The Golden Days Are Over

Townhall.com ^ | July 6, 2011 | Mike Shedlock

[Kaslin]

Bill Gross has a Plan to Fix the Fractured U.S. Job Market.

However, before you can fix any problem you have to understand what the problem is. Interestingly, Gross seems to have a handle on some aspects the problem. Here are two key points from the article on which I agree with Gross.

If we are to compete globally while maintaining a higher wage base, we must train for “middle” in addition to “high” tech. Philosophy, sociology and liberal arts agendas will no longer suffice. Skill-based education is a must, as is science and math.

The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper. That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities. Our labor force is too expensive and poorly educated for today's marketplace.

Gross also cites several facts about the cost of education in the US that also hit the mark.

Fact: College tuition has increased at a rate 6% higher than the general rate of inflation for the past 25 years, making it four times as expensive relative to other goods and services as it was in 1985. (Click here for a list of the ten most expensive colleges and universities in the U.S.)Subjective explanation: University administrators have a talent for increasing top line revenues via tuition, but lack the spine necessary to upgrade academic productivity. Professorial tenure and outdated curricula focusing on liberal arts instead of a more practical global agenda focusing on math and science are primary culprits.

Fact: The average college graduate now leaves school with $24,000 of debt and total student loans now exceed this nation's credit card debt at $1.0 trillion and counting (7% of our national debt). Subjective explanation: Universities are run for the benefit of the adult establishment, both politically and financially, not students. To radically change the system and to question the sanctity of a college education would be to jeopardize trillions of misdirected investment dollars and financial obligations.

Conclusion to ponder: American citizens and its universities have experienced an ivy-laden ivory tower for the past half century. Students, however, can no longer assume that a four year degree will be the golden ticket to a good job in a global economy that cares little for their social networking skills and more about what their labor is worth on the global marketplace.

5-Point Summary of the Problem

1. U.S wages are out of line
2. U.S. education is too expensive
3. U.S. universities are run for the benefit of teachers, teachers' unions, and administrators, not for the benefit of students
4. Student loan programs make life-long debt slaves out of students
5. U.S. tax policy encourages flight of capital and jobs overseas

Bill Gross' Proposed Solution

“We need a program as ambitious as the GI Bill,” but one that focuses on retraining existing unemployed workers and redirecting our future students.

Government must step up to the plate, as it should have in early 2009. An infrastructure bank to fund badly needed reconstruction projects is a commonly accepted idea, despite the limitations of the original “shovel-ready” stimulus program in 2009. Disparate experts such as GE's Jeff Immelt, Fareed Zakaria, Jeffrey Sachs and Paul Krugman believe an infrastructure bank to be an excellent use of deficit funds: a true investment in our future.

In the end, I hearken back to revered economist Hyman Minsky – a modern-day economic godfather who predicted the subprime crisis. “Big Government,” he wrote, should become the “employer of last resort” in a crisis, offering a job to anyone who wants one – for health care, street cleaning, or slum renovation. FDR had a program for it – the CCC, Civilian Conservation Corps, and Barack Obama can do the same. Economist David Rosenberg of Gluskin Sheff sums up my feelings rather well. “I'd have a shovel in the hands of the long-term unemployed from 8am to noon, and from 1pm to 5pm I'd have them studying algebra, physics, and geometry.”

Those who advocate that job creation rests on corporate tax reform (lower taxes) or a return to deregulation of the private economy always fail to address dominant structural headwinds which cannot be dismissed: 1) Labor is much more attractively priced over there than here, and 2) U.S. employment based on asset price appreciation/finance as opposed to manufacturing can no longer be sustained. The “golden” days are over, and it's time our school and jobs “daze” comes to an end to be replaced by programs that do more than mimic failed establishment policies favoring Wall as opposed to Main Street.

Pure Keynesian Nonsense

Gross correctly cited college expense as a problem. He also correctly cited global wage arbitrage as a problem. What proposal did he make to fix either of them?

The answer is he didn't. Instead he cited self-serving clean-energy nonsense from GE.

Of course GE's Jeff Immelt wants a massive energy build-out. Such a program would benefit GE and the value of Immelt's stock options.

Of course Krugram always wants more fiscal stimulus because he is a Keynesian clown, and that's what Keynesian clowns always want.

The golden days are indeed over, but Bill Gross' solution is pure Keynesian nonsense. Neither Gross, nor Immelt, nor Krugman ever say how we are supposed to pay for their proposed "infrastructure bank.

Time to Scrap Davis-Bacon, End Public Union Collective Bargaining

Unlike Krugman, Gross seems to understand one key point: the "U.S. labor force is too expensive".

