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Economics

Welfare: It’s Worse Than Cato Realizes


On Monday, MIchael D. Tanner and Charles Hughes of the Cato Institute published their white paper, The Work vs. Welfare Trade-Off: 2013. Even if you haven’t read the full 52 page report, odds are you have at least heard of it. In the last 48 hours, it’s been reported on by FOX News, Twitter has exploded with mentions of the report and the authors’ conclusions. It keeps popping up on Facebook.

Then again, you may not have heard about Cato’s latest. Despite the hew and cry the report has generated amongst the small government crowd, left wing outlets and publications have hardly made mention of it. Searches of Huffington PostSalonThe New Republic, and The Nation will not yield any mentions of the authors or their paper. Nor has MSNBC deigned to give any coverage, although a search of their website does produce a a short, paragraph spot from WISE in Indiana. Even the “mainstream” networks (ABC, CBS, NBC, CNN) haven’t seen fit to give this story even a 1 second mention (although CNN does see fit to list articles about Dr. Phil and Jerry Springer among their “top stories”).

As the cliche notes, the silence from the liberals is deafening.  It’s to be expected, I suppose. For over 90 years, the linchpin in liberal ideology is that government assistance is a requirement for good governance. It gave rise to the New Deal programs of the 1930’s and the Great Society / War on Poverty in the 1960’s. Ask a liberal why, despite these massive government assistance programs, poverty rates remain basically unchanged over the past 60 years and you will hear dozens of excuses. From latent racism to corporate greed, liberals have a smorgasbord of time-worn choices to use. Admitting that the welfare programs they cherish have a problem isn’t in that toxic stew. When faced with as well researched a report as the one produced by Tanner & Hughes, with irrefutable facts that demonstrate the sheer lunacy of the American welfare system, all a liberal can do is cover their ears and stomp around in denial.

The authors conclude that despite the much ballyhooed 1996 Welfare Reform Act, the typical welfare recipient receives more benefits for a longer time with less chance of actually working in 2013. The one achievement that Bill Clinton can point to in defending himself as as a moderate has turned out to be an even bigger failure than his handling of a nascent terror group calling itself Al-Qaeda.

I don’t disagree with the authors regarding their conclusion. If welfare is meant to be a bridge towards making the poor self-sufficient, the the government has completely failed. The authors report:

The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour.

This is where I have a small problem with Cato’s paper. While I agree that the system is a mess, I believe it is even more of a mess than Cato presents. Why? Two reasons. First, Cato used a 40 hour work week to determine the “equivalent wage” for a welfare recipient. This might have been acceptable when doing this report 17 years ago. However, the average hours worked per week has been steadily falling for the past 14 months (thanks, Obamacare!) and currently stands at 34.4 hours. Odds are since someone transitioning from welfare to work would be in an entry level position and said positions have seen even more drastic cuts to the workweek, the equivalent wage should be based on the 25.9 hours worked per week by chambermaids or the 31.4 hours worked by retail clerks. I’m fairly comfortable using 34.4 hours, since it closely replicates the original reports intent.

Second, the authors failed to account for the individual states minimum wage laws when computing their statistics. They deliver two pretty powerful snapshots:

  • “Welfare currently pays more than a minimum wage job in 35 states, even after accounting for the Earned Income Tax Credit.”
  • “In fact, in 13 states, welfare pays more than $15 per hour.”

Yet, when accounting for the two factors I entered, I came up with even more grim results:

  • Welfare currently pays more than a minimum wage job in 44 states, even after accounting for the EITC
  • In fact, in 21 states, welfare pays more than $15 per hour

And I would add a third bullet point:

  • Currently, welfare pays an equivalent wage more than $5 per hour greater than the minimum wage in 33 states

In fact, if the goal is to make welfare an unattractive option for the poor and we want to move them into working, it can be argued that the equivalent wage should be at least $1 less than the state minimum wage. Using that criteria, only one state – Idaho – is succeeding.

Yes, my friends. Bill Clinton promised to “end welfare as we know it.” He was right. Welfare has become a highly paid career choice.

