Economic Analysis
The IRS Scandal Smoking Gun?
May 22, 2103 – by Dr. Peter Morici
In the IRS targeting scandal and others, Washington and the media are obsessed with the question: What did the president know and when did he know it? That misses the point – Mr. Obama’s presidency is much more damaging to the nation than the mistakes of subordinates now coming to light.
Meeting with anti-Tea Party IRS Union president
Most recently, we learn President Obama met with anti-Tea Party IRS Union President Colleen Kelley just before the tax agency began targeting conservative groups. Is that the smoking gun? Was the president in on the plan to harass opponents of big government?
Through labor-management forums, the union has a lot to say about how the IRS is run, but I doubt a transcript of the meeting, if we could get one, would prove the two presidents directly conspired to use IRS powers to target conservative groups. Instead, it would likely show they were in concert on the need to defeat the GOP in 2012, and countering the Tea Party’s influence was important.
However, the union solicits contributions from members to campaign against the Tea Party, and AFI-CIO affiliated unions educate their members that Republicans and conservatives groups are the enemies of progress.
In that kind of an environment is it any surprise that card carrying union members at the IRS thought it was just fine to target advocates of limited government? Hardly!
Executive order
That’s union politics. But the president doesn’t have to encourage it beyond what his responsibilities as chief executive require, yet he does. In 2009, the president signed an executive order to allow the union to have pre-decisional involvement in all IRS workplace matters.
Now the president acts with such great surprise that workers paying dues and making political contributions to an organization that targets the Tea Party and conservative groups are harassing the same in their work.
The president is not uninformed or incompetent – he is cynical and corrupt.
We did not know that he was so lacking in moral fiber and self restraint when we elected him, because as a senator both in Illinois and Washington, he spent most of his time running for higher office – we never observed him exercising discretion and dealing with tough choices as a legislator or executive.
Having chosen him in haste, the nation can repent at its leisure.
Abuse of power
He won’t be impeached and convicted, but he will continue to abuse his powers. And he sets the tone for his administration.
He didn’t have to tell Attorney General Holder to pursue sweeping subpoenas of the Associated Press or name a Fox correspondent a conspirator in investigations of leaks-actions that will intimidate a free press.
Or for the Secretary for Health and Human Services to shake down private executives for “donations” to nonprofits led by former Obama Administration officials. Or for the Secretary of State to cover up the ineptitude that led to the death of a U.S. ambassador and several diplomats at the hands of terrorists in Libya.
It’s just how they do business in Chicago, and now sadly in the nation’s capital. All with a wink, a smile and a denial from the president of the United States.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. (See his U.S. economic forecasts here.)
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As a CEO, Why President Obama Gets an “F”
May 17, 2013 – by Dr. Peter Morici
CEOs of large organizations all face the same problem – driving their agendas in organizations too diverse and geographically dispersed to manage directly.
They hire competent managers for their units, set goals and establish clear metrics for evaluating performance. As in politics, competition in business is tough, and CEOs must set ethical boundaries for their managers’ conduct.
In all this, the CEO’s personal conduct is critical.
Early in his presidency, Mr. Obama flaunted American constitutional tradition by pushing through major social legislation, ObamaCare, without a bipartisan compromise and consensus. And he relied on a legislative sleight of hand to pass the Senate.
Obama’s ethical standard
Simply, Mr. Obama’s hard left agenda requires him to treat the constitution and Congress as mere inconveniences – expediency is his ethical standard.
For example, unable to obtain Congressional ascent, even among moderate Democrats, for limits on CO2 emissions and other environmental goals, the EPA – at his public behest – has written regulations imposing new and onerous requirements on business.
The Obama Credo of Management: We’ll do as we please, stop us if you can.
His failure as a CEO, now with grave political consequences, was to impose no limits on managers’ behavior and implement adequate controls – mechanisms for the CEO to monitor the performance of units and head off emerging threats to the survival of the organization.
Regarding the latter, of paramount importance is to insulate the president from any fallout from their actions.
Cues from the boss
Cabinet secretaries and agency heads took their cues from the boss – at State, Justice and the IRS senior management would have had us believe they were unaware of what was happening in Benghazi, with the Associated Press, or at the Cincinnati Office of the IRS.
And the president only learns about many problems when reported in the news?
Mr. Obama simply has been too busy giving speeches, raising money, and trying to turn every event to political advantage to keep tabs on his managers, as any good CEOs would do.
CEOs periodically meet with their principal managers – in groups and where necessary individually – to probe their tactics, offer assistance from their own wealth of experience, and discern areas where managers may be planting problems that will burgeon into crisis.
Failing at this, the president has managed to continence management failures that cost the lives of Americans abroad, weaken our national security, rock public confidence in government, and threaten our constitutionally guaranteed liberties.
Comparison with Jimmy Carter
Mr. Obama has a lot in common with one predecessor, Jimmy Carter – both failed as CEOs. The man from Plains is a decent and ethical man but micromanaged too much, whereas Mr. Obama acquired his moral compass in the Windy City and simply can’t manage at all.
Americans should not be surprised. Mr. Obama came to Washington with profound campaign skills but virtually no record as a legislator or manager. He spent seven years in the Illinois Senate as a virtual non-participant, bored and seeking higher office, and his four years in the U.S. Senate running for president.
Americans turned to him, because they were justifiably disappointed with President Bush and tagged John McCain with the blame.
Prior to his presidency, Americans never observed Mr. Obama running anything, other than a campaign. He had not been a governor or a congressional committee chair. In military terms, we made him a five star general before even serving as a lieutenant.
By his own actions, he is arrogantly ambitious but sadly incompetent. He has corrupted the foundations of our Republic, and for that he gets a failing grade.
Dr, Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. (See his U.S. economic forecasts here.)
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Europe’s Permanent Recession
May 15, 2013 – by Dr. Peter Morici
On May 6, I wrote Europe was in danger of falling into a permanent recession – a depression.
(Editor’s Note: Scroll down to read Dr. Morici’s Op Ed prediction of May 6 — “Strategies to Avert a Depression in Europe” – or read it on the street.com.)
Now, the European statistical agencies report France joined Italy and Spain’s recessions during the first quarter, and economic activity across the entire Eurozone continued to contract.
