QUOTE OF THE DAY
WSJ: ObamaCare and the '29ers'
Here's a trend you'll be reading more about: part-time "job sharing," not only within firms but across different businesses.
It's already happening across the country at fast-food restaurants, as employers try to avoid being punished by the Affordable Care Act. In some cases we've heard about, a local McDonalds has hired employees to operate the cash register or flip burgers for 20 hours a week and then the workers head to the nearby Burger King BKW +2.39% or Wendy's to log another 20 hours. Other employees take the opposite shifts.
Welcome to the strange new world of small-business hiring under ObamaCare. The law requires firms with 50 or more "full-time equivalent workers" to offer health plans to employees who work more than 30 hours a week. (The law says "equivalent" because two 15 hour a week workers equal one full-time worker.) Employers that pass the 50-employee threshold and don't offer insurance face a $2,000 penalty for each uncovered worker beyond 30 employees. So by hiring the 50th worker, the firm pays a penalty on the previous 20 as well.
These employment cliffs are especially perverse economic incentives. Thousands of employers will face a $40,000 penalty if they dare expand and hire a 50th worker. The law is effectively a $2,000 tax on each additional hire after that, so to move to 60 workers costs $60,000.
A 2011 Hudson Institute study estimates that this insurance mandate will cost the franchise industry $6.4 billion and put 3.2 million jobs "at risk." The insurance mandate is so onerous for small firms that Stephen Caldeira, president of the International Franchise Association, predicts that "Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business." The franchise association says the average fast-food restaurant has profits of only about $50,000 to $100,000 and a margin of about 3.5%.
Chicago Tribune: The loaded shoe box
After Illinois' secretary of state died in 1970, a hotel room discovery turned tributes to the career politician into cries of outrage
When Illinois Secretary of State Paul Powell's body was found Oct. 11, 1970, in a Rochester, Minn., hotel room, political heavyweights tripped all over one another offering bipartisan tributes to the powerful Downstate official.
The Tribune reported how Chicago Mayor Richard J. Daley, a fellow Democrat, predicted the 68-year-old Powell "will be recognized as a major figure in the history of the state." The chairman of the Illinois Republican Party noted: "His lengthy tenure in office was evidence of the warmth people felt for him." Powell was elected to the Illinois Legislature in the 1930s and rose to become speaker of the House before being elected secretary of state in 1965. He held that office until his death.
Lt. Gov. Paul Simon, a Democrat and the gold standard of an honest public servant, said: "Powell has been in the forefront of nearly every battle that has brought help to the helpless and given hope to the young and old." Former President Harry Truman was an honorary pallbearer for Powell, the Tribune reported, observing: "Besides being friends, the two Democrats were alike in their personalities — folksy, quick witted, and fast to anger, but much loved by those who knew them — regardless of politics."
Then the cheering turned into cries of outrage, just as they have 43 years later for Jesse Jackson Jr. But the Jackson scandal unfolded slowly — the congressman's disappearance from public view amid rumors the feds were investigating, culminating in last week's guilty pleas entered by Jackson and his wife, Sandi.
Powell, however, went from hero to bum quicker than you can say: "a shoe box filled with money."
American Thinker: The Feds Want Your Retirement Accounts
Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts such as IRAs. Slowly, the cat is being let out of the bag.
Last January 18th, in a little noticed interview of Richard Cordray, acting head of the Consumer Financial Protection Bureau, Bloomberg reported "[t]he U.S. Consumer Financial Protection Bureau [CFPB] is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency's first foray into consumer investments." That thought generates some skepticism, as aptly expressed by the Richard Terrell cartoon published by American Thinker.
Days later On January 24th President Obama renominated Cordray as CFPB director even though his recess appointment was not due to expire until the end of 2013.
One day later, in the first significant resistance to President Obama's concentration of presidential power, a three judge panel of the U.S. Court of Appeals in Washington DC unanimously said that Obama's Recess Appointments to the National Labor Relations Board are unconstitutional. Similar litigation testing the Cordray appointment to the CFPB is in the pipeline.
The Consumer Financial Protection Bureau (CFPB) created by the 2,319 page Dodd-Frank legislation is a new and little known bureau with wide-ranging powers. Placed within the Federal Reserve, a corporation privately owned by member banks, the CFPB is insulated from oversight by either the President or Congress, its budget not subject to legislative control. It is not even clear that a new President can replace the CFPB director on taking office.
Jim Pethokoukis: The New York Times just wrote one abysmal editorial on raising taxes
What a misguided yet clarifying editorial on taxes from The New York Times. I think we are going to have to take this one apart sentence by sentence:
1. “To reduce the deficit in a weak economy, new taxes on high-income Americans are a matter of necessity and fairness; they are also a necessary precondition to what in time will have to be tax increases on the middle class.”
First, congrats to the NYT for admitting that Democrats eventually will shift their tax-raising sights from billionaires and millionaires and households making over $450,000. To afford the level of spending Democrats desire, everyone will need to pay more (probably with a VAT). As former White House economist Jared Bernstein told the NYT recently, “We’re not collecting the revenue we need to support the spending we want.”
Second, I doubt the good Keynesians on the NYT editorial board even believe that it’s necessary to reduce the deficit during a weak economy. NYT columnist Paul Krugman sure doesn’t seem to think so. Krugman in today’s paper: “America doesn’t face a deficit crisis, nor will it face such a crisis anytime soon. We should be spending more, not less, until we’re close to full employment.” The NYT editorial is using the excuse of deficit reduction to push through more upper-income tax hikes to make it easier to later argue for middle-class tax hikes.