Below is a chart showing the difference between the equivalent wage and the state minimum for all 50 states, plus the District of Columbia. Where does your state rank?

Rank Jurisdiction Equivalent Wage Difference, State Minimum vs. Welfare
1 Hawaii  $                   26.62
2 Massachusetts  $                   20.25
3 DC  $                   20.16
4 New York  $                   17.18
5 New Jersey  $                   17.04
6 Connecticut  $                   16.55
7 Rhode Island  $                   16.47
8 Vermont  $                   15.07
9 New Hampshire  $                   14.97
10 Maryland  $                   14.08
11 California  $                   12.77
12 Wyoming  $                   10.98
13 Oregon  $                   10.22
14 Minnesota  $                     9.16
15 Delaware  $                     9.08
16 North Dakota  $                     8.87
17 Pennsylvania  $                     8.78
18 Nevada  $                     8.42
19 New Mexico  $                     8.10
20 South Dakota  $                     7.62
21 Kansas  $                     7.56
22 Michigan  $                     7.37
23 Montana  $                     7.25
24 North Carolina  $                     7.15
25 Alaska  $                     7.01
26 Washington  $                     6.93
27 Ohio  $                     6.80
28 West Virginia  $                     6.67
29 Alabama  $                     5.78
30 Indiana  $                     5.55
31 Missouri  $                     5.39
32 Oklahoma  $                     5.32
33 Louisiana  $                     5.19
34 South Carolina  $                     5.00
35 Wisconsin  $                     1.07
36 Virginia  $                     1.06
37 Nebraska  $                     0.81
38 Arizona  $                     0.76
39 Iowa  $                     0.69
40 Georgia  $                     0.61
41 Utah  $                     0.55
42 Colorado  $                     0.46
43 Maine  $                     0.28
44 Kentucky  $                     0.21
45 Texas  $                   (0.23)
46 Arkansas  $                   (0.41)
47 Tennessee  $                   (0.48)
48 Mississippi  $                   (0.64)
49 Illinois  $                   (0.66)
50 Florida  $                   (0.75)
51 Idaho  $                   (1.02)

A Generational Divide


Yesterday, Senator Frank Lautenberg died. While I doubt there was anything politically speaking we agreed on, I still respected the man’s commitment to our home state (New Jersey) and country. When I posted those thoughts on Facebook, I was blasted by a sizable number of my friends for memorializing a liberal Democrat. The commentators disparaged him for everything from “spitting on his oath of office” and “attempting to overturn the Constitution” to being an “outright fraud” or “typically corrupt NJ politician.”

Those last two made me stop and think for a moment. Had Lautenberg ever been associated with any sort of corruption or abuse of of his office? The answer is no, and that is saying something for a New Jersey politician. The only association with scandal in his 30+ years of public service is that he replaced a Senator who was convicted for his role in Abscam. Was he a classic liberal? Yes. Corrupt. No.

But why the vilification of a man whose biography is the epitome of the classic American success story? Within the answer to that question lies the answer to much of what ails our political system today. And the answer is not a matter of liberal or conservative principles, but rather what defines those principles in the 2010’s. Undergirding those definitions is not racism (though it is always an undercurrent) or sexism, but ageism.

A little relevant history is probably in order here. I was born in 1965. This makes me either an old Gen X’er or young Baby Boomer, according to demographers. Frank Lautenberg was born in 1924, making him a member of the “Greatest Generation.” Now stop to consider what those demographic distinctions mean, politically speaking. Senator Lautenberg would have been in kindergarten at the start of the Great Depression. By the time he was entering his junior year in high school, Germany was invading Poland and World War II was underway. After a youth of watching New Deal programs like the WPA and CCC save his hometown from disappearing from the map, his young adulthood would be spent fighting the Nazi’s. He would spend the rest of his twenties attending college under the GI Bill. In his 30’s, government programs helped him found ADP – and government contracts helped him grow ADP into the world’s largest payroll processing company.