The straight jacket imposed by Euro-think-allegiance to a failed experiment in a common currency, ill-conceived and overzealous austerity measures, and halting and inadequate labor market reforms – caused continued economic contraction across the entire Eurozone.
Europe’s GDP fell 0.2 percent in the first quarter, after dropping 0.6 percent in the fourth quarter, and has been falling for six quarters.
Germany is barely growing – GDP was up a scant 0.1 percent after falling 0.7 percent in the fourth quarter. Europe’s situation would be akin to California being in neutral, while the rest of the United States went backwards – profoundly!
In France, investment is sinking like a stone – new spending by non-financial businesses was down 0.8 percent, after falling 0.7 percent in the fourth quarter.
Why France is sinking
Inadequate labor market reforms, France’s virulent protectionists instincts and a rudderless socialist government, coupled with a euro that is overvalued for much of the French economy, are driving businesses away.
Even though consumer spending was nearly flat, austerity measures and weak investment spending pushed down GDP by 0.2 percent in the first quarter, after a similar loss in the fourth quarter.
Italy’s data told a similar sad tale – GDP fell 0.5 percent after falling 0.9 percent in the fourth quarter. Elsewhere, unemployment in Spain and Greece remain at alarmingly high levels.
Outside the Eurozone, the UK narrowly escaped a recession – first quarter GDP was up a slim 0.3 percent, after falling a similar amount the previous quarter.
For the Eurozone, the positive notes are that the first quarter contraction was not as severe as in the fourth quarter, and recent snippets of data for spring economic activity have been a bit less discouraging in the North – indicating the U.S. spring swoon may be mirrored by some moderation in the European malaise.
Germany and the other northern countries are quite dependent on the South to export their industrial products, and are much advantaged by the euro, which tends to be undervalued for their economies at current prices, while overvalued for the southern region.
Euro’s misalignment
Essentially, the euro imposes a misalignment in prices for industrial products and tradable services, making the North appear more competitive than its fundamentals would otherwise support and the South perform poorly.
Along with austerity, clinging to the euro makes unlikely a sustained recovery in Greece, Spain, Portugal and regions within Italy and France aligned with the South.
In the South, labor market reforms and falling wages cannot proceed rapidly enough to attract new investment as long as the common currency is in place, putting the region in a permanent recession – a depression.
That is a recipe for a permanent recession throughout Europe or at least prolonged stagnation similar to the fate of Japan over the last several decades.
Long periods of weak or declining capital spending will leave European industry permanently out of date and terminally uncompetitive. Though pockets within the core of Europe’s industrial north will thrive – much like Fiat and similar firms located in Italy’s Northern League – overall Europe will decline.
Eventually, incomes and living standards in more robust Asian economies – South Korea and urbanized China – will overtake those in important segments of Europe.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. (See his U.S. economic forecasts here.)
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IRS and Associated Press Scandals Are a Failure of Presidential Leadership
May 14, 2013 – by Dr. Peter Morici
News the IRS targeted conservative groups for intense scrutiny is just one in a series of revelations pointing to a culture of expediency and intolerance in the Obama White House that corrupts this administration.
Benghazi murders
Consider the September slayings of Ambassador Chris Stevens and three other U.S. diplomats in Benghazi. If the attack were revealed to be undertaken by terrorists, it posed a grave embarrassment to the President’s antiterrorism strategy – eight weeks before the election.
On September 12, the Acting Assistant Secretary of State for Near Eastern Affairs wrote in an email, “The group that conducted the attacks, Ansar al-Sharia, is affiliated with Islamic terrorists.”
Yet, on the Sunday talk shows, UN Ambassador Susan Rice characterized the incident as the result of spontaneous street demonstrations inspired by an anti-Muhammad YouTube video.
Sebelius – ObamaCare
ObamaCare, having passed through the Senate on a slight-of-hand, has been contentious from the start, and the Congress has not appropriated as much funds as Health and Human Services Secretary Kathleen Sebelius would like to implement the law.
To do the work of HHS, she has sought large contributions from private healthcare companies to liberal non-profit groups. With health care so heavily regulated, it is hard to characterize these donations as voluntary.
No doubt, favors rendered will be returned, and it smacks of Chicago-style cronyism and corruption.
4th Estate
Now we learn the Justice Department misused subpoena powers to engage in sweeping fishing expeditions through Associated Press and personal phone records – clearly an effort to stifle investigative reporting that the American Civil Liberties Union quickly branded “an unacceptable abuse of power.”
IRS
In 2010, the IRS began targeting conservative political groups seeking non-profit status for intense scrutiny and harassment. Former IRS Commissioner Douglas Schulman and the White House would have us believe they were unaware of this targeting, and Mr. Schulman was adamant in denials at Congressional Hearings on March 22, 2012.
However, we now learn senior IRS officials were informed of inappropriate conduct two months later, but the Congress was not informed.
The White House can be expected to argue that the targeting was the work of overzealous underlings at the IRS inappropriately exercising discretion – much like the Nixon campaign thugs who broke into Watergate.
This fails to come to terms with the culture of contempt, cultivated by President Obama and other Democratic leaders, toward those who disagree with their progressive ideas.
Political culture
President Obama’s appearance of boredom and disinterest toward Governor Romney during the first presidential debate, and Vice President Biden’s disrespectful grinning at Vice-Presidential candidate Paul Ryan, were an indication of something dangerously wrong with the Washington political culture.
Many conservatives view Democrats, as not merely wrong but stupid, and many liberals view Republicans as not merely wrong but evil.
If your opponents are evil, anything goes.
Campaigns can get that way, but the conduct of the president requires a higher standard, and he should constrain his lieutenants’ more visceral instincts.
Instead, President Obama cultivates a culture of anything goes to defeat opponents and advance his liberal agenda.
Cues from the boss
Underlings act accordingly – any good manger will tell you subordinates exercising discretion take their cues from the conduct of their boss and the messaging of the CEO.
The folks that committed the worst offenses at the IRS were civil servants and three levels below Commissioner; however, the IRS is not a public service that attracts advocates of limited government.
You have to be a believer in government – lots of it – to make a career as a tax collector and to target political groups seeking to reduce taxes and spending, and criticizing how the country is being run.
