in 1960 we were the leaders in adding value, but now we’re not because we let others take our place. Re-establishing our manufacturing base will help us get that crown back, even if some parts of the country do more to help themselves in improving their economic state.

Back to that three letter word: J-O-B-S

I still like picking on Joe Biden. But over the last month or so I’ve collected a lot of divergent information on policy suggestions, each of which promses to be the magic elixir to get our economy moving in the right direction again.

I think the key to this lies in two areas: manufacturing and energy. In that respect, I keep a lot of information handy to discuss in this space, with a group called the Alliance for American Manufacturing (AAM) generally representing the left-of-center, pro-union side. And while their main goal seems to be increasing the coffers of Big Labor, luckily most workers still have free will – ask the employees at the Tennessee Volkswagen plant about how much effort from the UAW can be rebuffed in a simple up-or-down vote.

Currency manipulation is one area in which the AAM has been focusing. A study they cite, by the liberal Economic Policy Institute (EPI), makes the case that:

Many of the new jobs (if the subject is addressed) would be in manufacturing, a sector devastated by rising trade deficits over the past 15 years. Rising trade deficits are to blame for most of the 5.7 million U.S. manufacturing jobs (nearly a third of manufacturing employment) lost since April 1998. Although half a million manufacturing jobs have been added since 2009, a full manufacturing recovery requires greatly increasing exports, which support domestic job creation, relative to imports, which eliminate domestic jobs.

Personally I disagree with the premise that rising trade deficits can be blamed for the job losses; instead, I think an absurdly high corporate tax rate and onerous regulations have contributed more to chasing away American manufacturing. (While many simply blame “outsourcing” for the problem, fewer understand the dynamics which led to the outsourcing.) Yet there is merit to the idea that all sides should be competing on as level of a playing field as possible when it comes to the means of exchange, and China is one of the worst offenders. (And why not? They are communists, after all, and you can’t trust communists any farther than you can throw them.)

Two of EPI’s findings are quite interesting: first, should the EPI model come to its fruition, the oil and gas industry would be the hardest hit, and second, Maryland would be among the states least impacted, with barely a 1% rise in employment.

Yet AAM president Scott Paul is quick to blame Barack Obama:

President Obama promised to hold China accountable. He hasn’t. The White House last month said President Obama would use his pen and his phone to make progress on economic issues. He could start today by signing an order to designate China as a currency manipulator. Then, he could call the Chinese leadership to demand an end to that practice, and secure an agreement on a plan to cut this deficit in half over the next three years.

I sort of wish Mr. Paul would also figure out the other problems, but he is correct to be concerned about our Chinese policy. Job creation has become more important than deficit reduction in the minds of Americans, both in the AAM poll I cited above and a Pew Research Poll cited by the American Petroleum Institute (API).

And the industry which benefits from API’s efforts represents another piece of the puzzle which we can take advantage of: our abundant energy supplies. While America uses 26 trillion cubic feet of natural gas per year, there is the possibility of as much as 10,000 trillion cubic feet within our land mass. That’s nearly 4 centuries worth, so I don’t think we will run out anytime soon. (Estimates have continued on an upward path as new technology makes previously unworkable plays economically viable.) As I keep saying, it’s too bad we don’t have a nice shale play under our little sandbar. Not only that, but the infrastructure we will need to take advantage of all that (and help curtail spot shortages like the ones we’re having this chilly winter) would be a guaranteed job creator – one which derives its basis from the private sector. New pipelines aren’t just for export facilities like Cove Point, but could benefit this area and perhaps bring more natural gas service to our region.

Unfortunately, Maryland isn’t poised to take advatange of either the manufacturing or energy booms at present, thanks to back-breaking economic policy and a foolhardy go-slow approach on fracking. It takes a strident opponent of the latter to suggest yet another approach which will do damage to the former, but gubernatorial candidate Heather Mizeur accomplishes this with the tired old combined reporting proposal. Hers comes with a twist, though, which she announced last Monday:

In the morning, Mizeur will host several Maryland business owners for a Small Business Roundtable. They will discuss her legislation to provide tax relief to small business owners, as well as other highlights from the campaign’s ten-point plan for jobs and the economy, which was released last fall. She will also hear from the business owners on a range of other concerns.

(snip)

At 1:00 pm, several business owners will join Mizeur in front of Ways and Means to testify on behalf of legislation that would enact combined reporting and distribute the estimated $197 million to small businesses for personal property tax rebates.

It’s the liberal way of picking winners and losers. And according to a 2008 study by the Council on State Taxation – admittedly, an opponent of the practice:

Combined reporting has uncertain effects on a state’s revenues, making it very difficult to predict the revenue effect of adopting combined reporting.

Even proponents don’t address that aspect, instead emphasizing how it would “level the playing field between multistate corporations and locally based companies.” But since Mizeur’s idea is one which would subsidize some businesses under a certain employment plateau, the uncertainty would likely be just another reason to avoid Maryland.

On the other hand, a Republican like Larry Hogan at least gets businesses together to discuss what they really want. Granted, once he gets them together he speaks in broad concepts rather than a more specific plan, but at least he’s listening to the right people. None of the others in the GOP field have specific plans, either, although Ron George probably comes the closest.

One has to ask what states which are succeeding economically are doing to attract new business. The state with the lowest unemployment rate, North Dakota, is prospering – more like crushing the rest of the field – on account of abundant energy resources, and perhaps that success is pulling surrounding states up with it. Its three neighbors (Montana, South Dakota, and Minnesota) all rest within the top 13 when it comes to low unemployment rates and other regional states like second-place Nebraska, Iowa, Wyoming, and Kansas lie within the top 10. Although the top five are right-to-work states, half the bottom 10 are as well. Nor can tax climate be seen as a dominating factor since the top 10 in unemployment vary widely in that category: Wyoming, South Dakota, Utah, and Montana are indeed excellent in that aspect, but North Dakota is decidedly more pedestrian and Iowa, Vermont, and Minnesota are among the worst.

But Maryland has the tendency to depend too much on the federal government as an economic driver. This presents a problem because bureaucrats don’t really produce anything – they skim off the top of others’ labor but don’t add value. Certainly it’s great for those who live around the Beltway, and it’s telling that all three of the Democratic candidates have a connection to the two Maryland counties which border the District of Columbia while none of the Republicans save Larry Hogan do.

In order to create jobs, I think the state needs to diversify its economy, weaning itself off the government teat and encouraging manufacturing and energy exploration. Meanwhile, there’s also a need to rightsize regulation and restore a balance between development and Chesapeake Bay cleanup – specifically by placing a five-year moratorium on new environmental restrictions while cleaning up the sediment behind the Conowingo Dam. Let’s give that which we’ve already done a chance to work and other states a chance to catch up.

The best route out of government dependence is a job. Unfortunately, when the aim of the dominant political party in the state is one of creating as many dependents as possible, a lot of good entrepreneurs will be shown the door. It’s time to welcome them in with open arms.