In contrast, my youth was dominated by the debacle of the Vietnam War and shame of Watergate. The economic stagflation of the Carter years ended with the ignominy of the Iranian Embassy. After my time in the Marines, there wasn’t a GI Bill – it had been replaced by the Veteran’s Education Assistance Program (VEAP), which paid for one semester of college. My first business wasn’t assisted by the government; rather I spent more time than I really had ensuring I wasn’t running afoul of some obscure regulation or another (something that still plagues entrepreneurs to this day.

In short, Frank Lautenberg witnessed an activist government that worked to improve lives, that won the most critical war of the pre-nuclear age and that literally saved the world. As Robert Samuelson points out in this op-ed, I grew up witnessing an activist government with rampant corruption, rife with incompetence, incapable of managing even a comparatively small crisis. Lautenberg’s political views were largely shaped by watching a government managed economy, that while imperfect, at least managed to make poverty tolerable. Mine are the result of watching a government managed economy that has eroded the earning and savings power of it’s citizens and thrown millions into poverty (see chart below).

Click on the image to read the original article

This clash on the views of the efficacy of Big Government is at the heart of the the turmoil within the Republican party. Baby Boomers, such as John McCain, Mitch McConnell and John Boehner share the view that Big Government isn’t inherently bad – just that our current government is poorly managed. The Gen X’ers (Rand Paul, Ted Cruz, Mike Lee, Marco Rubio, etc) simply believe that government has grown too large and unwieldy – or as Samuelson put it, government has “bitten off more than it can chew.” Democrats have largely staved off this demographic upheaval because (a) the vast majority of their Congressional Leadership is comprised of people over 70 and (b) the current President is also an unabashed liberal. The clash of identities that marked the Clinton presidency (Clinton, while more liberal than his Republican counterparts, certainly isn’t as far to the left as the current president).

So how does this story end? It can only end one way, and that’s also a result of demographics. The old standard bearers will eventually die off, leaving the Gen X (and eventually, Millenials) in charge of the Republican brand. Although my friends on the left probably do not want to hear this, eventually the liberal wing of the Democrat party will also die off (liberals are a declining percentage of the population, as recently as last year’s elections only 24% of the electorate declared themselves as “liberal” or “progressive”). That will leave the more conservative DLC wing in command. Future arguments will focus entirely on what role is appropriate for the federal government in our republic, not the size or machinations of said government.

And that is a good thing.


Mike Rowe: the First Four Years are the Hardest…


Mike Rowe, doing another Dirty Job

You may be familiar with Mike Rowe from his show on the Discovery Channel, Dirty JobsEven if you’ve never seen the show (in which case I suggest you catch an episode), you’ve probably seen him shilling cars and trucks for Ford or paper towels for Viva. And if you watch ABC’s World News then you hear his voice every night – he’s the announcer during the opening and commercial breaks.

What you  may not realize is that he is also a serious advocate for vocational training. His foundation, mikeroweWORKS, is dedicated to making education in skilled trades something other than a remedial course of study. He understands a point I made several weeks back, that a four-year degree is not the best path for every student. Or for our nation’s future.

Before you say that of course our nation still values the skilled trades as highly as a college education, ask yourself how you would react if your son or daughter announced their intention of becoming a truck driver after high school. Or a plumber, electrician, farmer, or welder. Even thought they are among both the highest paying and most consistently sought after trades by employers, I doubt it would be greeted with the same enthusiasm as an announcement they wanted to become an astrophysicist or surgeon.

Therein lies a major problem, both for the current economy and the economy of the future. Already the news is full of accounts of college graduates queuing up for job applications in the unskilled trades (think retail worker), simply because there isn’t demand for their skill set. At the same time, there is a desperate need for mechanics, welders, riggers, electricians, plumbers, HVAC techs – all you need to do is pick up the help wanted section of any metro newspaper.

Mr. Rowe understands this problem is a problem. To that end, he’s written an open letter to Mitt Romney. He wrote a similar one to Barack Obama during the least election cycle, but based on the President’s education initiatives it fell on deaf ears. You can read the full letter here, but I wanted to lift one line that I thought exemplified the problem:

I always thought there something ill-fated about the promise of three million “shovel ready jobs” made to a society that no longer encourages people to pick up a shovel.