Corruption
The President’s contempt for political opponents and dissent, and expediency in delivering results, has corrupted the most basic functions of government, and emboldened those with personal agendas to threaten our liberties.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Forgiving Student Debt Won’t Help Students or Fix Colleges
May 13, 2013 – by Dr. Peter Morici
College is too expensive, graduates can’t find decent jobs and pay off their loans, and students, parents and educators all share in the blame. Now, President Obama proposes to forgive more student debt and that will make a bad situation worse.
More than half of recent graduates are working as waiters, taxi drivers or some other occupation that does not require a college education. The number in minimum wage jobs has doubled since 2007.
Slow growth and a tough jobs market is one reason but as importantly, too few college students choose tough majors like nursing, engineering and accounting that enjoy a robust demand for graduates. Too many select easier subjects like politics, history and other liberal arts, and emerge with few practical skills.
Good jobs abound for technicians in healthcare, computers and other fields – often educated at community colleges – and the Labor Department finds most rapidly growing occupations don’t require a bachelor’s degree. However, parents fear their children, without a four-year diploma, will lack the flexibility to navigate a lifetime of changing conditions.
University professors and presidents
If students are lazy and parents risk adverse, university professors and presidents are worse.
Professors simply teach less and engage in more research of questionable value than in the past. In the 1950s and 1960s, a significant track record of publications was not required for tenure for most undergraduate faculty – advancing the frontiers of science and the arts was mostly the work of professors engaged in post-graduate education.
Nowadays, professors at all levels must publish to win tenure, but much of what they do adds little value to either the practical world or the advancement of knowledge in a purer sense – but requires lighter teaching loads to enable.
Once tenured, many don’t publish much but still keep their light teaching schedules.
University bureaucracies are even worse –presidents and deans often have staffs bigger than CEOs and managers running much larger businesses. And faculties, which make virtually all decisions by consensus, spend endless hours in committees advising presidents and deans, and are supported by mind-numbing bureaucracies too.
Politics in education
University presidents are politicians, not business managers. They understand who makes the choices – students, who pay the bills – parents, and who they must please in the Alice-in-Wonderland world of university governance-faculty.
Rational they are – instead of encouraging students to study useful subjects and containing skyrocketing costs, they focus on fund raising and lobbying government officials to facilitate more student loans.
Tuition jets into the stratosphere, students amass huge debt, and universities produce a lot of high quality unemployment.
President Obama is rational too – parents, students and former students all vote. Instead of radically refocusing national policy on skills acquisition through a dramatic expansion of vocational education in high schools and community colleges, he promises to increase the percentage of Americans with four-year diplomas.
Now he proposes forgiving billions in student debt with federal dollars. Borrowers in the program would make payments equal to 10 percent of their monthly income, after rent and basic living expenses, and after 20-years of on-time payments be forgiven of all debt – regardless of how much they had borrowed.
Debt forgiveness simply encourages young people and parents to continue poor choices and borrow too much, and colleges to push up tuition – things the nation can’t afford. It certainly won’t help graduates find jobs.
Conclusion
To compete in the global economy and create good jobs at home, America needs workers with the right skills. That means limiting access to college to those who can genuinely profit from a university education, requiring professors to teach more and teach more that is useful, and redirecting more of what the nation spends on education into other channels of vocational raining.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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It’s Time to Start Taxing Internet Sales, but with a Twist
May 7, 2013 – by Dr. Peter Morici
The Senate recently passed a bill that would require internet retailers to collect sales taxes on behalf of local governments. This bill has flaws that could be fixed in the House, and should be passed.
I don’t like the idea of the state and local governments collecting more taxes – they know no limits to their capacity to tax and squander our hard earned dollars – but the current situation is unfair and bad economic policy.
In 1992, the Supreme Court held that states did not have the power to levy taxes on online sales, unless the retailer has a physical presence in their state. Large retailers, like LL Bean, routinely charge the appropriate state taxes where they have a store or warehouse but not on sales in states where they do not.
Main Street retailers complain this places them at an unfair disadvantage – and they are absolutely correct. No business would like the government giving a 5 percent price advantage to out of state competitors.
However, small retailers behave as if requiring internet retailers to charge sales tax would be a salvation for their flagging fortunes – it wouldn’t be.
Small merchants’ disadvantage
Most local retailers, competing with internet businesses and big box stores, lack the scale to offer the variety of products an increasingly diverse American population demands, and the scale to get favorable prices at wholesale.
Taxing internet sales would make this problem worse by consolidating online competitors. The online bookstore in Tuscaloosa is much less menacing to the small bookstore in Boston than Amazon.com.
However, the Senate bill would drive out the Alabama retailer and enlarge giants like Amazon.com.
The Senate bill would require all retailers with more than $1 million dollars in sales to collect and remit sales taxes to every state and local jurisdiction. That would require coding each sale by zip code and remitting to the states the appropriate taxes – those often vary not just by state but also city and county, and by products covered.
In the end, local vendors would have to rely on software or services comparable to the payroll services that now cut paychecks and remit withholding taxes on income, social security and unemployment insurances to state and local governments.
As anyone owning a small business knows those services are far from perfect. Many have received erroneous assessments and penalties, owing to mistakes made by payroll services, and those take some considerable time and effort to resolve.
Complications
For payroll purposes, small businesses must deal with their home state and a few neighboring jurisdictions, but for the purposes of sales taxes the potential expands to more than 5,000 state, city and county governments. Imagine running a rare books store in Boston with an online presence and receiving a few hundred erroneous notices of assessment from jurisdictions as far away as Alaska.
Not surprisingly, Amazon.com is in favor of the legislation. It could handle these issues much as Xerox handles employee payroll taxes all across the country – its small competitors could not.
Paying sales taxes in all 50 states adds to its costs but the benefits to its bottom line of driving out small competitors easily makes up the difference – with a big profit.
The Senate bill excludes retailers with annual sales less than $1 million but that is a pittance in retailing, and bears no parallel to definitions of small business in other federal legislation.
For example, local restaurants and other businesses with less than 50 employees are exempt from ObamaCare mandates to provide employee health insurance, and supporting 50 employees can easily require sales north of $10 million dollars.