Logically, that must be the starting point for any discussion.

Before any project can be economically viable, labor costs must be addressed, and that is exactly why we need to scrap Davis-Bacon and all prevailing wage laws. We also need to eliminate collective bargaining of public unions, preferably getting rid of public unions in entirety.

Unless and until we do that, we will dramatically overpay for infrastructure projects and taxpayers will pay through the nose for them.

Government should strive to provide the most services at the least cost. Public unions strive to provide the fewest services at the most cost. Is it any wonder cities and states are broke?

Killing Collective Bargaining the Single Best Thing for Education

The results are in: Union-Busting is a "Godsend"; Elimination of Collective Bargaining is the Single Best Thing one Can do for School Kids

Congratulations to Governor Scott Walker for sticking to his guns. The state of Wisconsin is far better off because of it. So are taxpayers. Most importantly, so are the school kids.

Please consider Union curbs rescue a Wisconsin school district

The Kaukauna School District, in the Fox River Valley of Wisconsin near Appleton, has about 4,200 students and about 400 employees. It has struggled in recent times and this year faced a deficit of $400,000. But after the law went into effect, at 12:01 a.m. Wednesday, school officials put in place new policies they estimate will turn that $400,000 deficit into a $1.5 million surplus. And it's all because of the very provisions that union leaders predicted would be disastrous.

In the past, teachers and other staff at Kaukauna were required to pay 10 percent of the cost of their health insurance coverage and none of their pension costs. Now, they'll pay 12.6 percent of the cost of their coverage (still well below rates in much of the private sector) and also contribute 5.8 percent of salary to their pensions. The changes will save the school board an estimated $1.2 million this year, according to board President Todd Arnoldussen.

"The monetary part of it is not the entire issue," says Arnoldussen, a political independent who won a spot on the board in a nonpartisan election. Indeed, some of the most important improvements in Kaukauna's outlook are because of the new limits on collective bargaining.

In the past, Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust -- a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.

Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, 'We can match the lowest bid,'" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes.

Ridiculous Cost of Education

Nowhere does Gross address the cost of education other than to cite it as a problem.

The student loan program is a huge price of the problem. It does nothing but make students debt slaves for life. Student loans should be scrapped entirely. Education costs will drop dramatically once that happens.

Moreover, pension benefits of teachers and administrators are outrageous, especially at the university level. Salaries for sports coaches are outrageous.

All of those excesses need to be reined in.

Corporate Tax Law Changes

Every few years one or both parties proposes a corporate tax holiday to repatriate profits held by corporations overseas. Such actions must stop. All repatriation holidays do is encourage more outsourcing of jobs and capital, while corporations bide their time, waiting for the next tax holiday.

US companies that only do business inside the US are at a huge disadvantage to large corporations who can shift profits overseas.

GE is a prime example. Please consider G.E.’s Strategies Let It Avoid Taxes Altogether.

In 2010, GE reported $14.2 billion in profit, $5.1 billion in the US. Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

Gross has high praise for GE.

The only thing GE deserves high praise for is an army of lawyers and lobbyists to reduce its tax bill to the detriment of struggling small businesses who cannot compete and get no such breaks.

If we are going to have a corporate tax, we should have a fair one.

Mish's Proposed Plan for Jobs and Education

1. Scrap Davis-Bacon and all prevailing wage laws
2. Enact national right-to-work laws
3. Kill defined benefit plans for public workers
4. Scrap student loan programs entirely
5. End all support for for-profit colleges
6. Revise corporate tax laws
7. Stop corporate tax repatriation holidays
8. Slash military spending. The US can no longer afford to be the world's policeman.
   

Those ideas will increase corporate tax revenues, end corporate tax unfairness to small US businesses, lower infrastructure costs, lower education costs, allow more public workers to be hired at the same costs as before thereby lowering the unemployment rate.

A key reason we have a jobs problem and an education problem is costs are too high. Gross purports to fix the problem via more government spending.

The solution cannot be the same as the problem, yet Gross proposes just that. Unions, untenable wages and benefits, and excessive government spending caused Greece to go bankrupt. Massive public works programs put Japan in a very precarious situation, with nothing but debt to show for its efforts.

History has proven time and time again that public spending proposals cannot and will not work. Gross and Krugman are blind to history. Immelt is talking about what is good for GE, not America.

The bond market forced Greece's hand. If we listen to Gross, Krugman, and Immelt, the US will soon be in the same spot.