In a nutshell, THAT is the biggest problem with getting our nation back to work today. Many of my conservative friends are adamant about making welfare and unemployment recipients work for their benefit checks. I don’t necessarily disagree with that sentiment. But in a nation that no longer values physical or skilled labor, how likely is a program akin to Roosevelt’s CCC or WPA to succeed?


The Hangover


I’m pretty sure everyone reading this has experienced a bad hangover after a night of too much partying. You wake up with an oversized cotton ball in your mouth, your head is ringing like a fire bell, you have strange cravings for McDonald’s French fries and you can’t seem to move faster than a poorly fed snail. You want to kick yourself. Yeah, the party was awesome (and you still can’t find that missing lamp shade), but man, the hangover is more price than you wanted to pay.

I get the feeling many on the left are feeling something like that today. First, after the euphoria of Bill Clinton’s speech Wednesday night, they had to deal with a less than impressive performance from Barack Obama last night. Either Obama’s speechwriting team needs a shake-up or the President is out of ideas; most of what we heard last night is best summed up as “Hey, I want a do-over!” Most media outlets, including admittedly left-leaning publications like the NY Times and Politico, panned the speech as not one of his best efforts.

Then, along came this morning’s jobs report from the Bureau of Labor Statistics. No wonder the president wants a do-over.

By now, you probably read all of the doom-and-gloom reporting about it. Make no mistake, this was a pretty lousy report. But worse than the numbers themselves is what it all means when you actually dig into them a little.

First, the headline numbers: the economy only created 96,000 new positions in August, but the unemployment rate dropped to 8.1%. This should be good news for the President, right? The unemployment rate is dropping (if somewhat unsteadily) and may actually get under the magic 8% mark most pundits think is needed if Mr. Obama is to have a real shot at reelection. And 96,000 new positions is better than no new positions, right?

Well, yes, sort of. For a better picture of why the jobs report is foreshadowing a major problem, see figure 1. This is the raw BLS data for the past year. Before your eyes begin to glaze over, there are three numbers to pay particularly close attention to.
3,965,000
1,808,000
2,723,000

The first number is the increase in the working age population over the past year. The second is the number positions created in the past year. That last one? That’s the number of working age Americans who simply gave up looking for a job in the past year. To put it another way, more of your friends, relatives and neighbors gave up the hope of even finding a job than actually found one. Nearly a million more, in fact. That’s one million American’s who are now dependent on some outside source just for survival, be it a friend, relative or the handout machine that’s become the US government.

Most economists say we need between 110,000 and 175,000 new jobs each month just to keep up with population growth. But when you look at the actual increase in working age population, the average number actually needed is around 330,000. This is very bad news for team Obama, otherwise he could point to the average of 150,000 jobs created over the past year and claim that his policies are working, albeit slowly. But the reality is that his policies are, at best, creating jobs at only half the rate needed to bring the US back to full employment.

This is particularly troubling, given that every other indicator says we should have been creating jobs at a much faster pace over the past 24 months. If you look at hourly wages, those increased by an average of 3 cents per month between March 2010 and June 2012. Although not at the level of increase seen during the Reagan, Clinton or Bush recoveries, it is still stronger than historic wage growth. Worker productivity across all sectors is also nearing an all-time high and produced solid gains during the same period. Taken together, high wage growth and productivity gains always produced significant jumps in employment before – but not now. What could possibly be holding back the “jobs engine”?

The BLS publishes an “Employee Cost Index” on a quarterly basis, and a large part of the answer can be found there. While wages and productivity show considerable growth, the ECI is also growing – in fact, it’s grown by nearly 11% since March 2010. Of that, change only 18% is represented by increased wages and a 12% drop in non-cash benefits (things like health coverage and gym memberships) counterbalances that number. So, where is the additional 10.3% in employee cost coming from? The answer is a combination of regulatory costs and taxes, the results of 3 years of this administration’s ceaseless efforts to tie nearly every industry into a Gordian knot of inefficiency. New regulations and business taxes now exceed the productivity gains made by our nation’s workforce by a 4:1 ratio, effectively wiping out the need to hire. Indeed, those costs are probably now the single biggest impediment to real employment growth our nation faces. After all, if you owned a business, you would need to be looking at explosive growth potential, not just modest growth, before bringing that much excess on board.