Although it is far from a perfect solution, raising the threshold for retailers that must collect sales taxes outside their jurisdiction to $10 million would do a lot to more to preserve small businesses – including brick and mortar retailers – than requiring virtually all retailers to comply.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Strategies to Avert a Depression in Europe
May 6, 2013 – by Peter Morici
The whole of Europe is headed for a permanent recession – a depression. Austerity and labor reforms can’t save it. Radical measures – abandoning the euro and deficit spending in Germany – are the only way out.
Unemployment exceeds Great-Depression levels in Spain, many parts of Greece, Portugal and Italy, and is rising in northern Europe. Slashing government spending and labor market reforms have neither restored Club Med economies nor their governments to solvency.
Across much of Europe, GDP is shrinking faster than governments can cut spending and sovereign debt burdens are becoming worse, not better.
In the south, labor-market reforms can only work if those are decisive enough to change investors’ perceptions and export opportunities abound to sell what new factories could make. Europe’s entitlement culture makes swift reform politically impossible, and the Club Med states’ economic troubles have spread to their natural export markets – the German and other northern economies are contracting too.
For Club Med governments, stimulus won’t work either. They can’t increase borrowing and spending fast enough to boost their economies without panicking bond investors and instigating a pan-European financial crisis.
Angela Merkel’s dilemma
What should keep Angela Merkel awake at night is if southern Europe completely collapses, Germany and the other northern states, lacking southern markets for their exports, will be thrust into a permanent recession too-all of Europe would be gripped by depression.
Then it’s either draconian austerity and double-digit unemployment for Germany and other northern states too or investors will desert their bonds too.
The European Central Bank would either have to preside over the demise of the euro or print enough money to finance governments and set off hyper inflation – Europe would be gripped by double-digit inflation and unemployment.
What technocrats behind Chancellor Merkel’s extreme austerity prescriptions for southern Europe won’t acknowledge is that a significant measure of German and northern Europe economic success is premised on exporting to the south and amassing trade surpluses.
Simple math requires the Mediterranean states to have corresponding trade deficits as long as those are locked inside the euro and can’t devalue their currencies to escape. Those trade deficits must be financed by borrowing from the north – either by their governments spending and borrowing too much, as Rome and Athens did prior to their crises or their banks finance real estate bubbles, as Madrid permitted prior to the global-financial collapse.
GDP contractions
Once that borrowing is constrained – as the austerity imposed by Germany in exchange for aid now requires – German and other northern economies lose their export markets and sink into recession. That is happening right now – GDP is contracting in Germany, France, Belgium, Luxembourg, Austria, and Finland.
The only option left is for Germany and the others to boost government spending and deficits to stimulate their economies, export less, and import more from the south, permit trade to balance between the north and south and get Europe on a more sustainable path. German politics make voluntarily abandoning mercantilism virtually impossible.
Prior to the euro, the European Union thrived without permanent unemployment throughout the Mediterranean states. But now the single currency has locked in high-labor costs in the south and made their recessions permanent.
National currencies
A return to national currencies would permit Italy, Spain and the others to devalue to make their exports more attractive in Germany and other northern states and rebalance trade and growth in ways the German politicians can’t or won’t.
Europe is slipping into a depression – unemployment and stagnation not seen since the 1930s. Nothing can save it other than abandoning extreme austerity, labor-market reforms too rapid for national politics to support, and a single currency that delivers economic decay and depravation to large portions of the continent.
When high unemployment in Europe brings voters to their senses, then abandoning the euro and realism about the prosperity and security governments can guarantee may bring Europe back. Nothing less will do.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. Formerly, he was chief economist of the U.S. International Trade Commission. (See his U.S. economic forecasts here.)
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Jobs Growth Rebounds in April but More Trouble Ahead
May 3, 2013 – by Dr. Peter Morici
The Labor Department announced the economy created 165,000 jobs in April, and the unemployment rate slipped a notch to 7.5 percent. That’s better than March but hardly enough – getting unemployment down to 6 percent over the next three years would require 365,000 jobs a month, and that is not likely to happen.
Adding in discouraged adults and part-time workers who want full-time jobs, the unemployment rate becomes 13.9 percent. Meanwhile, hundreds of thousands of young college graduates face years working at Starbucks and may never get on the ladder to a meaningful career.
Slow growth is the big culprit: Forty five months into the economic recovery, growth has averaged a subpar 2.1 percent. Growth closer to 3 percent is needed to pull down unemployment without chasing adults out of the workforce and sentencing well educated young people to low-skilled employment, but the President and Congress are taking the country in the wrong direction.
Defense cutbacks negotiated with Congress during President Obama’s first term have sliced some $62 billion from federal spending since last fall. Tax increases enacted in January and sequestration triggered in March will further reduce household purchasing power and government spending by another $200 billion in the second and third quarters of this year.
Job-killing policies
Together, those policies will kill about 4 million jobs over the next 3 years.
With southern Europe’s depression spreading to Germany and other northern states, the prospects for U.S. exports and cut-priced competition from Europe in U.S. markets is heating up – growth and jobs creation could stay depressed for a long time.
A bounty of inexpensive natural gas, rising wages in China, and dysfunctional government policies in Europe and Japan makes the United States a more attractive location for manufacturing. However, new factories will require very few workers – engineers have applied the wizardry of handheld devices to factory automation with amazing results.
It is hard to imagine the Federal Reserve could do more to support growth. Already, it is buying virtually all the new mortgage back securities and 70 percent of the new federal debt issued each month.
This is keeping interest rates at record lows and boosting new home construction; however, it penalizes the elderly who rely on CDs and fixed-income investments and reduces their spending on goods and services. Many cash strapped elderly have returned to work, often taking jobs from younger workers.
Missed opportunities
Stronger growth would help and is possible. Forty-five months into the Reagan recovery, GDP was advancing at a 5.2 percent annual pace – nowadays, that pace would bring unemployment down pretty quickly.
More rapid growth requires importing less and exporting more – dealing with the $450 billion trade deficit on oil, by drilling more offshore and in Alaska, and with China, by addressing its undervalued currency and protectionism.
Faster growth also requires right-sizing business regulations to make investing in new jobs less expensive and time consuming. Regulatory enforcement is needed to protect the environment, consumers and financial stability but must be delivered cost effectively and quickly to add genuine value.
Overall, more jobs require trimming back on tax increases and spending cuts, and more pro-growth trade, energy and regulatory policies.