Addendum:

Reader "Brian"comments

1. Government doesn't create jobs. Government jobs come at the expense of private sector jobs.

2. Bill Gross' comment "I'd have them studying algebra, physics, and geometry" is wrong. Not everyone needs to learn algebra, physics, and geometry. If money is to be spent in education, it should be where it is needed in trade tech schools. Americans are brainwashed into thinking that getting a four year degree is a path to financial success when a highly skilled tradesman makes more money and is more in demand today than a student with a fluff degree working in an office. We are creating a nation of unskilled workers in debt and ill prepared for the necessary jobs in a diverse economy.

3. Bill Gross won't speak poorly of educators or unions so long as endowments and pension funds make up a large portion of PIMCO investors

Thanks again for the article!
Brian

Regarding point number 1 above: Much government "work" is makeshift, and not needed at all.

Regarding point number 2 above: How many math majors do we need? How many PhDs do we need? If everyone has a PhD, then by definition, Walmart greeters and trash collectors will be PhDs. As Brian suggests, much is to be said for learning a trade instead.

Regarding point number 3 above: Clearly PIMCO suffers from the same credibility problem as GE. Of course, one has to look at ideas presented instead of making Ad Hominem attacks, but Gross' proposal was very weak as noted. One cannot help wondering if Gross purposely strove to avoid offending unions and pension plans.

[ex-snook]

How about those on the other end of the bell curve?

[Spok]

The takers outnumber the makers and Dear Leader will get his social equality-we’ll all be destitute.

[RC2]

Colleges need to understand that if they continue on their path of not educating and just collecting money from students and government, just as our jobs, education will leave the country also.

[Carry_Okie]

Here's my program, starting with this piece I wrote for Bill Simon...

Education is the most critical issue in California, more serious than even the budget crisis. When Gray Davis first ran for Governor, he promised that Education was to be his highest three priorities, but instead Mr. Davis has shown us what they really were all along: Re-Election, Re-Election, and Re-Election. What were the results? Education spending per student has increased nearly 30%, while classroom performance remains relatively unimproved and at the bottom of a nation producing a third rate primary and secondary education product. The system is broken and the State is nearly bankrupt. So what can we do?

One answer is to free California’s teachers from the overwhelming power of national unions. Teachers should have a choice whether or not to support an often radical political agenda. Unlike Gray Davis, if you elect me Governor of California, I will enforce the law that prohibits unions from requiring campaign contributions in dues payments without teacher’s permission (Beck (487 US 735), 1988).

Second, we must reverse the trend toward large unified school districts that has effectively excluded parents from affecting public school decisions. The purpose of consolidation was supposedly to reduce the cost of overhead through economies of scale and to strengthen the districts’ collective bargaining power, but that isn’t how it has turned out. Instead, district bureaucracies have become enormous and the resulting issues are so complex that parents are pushed aside by an organizational machine controlled by union lawyers.

I plan to assist formation of corporate service associations for school districts so that they can divest operations into smaller, more personalized institutions while retaining the organizational muscle to deal with the unions. Smaller school districts will give parents a stronger voice on district boards over the issues that matter to them. The principle need to make this possible is to develop programs for children with special needs. Here is where can turn to parents for solutions.

Some would argue that parents on local School Boards aren’t qualified to make administrative decisions about public education, especially over programs for children with developmental challenges. So, I’d like to talk about an education success-story that not only proves that argument wrong, it points toward a total transformation in public education.

Home education is enjoying a renaissance in America, and religious freedom isn’t the principle reason. Parents are choosing to home school to assure educational excellence for their children, whose learning habits they know best. A family bond of patience and discipline is a critical factor in student success, especially in a challenging situation. What many people don't know about home-schools is that they have a high percentage of students with genetic, behavioral, and developmental disabilities that had often been poorly served by public institutions. Even with that statistical disadvantage, SAT, ACT, and STAR test scores strongly indicate that home education is producing superior results across the entire spectrum of individual ability.

So parents ARE competent to make choices about their children’s education, and home schools successfully manage nearly every type of specialized educational problem. So what are they doing right that we can apply to public institutions?

As home-educators have grown in number, they have been organizing into loosely knit education cooperatives that point to a new form of public education: a decentralized, customer-oriented network for lifelong learning, using products customized to meet individual interests and abilities. That promises what 21^st Century public education could really become: a multi-disciplinary market of customized learning products and services.

We are already starting to see the effects of this change. Software and curriculum companies are finding a growing market of customers committed to gaining competitive advantage. Colleges and universities are offering online degrees because they need superior students to assure productive alumnae. Superior teachers could get rich transmitting their ideas and methods to a mass-market. Where better to develop those products and sell them to the world than California?