Many of my friends on the left insist that breakneck pace of regulations passed by the Obama administration are not having a negative effect on the economy. I submit they’re not only negatively impacting the economy, but giving business owners throughout all 57 50 states a hangover of our own.


“You Didn’t Build That”


Pres Obama campaigns in Roanoke, VA
July 13, 2012

Our President, it seems, is a socialist at heart. Or maybe a fascist. I used to joke about it, but never really believed our nation could elect anyone so far removed from American thought as that. But one thing is clear after his diatribe against business owners last week in Virginia: Barack Obama does not believe in the American Dream. He believes in the dreams of Karl Marx, instead.

If you’ve been successful, you didn’t get there on your own. YOU DIDN’T GET THERE ON YOUR OWN… somebody along the way gave you some help…
If you’ve got a business, you didn’t build that. Somebody else made it happen.”

Look, I get it. So do the millions of other Americans – and people from around the world, for that matter. Humans are social creatures; we create and live in societies in which certain responsibilities are shared. The President’s speech highlighted the ones most of us recognize: police and fire protection, education, transportation. But here’s what the President and his acolytes fail to understand: while we do these things for the mutual benefit of everyone in the society, we also understand that differences in outcome depend far more on individual ability than any other factor. The President discounts that notion, and in so doing, insults anyone who has slaved at creating a business. Perhaps he thinks it an archaic anachronism from the 19th century, the same way he does religion or gun rights. I’m pretty sure that the men we celebrate because of the ability to turn their dreams into reality would disagree – from Thomas Edison through to the neighborhood butcher.

Regardless of his reasoning, the result is the same twisted, demented view of society – that all people should enjoy more or less equal outcomes, regardless of ability. That is, of course, the basis for socialist and communist thought. It is the responsibility of those more able to provide the means for the rest of us, and it is our right to expect they will. Of course, that isn’t the American Way – but it is the Obama Way, and it dovetails neatly with the change he promised in 2008.

The American Dream is tied to equal opportunity, not equal outcomes. Stop and consider your own lives. Are you more successful than some of the people from your own past? Less successful? Certainly, as I look back to my own high school graduating class, I’m more successful than some of my classmates and not quite as successful as a few others. Why is that? Did they have a different baseline than I? Of course not. We grew up in the same town, came from families that were more or less similar in economic and social status and attended the same schools with the same teachers. That the difference in our economic and social outcomes might derive from innate talent or desire or even how hard each of us worked throughout our lives is of no consequence to the socialist.

“I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something – there are a whole bunch of hardworking people out there. If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive.”

Yes, Mr. President. We are all working from the achievements of those who came before. But there are also the failures who came before and who come along today, and we’re also working from them. Are some the result of bad luck or bad circumstance? Perhaps, but I’ve never believed in “luck” as we commonly refer to it. Besides, I’ve thrived despite what most people would consider horrible luck – being stricken at age 25 with Crohn’s Disease. Has that horrible illness held me back some? Yes, but it is what it is: and it simply means I have to work that much smarter and harder to ensure that I got a positive outcome. So, no, I don’t believe that “luck” plays a significant role in your outcome and your individual ability is far more important.

This is the point that the President fails to understand. Just as every person’s world view is shaped by the circumstances of their life first, I think the President’s is likewise informed. He can look back upon his own life and understand the concept of getting ahead by being pulled ahead far more easily than by working harder or smarter than anyone else. This is a man who, by his own admission, was a pothead in High School, a classic underachiever who wound up attending Harvard and Columbia not because of his academic achievement but because of affirmative action programs. He became Harvard Law Review editor not because of his journalistic or legal abilities, but because of campus connections (to this date, Barack Obama remains the only editor without a single byline). The pattern has repeated itself, time and again throughout his life until he rose to the pinnacle of success and assumed the Presidency. This is not to say the President is not intelligent; he certainly is, but undoubtedly he realizes he would not hold his office were he not the Chosen One from early on. But he believes it impossible to achieve success without some form of divine providence. He completely ignores that individual ability is a far greater indicator of success than any other factor.

