QUOTE OF THE DAY
WSJ: The Myth of a Stagnant Middle Class
A favorite "progressive" trope is that America's middle class has stagnated economically since the 1970s. One version of this claim, made by Robert Reich, President Clinton's labor secretary, is typical: "After three decades of flat wages during which almost all the gains of growth have gone to the very top," he wrote in 2010, "the middle class no longer has the buying power to keep the economy going."
This trope is spectacularly wrong.
It is true enough that, when adjusted for inflation using the Consumer Price Index, the average hourly wage of nonsupervisory workers in America has remained about the same. But not just for three decades. The average hourly wage in real dollars has remained largely unchanged from at least 1964—when the Bureau of Labor Statistics (BLS) started reporting it.
Moreover, there are several problems with this measurement of wages. First, the CPI overestimates inflation by underestimating the value of improvements in product quality and variety. Would you prefer 1980 medical care at 1980 prices, or 2013 care at 2013 prices? Most of us wouldn't hesitate to choose the latter.
Stateline: 2013 Sees One-Party Dominance in Many States
Rarely has an election seemed to have clearer consequences for state government than the one just completed.
The first result is that Republicans consolidated the power they had won in 2010. Despite some key Democratic victories, 53 percent of Americans live in states where Republicans control both the legislature and the governorship.
Republicans took state policy in a more conservative direction during the last two years, and fought back against President Obama’s policies. Nothing that happened November 6 will prevent them from doing the same thing again in the next two years. If the biggest obstacle to the president’s second-term agenda is the Republican-controlled U.S. House, the second biggest obstacle will be Republican power in the states.
The other major result was that Republicans won more power in states that were already Republican, while Democrats won more power in states that were already Democratic.
AG Beat: Retroactive tax bill in California may push more startups to Texas
One of the big incentives for California business owners to operate their companies there was a partial state tax exclusion on sales of stock of a Qualified Small Business (QSB). The exclusion allowed business owners and investors in these businesses to exclude 50 percent of any capital gains acquired through the sale of stock.
Even with increased taxes in the state of California in recent years, the impact wasn’t quite as damaging since owners could exclude half of the costs of capital gains. But due to a lawsuit filed against the Franchise Tax Board by a company that did not meet the requirements necessary to claim the exclusion, the California Court of Appeals retracted the exclusion for all business owners on sales of stock dating back to 2008.
These businesses will essentially be presented with a bill for the remaining 50 percent of those capital gains as well as interest.
policymic: Illinois is the Poster Child Of the Failures Of Progressive Policies
If anyone wanted a crystal ball to see how a progressive society driven purely by Democratic policies would look like, look no further than Illinois – where President Barack Obama established himself politically.
The Democrats monopolized complete control of Springfield 10 years ago, but Democratic Party Chairman Michael Madigan has been speaker of the Illinois House for 30 years now. To ensure it stays that way, Chicago Machine Democrats have gerrymandered congressional districts in Illinois in such an absurd fashion that one panel of federal judges called the new map “a blatant political move to increase the number of Democratic congressional seats,” while another separate judicial panel acknowledged that the new state legislature plan likely was “enacted in large part to give Democrats a partisan advantage.”
The gerrymandered districts delivered Illinois Democrats veto-proof supermajorities in both chambers of the state legislature in 2012 – making even the governor now irrelevant. Speaker Madigan and Senate President John Cullerton can now pass anything they want with lightning speed and without even looking at Governor Pat Quinn, let alone any Republicans that may still be around.
Detroit News: Union membership falls to 70-year low
The nation's unions lost 400,000 members in 2012 as the percentage of U.S. workers represented by a labor union fell to 11.3 percent, its lowest level since the 1930s - declining by 0.5 percent over the last year.
Michigan accounted for about 10 percent of the nation's loss of unionized workers as the Wolverine State fell to the seventh most-unionized state, from fifth in 2011.
The Bureau of Labor Statistics said the biggest hit was in public sector unions, where many states and cities have cut back on their unionized workforce.