Peter Morici is an economist and professor at the Smith School of Business,, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Why Unemployment Remains a Nagging Problem
May 2, 2103 – by Dr. Peter Morici
Yesterday, the Federal Reserve announced it is keeping its foot on the gas –for good reason. The fiscal drag imposed by the $160-billion January tax increase, and $45 billion in sequester spending cuts is slowing consumer spending and smothering investment.
Jobs will remain tough to find, and wages in the doldrums well into summer.
Now the risk is more for a second recession than inflation – even with the Fed printing enough money to purchase all the new mortgage backed securities and about 70 percent of the new federal government debt issued each month.
Prolonged money creation at that level sooner or later will cause asset bubbles that will burst when the fed pulls back –who will catch the economy then?
Here is my April monthly commentary on the job market:
Friday, the Labor Department is expected to report the economy added 153,000 jobs in April – up from 88,000 in March – and unemployment is expected steady at 7.6 percent. This gain may prove short lived, and this pace is well below what is needed to get unemployment to acceptable levels.
New hiring lags broader economic growth. In the fourth quarter, GDP was up only 0.4 percent – with businesses continually improving productivity, the economy was lucky to have created any jobs at all this past winter.
Businesses remain cautious about future demand, and reluctant to invest in new machinery, computers and software that would improve worker efficiency.
In the second quarter, GDP growth rebounded to 2.5 percent, but about 40 percent of that growth came from businesses piling up inventory – not from the final sales. Underlying demand remains weak – January tax increases limit household spending, trade deficits on China and oil continue to leak consumer dollars abroad, and sequester spending cuts reduce government purchases.
Q2 GDP forecast
Generally, economists expect second quarter growth at 2 percent or less – about the same or less than potential improvements in worker productivity; hence, jobs creation should slow through the spring. The unemployment rate would rise but for so many additional folks choosing not to work – 663,000 in April.
Should economic growth pick up, many adults may be expected to rejoin the hunt, and the economy would have to add more than 360-thousand jobs each month for three years to lower unemployment to 6 percent. That would require growth in the range of 4 to 5 percent – this is possible but not likely with current policies.
Since turning the corner in mid 2009, GDP growth has averaged 2.1 percent and unemployment has fallen from 10.0 percent to 7.6 percent.
In contrast, high oil prices and double digit interest rates pushed unemployment to 10.8 percent during Ronald Reagan’s first term; then GDP growth averaged 5.3 percent for the next three and half years, and unemployment fell to 7.3 percent.
Slow-growth factors
Factors contributing to the slow pace of recovery include the huge trade deficits on oil and manufactured products from China and elsewhere in Asia – these drain demand for U.S. goods and services. Absent U.S. policies to confront Asian governments about their purposefully undervalued currencies, and to develop more oil offshore and in Alaska, the trade deficit will continue to tax growth.
The recent surge in natural gas production, and accompanying lower prices, is substantially improving the international competitiveness of industries like petrochemicals, fertilizers, plastics, and primary metals – as well as consuming industries like industrial machinery and building materials.
However, the Department of Energy is considering proposals to boost exports of liquefied gas, which would create many fewer jobs, than keeping the gas at home.
Dodd-Frank regulations continue to make lending by regional banks to small businesses difficult. Many smaller banks have sold out or are considering consolidation with money center banks, which are less inclined to small-business lending.
More onerous regulatory reviews are an increasing complaint among businesses. Government needs to subject policies to protect the environment and other goals to the same efficacy standards the market applies to commercial technologies – regulatory assessments and enforcement are needed but those must be delivered cost effectively and quickly to add value.
Conclusion
Many businesses look to Asia where government policies are more accommodating and prospects for growth remain stronger.
A better jobs market is simply not possible without better trade, energy and regulatory policies.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland School, and a widely published columnist. (See his U.S. economic forecasts here.)
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Weak Consumer Spending Risks Double Dip Recession
April 29, 2013 – by Dr. Peter Morici
The Commerce Department reported that consumer spending advanced 0.2 in March – much weaker than the 0.3 and 0.7 percent registered in January and February.
Extraordinary year-end bonuses and dividends – intended to dodge higher taxes in January – boosted consumer activity in January and February but now households are hunkering down. Much weaker consumer spending is expected for the second quarter as the $120 billion January hike in payroll taxes and $45 billion increase in income taxes borne by the wealthy weakens household finances.
In January, when a last-minute tax deal raised social security taxes, working and middle-class families could not adjust spending immediately – they have to keep driving to work and feeding their children – but in March retail sales fell precipitously. Now forecasters expect traffic at shopping malls to recover only slowly.
Many upper income families pay taxes on a quarterly basis, and the actual impact of the quite complex changes to the tax code and rates implemented in January were not reckoned until their accountants computed their first quarter payments due April 15 – now they are trimming purchases even further.
Mortgage-interest deductions
Also, the January tax changes greatly reduced mortgage interest deductions for high-income families, and this will weaken demand for new and existing homes. The pace of sales may not be much affected but the price increases are likely to slow, especially outside of hot markets like Florida and New York, where speculators and foreign investors seeking refuge from uncertainty in Europe and China have been pouring money.
Overall real estate inflation will not support real asset growth and rising consumer spending the balance of 2013 as it did last year.
Along with sequestration, higher taxes are subtracting more than $200 billion from household purchasing power and government spending-that is slowing demand for what Americans make and makes jobs tougher to find.
More than 40 percent of the 2.5 percent growth in first quarter GDP was supported by growing inventories – not final sales of goods and services. Overall, final demand is advancing at a pace that will support subpar growth of about 2 percent – perhaps less – for the balance of the year.
U.S. corporations are reporting weak sales growth, even as profits advance, but the cost cutting necessary to accomplish that dichotomy will result in continued slow hiring and perhaps a wave of layoffs.
Weakening conditions in Europe make layoffs more likely, and the danger that Southern Europe’s severe recession could spread north to Germany and across the Atlantic to the United States and Canada is quite real.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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First Quarter GDP up 2.5 Percent on One-Time Factors, Second Quarter Growth Anemic
April 26, 2013 – by Dr. Peter Morici
The Commerce Department reported GDP grew at a 2.5 percent pace in the first quarter but don’t break out the champagne. Several one-time factors contributed to this seemingly robust performance.