Relegating individual ability to a mere production indicator, not success indicator: this has been the progressive dream for over a century, of course. Equality of outcome, not opportunity is the hallmark of the Liberal Dream. In Barack Obama, that dream has found the ultimate champion – and a man determined to foist it upon the United States, regardless of the consequences.


Well, that sucked…


So, here I was winding down my little vacation and getting ready to enjoy the weekend when I opened up my email and immediately got pummeled with the headlines about the June Jobs Report. Of all the ones I saw, though, this one about sums up the employment situation best:

Who’s in Charge of Fixing This?” via the NY Times.
Folks, when a newspaper that leans as far left as the Times is questioning your leadership (and you’re the most lefty D to hold the Presidency since Carter), it might be time to get off the tour bus and figure out why all that government spending hasn’t exactly lit up the economy. Of course, I fully expect to find out on the evening news that Obama will blame:
  • Bush
  • Wall Street
  • Congress
  • Europe
  • Some combo of all the above

He’ll express some sentiment about how terrible all of this unemployment is and how, of course, he’s blameless. But hey, if I could tour closed and shuttered places of business from a tank-proof, taxpayer funded tour bus, shout out “This sucks!” to a few hundred folks and revel in the glory of being the Rock Star President – who’s to say I wouldn’t do the same?

Ok, well – back to my vaca. See you on Monday. After looking over these numbers, it looks like there’s a lot of you who’ll be able to join me for coffee without worrying you’ll be late for work. And yeah, that sucks


Another Take on the College Conundrum


You may recall that earlier this month I did a two-part series on the issue of college costs. Apparently, I’m not the only person who believes the underlying cause for skyrocketing tuition and housing costs is the sheer number of undergraduate students currently enrolled in two- and four-year programs.

I came across this article last night by Richard Vedder, Professor of Economics at Ohio University. Professor Vedder describes in much more detail than I allotted the cause-and-effect of increased enrollment, and also goes into quite a bit of detail about how the federal government’s subsidies only exacerbate the situation, not alleviate it. Given that word broke yesterday that the Senate did what everyone expected and came to an agreement about how to use creative accounting to extend the student loan program at current interest rates, I thought it made sense to revisit the topic. Feel free to hit the link and post your comments.


The College Conundrum: An Alternative


Yesterday, I dissected the underlying problem with higher education, as it currently exists. A college education costs far more than it is actually worth.

At least Bluto wasn’t $500,000 in debt

Today’s students pay far too much and receive far too little benefit to justify the expense. What’s more, in most cases they are strapping themselves with insane amounts of debt in the process. It is a debt that hampers their ability to fully function in modern society. The resulting lack of disposable income for the first decade or more after graduation results in a generation that is incapable of financially supporting themselves. If there is an economic downturn (like now), that lack of spending power means that upwards of 40% of the labor force is unable to do those things which define a middle class lifestyle: own a home, own a car, start a family. Instead of college leading to the middle class, college results in poorly educated people (who mistakenly believe they’re highly educated) reliant on the government or their extended families for support.

So, what’s the solution? We constantly hear that without college, young people have no hope of starting in a good career, that their prospects for future advancement are limited and they will be limited in their ability to fully participate in the American Dream. And so we end up focusing on ways to make college more affordable, without actually looking at the reasons for the high costs involved.

As I pointed out, the principle reason for the inflated cost of higher education boils down to the number of people enrolled. There are 3 times as many college students today as there were 30 years ago – are we really surprised that tuition and fees are also three times higher than 30 years ago? The real question is why we are funneling so many people into colleges. If it is to prepare them for post-academic life, then there can be little doubt that we’re failing in a big way.