Among public sector workers, 35.9 percent are in a union - down from 37.0 percent in 2011, as the public sector shed nearly 250,000 union workers.
The public sector union rate is more than five times higher than that of private-sector workers. In the private sector, 6.6 percent are unionized, down from 6.9 percent in 2011.
Union membership fell in 34 states.
Crain's Chicago Business: Ten-year snapshot of Chicago's workforce by industry
It should come as little surprise to see local employment projections favoring jobs in tech, health care and business services in 2013. Recent history shows a diversification of Chicago's workforce with the emergence of those sectors.
Chicago in the early 20th century relied on steel, rail and stockyards to propel itself as the economic hub of the Midwest. The 1900 census, for example, classified nearly 7 out of 10 Chicago workers (specifically, those age 10 and up) in either the "manufacturing and mechanical pursuits" or "trade and transportation" industries.
Manufacturing grew steadily in the early 20th century. It dipped during the Great Depression, then bounced back to peak at 593,188 jobs by the 1950 census. The headcount of manufacturing workers has declined every decade since.
The rise of the service economy in the late 20th century burnished Chicago's reputation as a business services center. Since 1980, the collective "finance, insurance and real estate" industry has occupied a place in the top five professions of Chicagoans in each census.
In recent years, health and education workers have represented Chicago's top industrial classification. Lately, Chicago has also felt the influence the knowledge economy with the recent growth of technology services companies. This has led to a new census classification of "information" worker.
Built in Chicago: Tax Nirvana for start-up investors. Can I really avoid ever paying taxes again?
Taxes and start-ups. Do entrepreneurs or investors in early-stage companies even care about taxes? Well, right now taxes are on the minds of many investors because of the recent increase in tax rates. However, while taxes went up significantly for most investments, taxes for start-up investments just dropped like a rock… all the way down to zero! In an MBA class that I teach, we call this Tax Nirvana.
Although no investor is going to decide to bankroll a start-up just because of tax benefits, taxes do matter to them. And, if you are an entrepreneur searching for capital, you want to give potential investors every reason in the world to say yes. What could be a better excuse than avoiding taxes?
Starting this past January 1st, taxes on investment income were bumped up significantly for most investments. As one example, let’s say that a few years ago you had invested Apple’s stock (AAPL) and are sitting on some healthy gains. Now you are getting a little antsy about Apple’s prospects. If you sold Apple’s stock last fall, your tax rate on the capital gains would have been no higher than 15%. However, after January 1st the tax rate for some investors has increased to 20%, plus the gains are now subject to a 3.8% Medicare surcharge. This makes the new tax rate 23.8% -- a whopping 59% increase.
But, start-up taxes went in the opposite direction. As part of the recent ‘American Taxpayer Relief Act of 2012’, capital gains on most early stage investments are effectively ZERO because the investment gains are excluded from income. Frankly, it feels like a bit of a joke that the government used the word ‘Relief’ in the title of a tax bill that raised taxes. That said, start-up investors did receive real relief.
WSJ: How High-Achieving Parents Raise Star Scions
Maybe there's a gene for success.
That may explain why a growing number of today's high achievers turn out to be progeny of high-achieving parents. At least 14 hold or recently held prominent posts in fields such as business, law, executive search and government. Companies that aren't family controlled but have next-generation top executives include eBay Inc., NBCUniversal and Valeant Pharmaceuticals International Inc.
Among other things, highly successful parents serve as their offspring's role models, sounding boards and—perhaps most crucially—strategic door openers.
Expanded opportunities for women have increased the number of star scions, executive coaches say. Karen G. Mills, head of the U.S. Small Business Administration, is the daughter of Melvin and Ellen Gordon, the longtime CEO and president respectively of Tootsie Roll Industries Inc. Jessica Bibliowicz, leader of National Financial Partners Corp. is the daughter of Sanford I. Weill, a former Citigroup Inc.
Aspiring executives lacking this advantage might not be surprised that kids of successful parents flourish professionally, too.
CARTOON OF THE DAY