The economy is already slowing and new crises threaten. Most of first quarter growth likely was concentrated in January and February and the economy slowed, and actually may have contracted, in March.
In the fourth quarter, inventory investments and defense purchases were uncharacteristically weak – the former rebounded and the latter declined much less in the New Year. Also, extraordinary year-end corporate bonuses and dividend payments, intended to soften the blow of higher 2013 taxes, pushed up consumer spending early in the first quarter.
Those factors will not repeat in the second quarter, and January tax increases are finally starting to bite – consumers appear are hunkering down, and their confidence about the future is waning.
Purchasing power
Higher payroll taxes and income taxes paid by the wealthy took away $165 billion in purchasing power. Working – and middle-class families adjusted spending to accommodate higher taxes, but with a lag, because they must keep driving to work and feeding their children – now car dealers and shopping malls report slowing sales.
For upper income families, changes in the tax code were extraordinarily complex, and many pay taxes on a quarterly basis on self employment and investment income. The full impact of higher taxes on their after-tax income was not reckoned until their accountants computed their first quarter payments due April 15 – now they will be trimming purchases.
Along with sequestration, higher taxes are subtracting more than $200 billion from household purchasing power and government spending – that is slowing demand for what Americans make and makes jobs tougher to find.
Mortgage-interest deduction
A key element of the tax changes – reduced mortgage interest deduction— is dampening existing home sales. Holding up purchases are speculators, aided by the Federal Reserve’s easy money policies, and wealthy investors from continental Europe’s troubled economies who are parking capital in U.S. real estate.
They are scarfing up properties in choice markets in Florida, New York City and elsewhere with cash offers that frequently squeeze out ordinary homebuyers seeking a primary residence.
In several markets, prices have zoomed past what these ordinary buyer’s incomes will support; hence, speculators bets require that somehow after-tax household incomes will somehow surge permitting them to unload at a profit.
Dubious strategy
Slow growth and higher taxes on upper middle income and wealthy households makes that a dubious strategy, and the speculative surge cannot end well-housing price increases will slow, plateau or could crash all together.
The housing market bump to household wealth that has supported consumer spending growth in recent months will relent.
Similarly, the Fed’s low-interest policies are boosting stock and agricultural land values – at a pace beyond what future profitability of either asset class can sustain. Either slower growing values or outright adjustments appear inevitable, and the resulting drag on consumer spending will slow the recovery.
The continuing surge of Chinese exports onto American store shelves, and weakening demand for U.S. products in recession torn Europe are dampening demand for U.S. manufactures.
Japan’s weak yen policy is imposing tougher competition on U.S. automakers and other manufacturers of technology-intensive products. Already, the Commerce Department reported durable goods orders fell 5.7 percent in March, indicating much slower sales going forward.
The bottom line
Most forecasters expect growth to slow to less than 2 percent in the second quarter and to remain below 3 percent through the end of 2014.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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To Boost Growth, Everyone Should Pay Income Tax
April 22, 2013 – by Dr. Peter Morici
The economy is not doing well. Unemployment is too high and big deficits threaten the credit worthiness of the federal government, and only genuine tax reform will make things right.
With 46 percent of Americans paying no income taxes and many more who pay very little, it is no wonder federal spending is at record levels. It’s simply too easy to vote for politicians that promise free healthcare services and other worthy benefits by raising taxes on someone else-the wealthy.
Taxing the well off is not free – it slows growth, smothers jobs creation and pushes down wages for the middle class and working poor.
Much of the U.S. economy is not large multinationals but rather is innovative startups, the local restaurant and other small business services, that are mostly organized as limited liability corporations and pay the highest personal tax rates.
For those jobs creators the combination of federal, state and local taxes often increases the bite on income to well above 50 percent.
Ramifications
The impact is large and negative. During the Obama years, unemployment peaked at 10 percent and the economy has since grown at a 2.1 percent pace.
Over the comparable Reagan years, when taxes, especially on the well-off, were lower but more voters paid at least some income taxes, unemployment peaked at 10.8 percent but then the economy grew at 5.3 percent.
Simply, with lower taxes on the wealthy and more voters with skin in the game, the federal government did less and the economy did better – many more jobs were created and workers had more power to bargain for decent wages than they do now.
The highest marginal federal tax bracket is about 40 percent, but with so few Americans paying significant taxes, the average income tax rate is about 12 percent.
Solutions
To exercise some restraint on federal spending why not require everyone to pay at least 6 percent of their income in taxes and set the maximum rate of 18 percent – that’s about what Barack and Michelle Obama paid on their 2012 income. Folks in the middle would pay something in between so that the average take is still 12 percent of income.
Each year, automatically adjust those levels up or down so that the share of federal spending financed by the income taxes remains constant – if folks want more or less federal spending, everyone pays more or less federal taxes.
Also, get rid of all the deductions and exemptions – everyone pays on everything they earn. No special preferences for capital gains or the carried interest of Wall Street financiers, and then the minimum and maximum rates could be set even lower.
These reforms would eliminate the terrible disincentive high taxes impose on small businesses to invest, grow and create jobs. Corporate tax rates could be similarly reformed so that investment decisions are not made on the basis of getting a tax credit but on the likelihood of boosting profits and employment.
Working poor
For the working poor having to pay some taxes would be a jolt – as it would be for the elderly depending on social security. For the former, the minimum wage could be boosted an appropriate amount – perhaps 50 cents an hour – beyond what President Obama and Congress agree.
Social security payments could be similarly hiked, on a one time basis, by adjusting the payroll tax a few tenths of a percentage point.
A one-time jolt to inflation would follow as wages above the minimum adjusted through the forces of supply and demand, but it would be worth it to have tax sanity long term.
Politicians running for the Senate, House and Presidency could no longer promise the moon by getting someone else to pay for it. The economy would grow robustly and more Americans would benefit from the best social program of all-a good paying job and a promising future.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Fresh Evidence that a Spring Swoon is Gripping the U.S. Economy
April 19, 2013 – by Dr. Peter Morici
Fresh evidence is emerging that the U.S. economy is slowing in the second quarter. Stock prices continued to slide as earnings disappointed, and the Conference Board’s index of leading economic indicators pointed down.