Third, here is how you do deficit reduction, courtesy of economists Alberto Alesina and Francesco Giavazzi: “The accumulated evidence from over 40 years of fiscal adjustments across the OECD speaks loud and clear … adjustments achieved through spending cuts are less recessionary than those achieved through tax increases … spending-based consolidations accompanied by the right polices tend to be less recessionary … only spending-based adjustments have eventually led to a permanent consolidation of the budget, as measured by the stabilisation – if not the reduction – of debt-to-GDP ratios.”
Carpe Diem: Another question for proponents of a higher minimum wage
From Don Boudreaux at Cafe Hayek, a very challenging and novel question for proponents of a higher minimum wage:
I have a question for anyone who believes that a nearly 25-percent hike in the minimum wage (from $7.25 to $9 per hour) will not harm low-paid workers. Suppose the government were to mandate, not an hourly minimum wage, but, instead, an hourly minimum break time. Specifically, suppose Uncle Sam were to oblige employers to force each worker earning less than $9.00 per hour to take at least 15 minutes of break time each and every hour. Is it plausible that employers would continue to pay their low-wage workers for 45 minutes of work per hour the same wage that these employers paid for 60 minutes of work per hour?
Does anyone seriously doubt that employers would respond to this mandate by reducing these workers’ hourly pay, by replacing many of these workers with machines, by working these employees 33 percent harder or faster, or by otherwise adjusting to the higher costs imposed by a mandated minimum break time in ways that reduce the employment options and benefits available to low-paid workers?
Assuming that everyone of sense sees that a mandated minimum break time would prompt employers of low-skilled workers to adjust in ways detrimental to those workers, why do so many people of sense deny the reality that a mandated minimum wage – which is nearly the same beast as a mandated minimum break time – prompts the very same sort of adjustments by employers?
Forbes: Detroit Gave Unions Keys To The City, And Now Nothing Is Left
We keep hearing that the car industry in Detroit is “on the rebound” or that “Detroit is back.” In fact, the city itself is on its back, and it’s bounding toward bankruptcy or a state takeover. How did one of America’s most storied cities land in this predicament? While the city population has shrunk (from a peak population of 1.8 million in 1950 to 714,000 in the last census), it has hardly reduced the government that serves it. All you really need to know about Detroit, which is facing a $327 million budget gap, is that last year it was discovered to still be paying for a “horseshoer” (or farrier) on the Detroit Water & Sewer Department (DWSD) payroll. This individual costs some $56,000 in pay and benefits, despite the city not having any horses to shoe in his department.
Union bosses insisted the DWSD (average compensation: $86,000) needs more, not fewer, such unionized employees, a view associated with a broad spectrum of thinkers from Jimmy Hoffa to the Keynesians running the United States. The DWSD has more than twice as many employees per gallon of water pumped as that other paragon of Midwestern governance, Chicago. An independent report said four out of five employees in the bloated department were redundant and discovered a thicket of union regulations driving up costs. Plumbers complained that, due to union work rules, they had to wait to fix pipes until duly authorized “operators” came along first to shut them off.
The Detroit Federation of Teachers, which enjoys rich pay packages (corrected for purchasing power, Michigan teachers are the best paid in the nation, reported the Mackinac Center for Policy Policy), would do the UAW proud. Its employees pay only ten percent of the cost of their insurance premiums. While they take extravagant numbers of sick days or personal days — 8 per teacher — they also cash in on “unused sick days” to the tune of $14.5 million a year. What other industries are so surprised when you aren’t sick that they pay you a bonus? Then again, we’re talking about a group that paid people to quit — $4.1. million in “termination bonuses” were handed out to teachers’ union members in 2010-2011. And last December the city inexplicably sent out archaic “longevity bonuses” ranging from $150 to $750 depending on years of service for non-union municipal employees, even though the benefit was removed for unionized employees in 2009.
The Detroit Service Employees’ International Union did even better, soaking individuals for its own purposes. It arranged to corral thousands of people receiving Medicaid payments to care for sick friends or relatives into its union, for the purpose of charging these people dues, which it siphons directly from the Medicaid checks. So far SEIU has raked in $34 million this way.
From 2008 to 2011, health insurance costs for Detroit employees and retirees have jumped 62% to $186 million a year, the Detroit Free Press reported. Pension contributions in that period jumped 140 percent, from $50 million to $120 million.
To fight for their lavish compensation, unions have proven prepared to fight back with any weapon at hand. Appointing emergency financial managers is “just like being in the slave days,” complained Iris Salters, the president of the Michigan Education Association.
Investor's Business Daily: After Bankrupting Hostess, Union Workers Rake In The Federal Dough
Labor: Who says intransigence doesn't pay? After driving Hostess out of business by refusing to negotiate, union bakers have been rewarded by the White House with Trade Adjustment Assistance. It's all the foreigners' fault.
Politics: Who says intransigence doesn't pay? After driving Hostess out of business by refusing to negotiate, the White House has decided to reward the union bakers with Trade Adjustment Assistence, blaming foreigners. What a sweet deal.
Last November, Hostess Brands went into liquidation, throwing 18,500 employees out of their jobs. The baking giant had been through two restructurings, but the company remained unprofitable.
All the same, most workers at the bread and pastry maker, famous for its Twinkies and Ho Hos snack cakes, were willing to tighten their belts until good times returned.
They included hard-line unions, such as the Teamsters, not known for making concessions.
But there was one exception: the AFL-CIO-affiliated Bakery, Confectionery, Tobacco Workers & Grain Millers International (BCTGM).
It refused to deal, taking the entire company, including fellow workers, down with it.
Turns out the union knew exactly what it was doing.
This week, the Labor Department decided to shower Hostess workers with Trade Adjustment Assistance, a multibillion-dollar pork barrel program that was beefed up as a bone to Democrats, who were blocking passage of three free-trade treaties in Congress in 2012.
CARTOON OF THE DAY