I’ve always felt the primary purpose of education – whether primary, secondary or post-secondary – should be a dual mission: first, basic facts and skills (the “3 R’s”) and second, developing critical thinking skills. In American education, we’ve focused primary and secondary education on the former while nearly ignoring the latter. This trend is now extending into post-secondary education. A prime example is the dreaded research paper. I shudder at the memory of writing exhaustive, well-researched papers on a weekly basis while in college. The amount of time I spent developing a final paper for each class was measured in weeks, not days. Yet, today’s students often are tasked with only one paper at term’s end and drilled in preparing for weekly quizzes – an approach similar to the high school experience. The original purpose of higher education in the American system, developing one’s mind to sift through tons of data, determine which pieces are relevant and create a cohesive argument from them, is being lost. In other words, we’re graduating millions of kids prepared for an extended stay on “Jeopardy!” but not ready for the types of jobs that traditionally require a college degree.

This is also a result of herding high school students into college. I think the best way to tackle the costs associated with college stem from rethinking the way we handle primary and secondary education. Current elementary and secondary school curricula are leftovers from the days when the United States was principally an agricultural society, and recent reforms have done little to address that fundamental flaw. If anything, the recent and increasing emphasis on standardized testing and evaluation of student and teacher achievement is a step backward and fails to address the real world situations most young people face after graduating from high school. Because our education system now deemphasizes critical thinking skills in favor of rote memorization and socialization, most kids enter into adulthood knowing a set of facts that are essentially meaningless – unless preparing for life as a game show contestant.

The best course of action, I believe, is to reintroduce vocational training during high school and reemphasize critical thinking skills, beginning in primary school.

Vocational education programs, where they do exist, are often maligned, snubbed and underfunded. However, I see nothing wrong with providing basic education in critical skills developing courses (math, the sciences, history, English) while also providing 2-3 hours per day of vocational instruction to those students who prefer that track. This is a similar education structure to the German model, essentially – only instead of four tracks of study, I would streamline it to two and I wouldn’t begin the vocational track until the age of 13 or 14, not 10. Along with making vocational education an acceptable option, though, we need to reconsider the courses available. Traditional “vo-tech” professions such as auto mechanic and machinist should continue to be included, certainly. But many professions that currently require a bachelor’s degree only require it because it signifies the holder has developed basic critical thinking skills, along with the basic technical skills required. Professions like LPN or Network Engineer do not require the job holder to have in-depth conversations on the merits of St. Thomas Aquinas’ views of married clergy; there is no reason that learning how to create such a dissertation should be part of the education process to enter those fields.

As I said, the current emphasis on standardized testing results in less classroom time devoted to developing critical thinking skills. In extreme cases, it is turning our teachers into nothing more than room monitors and test graders. The practice grew from concerns that education standards in the US lagged other first-world nations in education achievement. While the goal was and remains laudable, the prescribed cure is making things worse. As a nation, we’ve fallen further behind in academic achievement. Somebody, somewhere decided that rather than measuring academic achievement in terms of how well students think, measuring how many arcane facts and figures they memorized was important. Don’t get me wrong, a basic knowledge set is important. But without the ability to turn those facts and figures into a thought, they are nothing more than bytes of data. We need to empower teachers to create thinking students and reward those students for developing their thought processes. The notion that those skills can wait until college to fully develop is proving wrong-headed.

Of course, there are challenges associated with this type of program. The biggest is probably changing the mindset we currently have regarding education. That requires buy-in from multiple stakeholders. Teachers unions, who’ve proven resistant to change in the past. School administrators, beholden as they are to current power structures. The federal government, still trying to figure out how “No Child Left Behind” left so many kids behind. Most importantly, it requires not only acceptance but a demand from parents, who likely will be confused by the changes.

The other option is to simply continue on the current course and leave another generation of kids ill-prepared for adulthood, in three phases of their development: their academic achievement, their career preparation and the amount of debt they’re saddled with before they ever earn a dime.


UPDATE: GDP Growth IS a result of government spending


I’ve heard from some of you, insisting I MUST have my facts wrong. After all, government spending has gone down over the past 3 years – not up. You know this because the esteemed Paul Krugman drills on this in every other column he writes and blogs about it daily. Besides, The Annointed One of 1600 Pennsylvania Avenue would NEVER LIE!!!