Next week the Commerce Department will likely report that GDP growth rebounded from 0.4 percent in the fourth quarter to more than 3 percent in the first quarter.
However, this was caused by a recovery in inventory and defense purchases, which were uncharacteristically weak last fall, and a surge in consumer spending in January and February, resulting from extraordinarily large year-end bonuses.
Those factors will not repeat in the second quarter, and January 1 tax increases are starting to bite –consumers appear to have tightened down on spending and their confidence in the outlook for the economy wanes.
Among the Conference Board’s leading indicator components that pointed south were a shorter average work week, rising initial unemployment claims, fewer manufacturing orders (as measured by the Institute for Supply Chain Management) and fewer building permits.
Moreover, the Philadelphia Fed index of manufacturing activity slipped, in line with the weakening suggested by the most recent ISM manufacturing indicators.
Yesterday, I wrote on the TheStreet.com that structural factors – inadequately addressed by the Administration’s response to the financial crisis – continue to hamper the economy. Growth should slip to below 2 percent in the second quarter, and the job market will remain difficult.
http://www.thestreet.com/story/11899199/1/morici-anti-growth-policies-slowing-us-economy-again.html
In a nutshell, without more business-sensitive regulatory policies, fewer and less expensive healthcare mandates, more assertive international trade policies, and more aggressive development of domestic oil reserves, the U.S. economy will continue to grow in fits and starts at best and constantly face the danger of a double dip recession.
Almost four years into the economic recovery, the Fed continues to purchase $85 billion in long-term Treasury and mortgage-backed securities each month, indicating some considerable level of desperation.
Those easy money policies have created asset bubbles in urban real estate, corporate equity and bonds, and agricultural land markets-if those burst the economy could easily head south.
Without radical changes in national economic policies, Americans face slow growth, higher taxes and stagnant or falling wages.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Anti-Growth Policies Slowing U.S. Economy Again
April 18, 2013 – by Dr. Peter Morici
Anti-growth policies continue to frustrate the aspirations of working Americans. The economy is likely growing at less than two percent in the second quarter, making prospects for a better job market remote.
Higher payroll taxes and income taxes paid by the wealthy took away $165 billion in purchasing power. Consumers reacted, but with a lag, because they need to keep driving to work and feeding their children-now car dealers and shopping malls report slowing sales.
Overall the fiscal drag of about $165 billion in higher taxes and another $44 billion in federal outlays mandated by sequestration are subtracting a tidy sum from aggregate demand, but the focus on short-term budget policies fails to reckon with a tougher issue-before these, even with record government spending and rock bottom interest rates, the economy has averaged only 2.1 percent growth since mid 2009.
By contrast, the Reagan recession was just as deep and wrenching as the Obama recession, but the Gipper accomplished 5.3 percent growth over the comparable period.
Broken but not fixed
Simply, what was broke and caused the financial crisis has not been fixed.
Banking is increasingly concentrated on Wall Street with the top five or six firms controlling about half of all deposits nationally. Even as the Fed pumps record amounts of money into the economy, these mega-banks have difficulty assessing local business projects. Small businesses that formerly relied on independent regional banks constantly complain “banks will give us a loan when we don’t need one.”
Big banks are happy to lend to multinationals like GM but much less so to their suppliers, and they are hamstrung by litigation and adopting to excessively cumbersome Dodd-Frank regulations.
They are not alone – manufacturers complain that federal and state regulators make building, running and hiring increasingly difficult. Either CEOs can spend their best talent building their businesses, or fencing with regulators and in court – the Obama Administration has made that choice for them.
ObamaCare ladles on mandates, taxes and higher health insurance premiums, leaving consumers with fewer dollars to spend, and making businesses of all sizes even more reluctant to hire.
Deficit ramifications
The $500 billion trade deficit –mostly on oil and with China and Japan – drags on demand for U.S. goods and services about three times more than recent tax increases.
Drilling bans and restrictions off the Atlantic, Pacific and Gulf Coasts and in Alaska, and the reluctance of the Obama Administration to bring meaningful pressure on China and Japan to fairly value their currencies, make significant relief unlikely.
Now the Energy Department is considering boosting liquefied natural gas exports, when keeping the new bounty from shale deposits at home to boost manufacturing would increase GDP and employment much more.
The Federal Reserve – by buying massive amounts of Treasury and mortgage-backed securities – has kept the big banks profitable and boosted the housing market. But rock bottom interest rates allow banks to “earn” profits and pay big bonuses with virtually free money.
This puts off the necessary and inevitable restructuring of U.S. banking-investment houses must be separated from commercial banks to reduce systemic risks, and large depositories like Bank of America have too many layers of bureaucracy that regional banks don’t have.
Why loans are scarce
Those make loans scarcer, more expensive and cumbersome to obtain than they need to be.
The housing market continues to recover but new home construction is less than 3 percent of GDP and cannot power a recovery. Moreover, easy Fed policies are creating new bubbles in big city markets – rock bottom interest rates are elevating prices above what incomes will sustain when the Fed takes its foot off the accelerator.
Asset bubbles are appearing in other markets – stock, corporate debt and agricultural land.
In the near term, the Fed can keep the economy growing at a modest pace, but without better regulatory, health care, trade, and energy policies, Americans face slow growth, higher taxes and stagnant or falling wages.
Dr. Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Why Trade Pacts with Europe and Japan Will Boost Unemployment
April 15, 2013 – by Dr. Peter Morici
President Obama is betting a lot on free trade. Recently, he has agreed to open talks for mega trade deals with the European Union and Japan in hopes of jump-starting growth in both places and boosting U.S. exports and jobs. However, far from an elixir, free trade has been a rock on the back of the U.S. economy and American workers, and the Obama strategy will only make things worse.
On university blackboards where economists theorize, free trade is a compelling idea – let each nation do more of what it does best, and international commerce will raise national productivity and incomes. But these benefits are not guaranteed if a few big nations can cheat on the rules.
The World Trade Organization has greatly reduced tariffs, export subsidies and barriers to trade posed by domestic polices – such as biases in government procurement and discriminatory product standards. In addition, U.S. deals with Mexico, Canada, South Korea, and other small nations have reduced tariffs on bilateral trade to zero and eliminated even more non-tariff barriers.