Funny, but I think those of you following that line of thinking are either (a) hoodwinked by the President or (b) Obama sycophants. The chart below was compiled by the Federal Reserve, and like most FEBR data, excludes inflation. But you’ll note that the increase in government spending as a share of GDP (and therefore, the commensurate reduction in GNP) eerily match the curve I developed.

So…..phhhhbbt. Stop listening to the liar-in-chief and his apologists. Learn how to do a little basic research on your own, people.

Oh, my…this IS the reason the economy hasn’t recovered!


GDP Growth & Government Spending


Obama’s Economic Hero

There are many things that puzzle me. For instance, why is the cold water tap always on the right-hand side of the faucet? It’s as if the guy who invented indoor plumbing arbitrarily decided to that cold water should come from the right and everyone since has followed suit. There’s no real reason for it. We could just as easily have cold water coming from the left and nobody would be any wiser for it.

A similar thought process seems to have occurred in regards to including government spending as part of a nation’s economic health, currently expressed as GDP. Once upon a time, we didn’t calculate GDP. We calculated GNP; the gross national product. That figure didn’t include government spending – because economists were interested in determining the productivity of a country’s economy. Governments simply do not produce anything; no goods, no services. In fact, government spending used to be regarded as a negative economic indicator. After all, the more governments spent, the more they had to raise revenue by confiscation (and yes, taxation is still confiscation – just with a prettier name). That pulled capital from the real economy – which lowers a nation’s GNP.

GNP remained the way the government and most economists measured economic output until 1993. The Clinton administration, swept to power on the mantra of “It’s the economy, stupid” was looking for a way to juice up the headlines. By switching from GNP to GDP, they found their way to reinforce the perception that the economy was improving. It didn’t matter that actual economic output barely increased from 1992 to 1993. By including government spending in the measure of the nation’ economic health, it seemed as if the economy had rebounded.

The Obama administration is relying on similar hocus-pocus to fool the American public in 2012. Yes, GDP is growing – but only because government consumes more of the national economy than at any time in history. Yes, more than during the New Deal of the 1930’s, more than the war spending of the 1940’s and more than during the profligate 80’s. In 2011, the US Treasury spent in excess of $6 trillion dollars and accounted for 41% of all economic activity recorded in the US GDP. By comparison, at the peak of World War II spending in 1944, the Treasury only accounted for 28% of GDP. Even at the height of the last major recession in 1983, the Reagan treasury only accounted for 36% of GDP. Yet, during the Obama administration, we’ve jumped from 36% in 2008 to 40% in 2009 – and haven’t fallen below that mark since.

Of course, there’s a flip-side to this coin: if government spending is what is driving perceived economic expansion, the reality must be that the real economy is shrinking. And after adjusting for inflation, that’s exactly the case: in 2008, GNP totaled $9.1 trillion dollars (that represented a $31 billion drop from 2007). But economic activity has continued to decline under the current administration’s tutelage. In 2009, GNP totaled $8.9 trillion and it has continued to drop since, all the way to $8.4 trillion in 2011.

This is the principle reason why job growth remains a real negative. The Obama team loves to pat itself on the back for “creating 4 million jobs over the past 18 months.” The sad truth is that the economy should have produced about 4.3 million jobs over the past 18 months just to keep pace with population growth. But the jobs picture makes sense when you compare it to actual economic growth. As the economy continues to contract, the demand for workers continues to decline. The only difference between 2012 and 2008 is that businesses don’t need to lay off workers to accommodate the reduced demand. They just simply don’t hire new employees.

I can summarize this with a very simple statement: if it seems to you that the recovery we hear so much about hasn’t ended the Great Recession, that’s because it hasn’t. There hasn’t been a recovery, except for those with direct ties to government spending. That’s the one component of GDP that has increased: by over $1 trillion over the past three years.

So, the next time you see a GDP number that trumpets economic growth, remember to dig into the numbers a bit. And remember, this is White House that replaced managing economic growth with managing spin.