For these rules to optimize specialization, productivity and incomes, exchange rates between national currencies must adjust to reasonably reflect production costs and facilitate balanced trade. To buy Chinese television sets and smartphones, Americans must sell enough industrial machinery and software in China or U.S. unemployment rises.
Exchange rates
Exchange rates are established in currency markets, created by businesses trading through major financial institutions. Unfortunately, China and Japan have blatantly manipulated these markets, without a credible U.S. response and with ruinous consequences for U.S. workers.
Japanese Prime Minister Abe has managed to push down the yen 23 percent from its value last August and that is worth more than $2,000 on every Toyota sold in the United States. The Japanese automaker can put that cash into additional vehicle content, advertizing, and discounts making a mockery out of fair competition with Ford and GM.
Similarly, troubles in southern Europe have motivated investors to move cash into U.S. Treasuries and stocks and suppressed the value of the euro against the dollar – to the great advantage of German exporters. Paradoxically, austerity policies for the Mediterranean states, championed by Angela Merkel, are doing more to boost German exports than resurrect those ailing economies.
With the three largest U.S. competitors enjoying undervalued currencies, it is no surprise the United States suffers from chronic, large trade deficits.
The United States exports $2.2 trillion in goods and services annually, and these finance a like amount of imports. This raises U.S. gross domestic product by about $235 billion, because workers are a bit more than 10 percent more productive in export industries, such as software, than in import-competing industries, such as apparel.
Low demand
Unfortunately, U.S. imports exceed exports by another $500 billion and that reduces demand for U.S.-made goods and services. With multiplier effects, the trade deficit is slashing at least $800 billion off GDP.
Many U.S. workers are pushed from high-paying jobs, not because they can’t compete, but because the administration fails to take a tough stand against currency manipulation. And as many as 8 million workers can find no work at all, because of misguided U.S. trade policies, and wages remain depressed.
Domestic manufacturers have petitioned President Obama, and his predecessors, to take action – and economists spanning the ideological spectrum have suggested substantive measures that could combat currency manipulation and misaligned exchange rates.
The administration has complained to China and Japan about currency manipulation but after years of U.S. inaction, they simply ignore U.S. warnings.
The Administration continues to negotiate trade pacts that open U.S. markets to foreign competition but lack specific rules and penalties to address currency manipulation. Until an American president is willing to ensure free trade in goods is matched by free trade in currencies, the U.S. economy will endure anemic growth and workers will suffer high unemployment and low wages.
Dr. Peter Morici is an economist and professor at the Smith School of Business,, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
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Why Jobs Growth Tanks in March
April 5, 2013 – by Dr. Peter Morici
The Labor Department announced the economy only created 88,000 jobs in March as many more adults quit looking for work than found jobs – for many Americans, good jobs remain tough to find.
The headline unemployment rate is 7.6 percent, but adding in adults who are discouraged and quit looking for work and part-timers, preferring full-time positions, the jobless rate becomes 13.8 percent. And, for many years, inflation-adjusted wages have been falling and income inequality rising.
Sluggish growth is one culprit – the Bush expansion delivered only 2.1 percent annual GDP growth – that’s about the same as the Obama recovery after 42 months. However, globalization and technological progress have wrought fundamental changes that rapid growth alone can’t fix.
Cheaper natural gas and rising wages in China make the United States more attractive for manufacturing. However, new factories require very few workers – engineers have applied the wizardry of handheld devices to factory automation with amazing results.
Similar progress has reduced many business support positions ranging from secretaries to travel agents. All, slicing demand for workers with a general high-school education.
Less demand for college grads
Over the last decade, the same thing has happened to college graduates occupying middle management and similar professional positions. Consequently, college graduates have been taking jobs once predominantly filled by high school graduates – insurance agents and adjusters, retail managers, to name a few – and the earnings advantage of college graduates over less educated workers has narrowed.
Well paying jobs abound for college graduates in technical areas-accounting, engineering, nursing and the like – but not for those with degrees in liberal arts and general business.
Similarly, high school graduates with some additional training, often through a community college, can find good jobs, for example, in the energy, medical, and hospitality sectors.
All this gives rise to widening income inequality between those who have specialized skills and those who don’t, and it imposes particular burdens on the two bookends of the labor force – recent grads and workers above 50.
Liberal arts degrees
Recent liberal arts graduates face particular difficulty getting that first decent job – such as in finance or the media – where employer training and entry-level experience combine to impart job-specific skills that permit them to climb the ladder.
Displaced older workers face much longer periods of unemployment, and many never secure positions that pay as well as the jobs lost. Many are digging into retirement savings well before they are 65, creating an army of near-indigent elderly a decade or two from now.
To combat unemployment, the Federal Reserve has kept mortgage interest rates low, but this penalizes the elderly who rely on CDs and fixed-income investments. They are returning to work, often taking jobs and displacing younger workers.
Stronger growth would help and is possible. Forty-two months into the Reagan recovery, GDP was advancing at a 5.2 percent annual pace-that would bring unemployment down to five percent pretty quickly.
More rapid growth requires importing less and exporting more-dealing with the $500 billion trade deficit on oil, by drilling more offshore and in Alaska, and with China, by addressing its undervalued currency and protectionism.
Regulatory environment
Faster growth also requires right sizing business regulations to make investing in new jobs less expensive and time consuming. Regulatory enforcement is needed to protect the environment, consumers and financial stability but must be delivered cost effectively and quickly to add genuine value.
However, unless America wants to sell what it makes cheaply, like so many Asian economies, it must have a smarter, savvier, and better trained workforce.
Parents don’t want their offspring on the vocational track. Hence, high schools have become, overwhelmingly, college preparatory institutions, when it is possible to prepare many graduates to directly enter the labor force in technical areas.
College students don’t want the hard slog through nursing or engineering. Art history and economics are easier and less intruding on the social aspect of college. And universities are too much run by professors who prefer to contemplate the shortcomings of their civilization than train young people to build it.
In a nutshell, more and better jobs require pro-growth trade, energy and regulatory policies, and more realistic expectations among parents, students and the high schools and universities that train workers.
Dr. Peter Morici is an economist and professor at the Smith School of Business,, University of Maryland, and widely published columnist. (See his U.S. economic forecasts here.)