We can use private and home education as if they were R&D laboratories developing and testing proven learning tools and services. Public school parents on school boards could then select those products that the State would fund for use in public schools. It is a gradual transformation, from experimenting on our children with untested academic theories, to contracting for innovative tools and methods that have been proven in the marketplace.

All we have to do is let it happen and keep government from regulating new educational methods out of existence. If you elect me Governor, that is what I will do. Federal education dollars aren’t worth the price of Federal control and bureaucratic requirements. Private and home education both leave the State with more money to spend per-child and provide a competitive incentive for public schools to keep their customers.

Together, let’s help California rise from the ashes of a broken system and lead the way once again, into a world of exciting possibilities for our children.

Now, that program would bring real change. In sum,

1. Enforce the U.S. Supreme Court decision re Communications Workers v. Beck (487 US 735, 1988).
2. Assist formation of corporate service associations. Offer State funding for local school districts to divest into smaller, more personalized institutions.
3. Use the private and home education market to develop and test learning tools and services. Private validation services could assess product performance against product claims. School boards would be free to select guaranteed products for use in public schools.
4. Insurance on the guarantee would cover the cost of remedial education if the product fails to meet warranted performance.
5. Veto any bill requiring home and private educators to conform to State teacher certification standards.
6. Veto any bill requiring State supervision of home schools.
7. Analyze any Federal program for insufficient funds and unintended consequences suspecting unfunded mandates. Cite New York v. United States (505 US 144, 1992).

Oh, but that's not enough. This little move would finish the job:

Envision a small shop in a strip mall: "We Test." We Test tests, and how. We Test tests are no joke, indeed; they're hard. REALLY hard. We Test guarantees that any person who can pass their tests can perform as specified with an insured guarantee. If the person you hire fails to perform to those specifications within the term of the guarantee, We Test pays the cost of hiring and training a replacement.

Any human then could use any means imaginable to acquire the necessary knowledge to pass We Test tests. Any school would do, no accreditation required. The Internet is loaded with coursework and curricula, libraries and lab-simulators. Any human with the drive and intelligence to learn on their own could then qualify for a job. No saving for decades, no brainwashing, completely transferable work, at any pace one can withstand. Any employer could then simply select from a menu of We Test specifications instead of a diploma, at any level. We Test tests.

One would think that this should have happened a long time ago, but in fact there is one thing standing in the way that makes the realization of this seeming inevitability a matter of now or never.

State licensing requires degreed credentials obtainable only at said profligate, bureaucratic and unaccountable institutions charging outrageous fees and demanding excessive time as only a State monopoly could command. Why not just amend the legislation specifying education for state licensure by adding the simple words, "or equivalent"?

As an example of how little it would take, consider my wife. She just passed her board certification exam as a Clinical Nurse Specialist in the Newborn Intensive Care Unit. She walked into H&R Block, sat at a computer, took a three-hour exam harder than anything she'd endured in her Masters' Program at Cal State San Francisco, and within five minutes after completion had her passing grade. If the private system can handle a test that specialized, why can't it test arithmetic, algebra, US history, or college chemistry? Instead of bricks and mortar, it would be e-books in quarters. Why not?

Yep, educrat monopolists really think outside the box all righty, only as long as you can stick the rest of us for their lousy product.

[FReepaholic]

...Our labor force is too...poorly educated for today's marketplace...

How can that be??? The Dept. of Education's yearly budget is $70 Billion!

[muawiyah]

Big problem in this piece ~ the writer(s) might even have a good idea or two but forgotten in all of that is the fact that chemistry, physics, biology, mathematics, etc. are ALL parts of the "Liberal Arts" at the major universities.

So, if we want to focus on "science" why then condemn "science"?

I never allow that particular erroneous view to interfere with my taking the time to read something else some other place. It's just IGNANT!

[RockinRight]

Scrap Davis-Bacon and all prevailing wage laws

Probably a good idea. Might solve the problem of employers hiring "off the books" illegals to save cash.

Enact national right-to-work laws

No-brainer, but, is it a Federal area or is this a states-rights issue?

Kill defined benefit plans for public workers

Why should they have anything but a 401k-like, private sector type plan, or even that if the entity can't afford it?

Scrap student loan programs entirely

I would agree generally, but perhaps put something in place that makes it easier for private student loans to be obtained, regulation and tax-wise. The reason costs increase so fast is the fact that with easy loans there is no downward pressure on tuition. Same would be true for trade schools if they saw a resurgence. This is not an easy fix, really. The idea behind loans is to prevent people being locked into a certain class, a reasonably smart kid with broke-ass parents needs some options (scholarships are another), but this does need changed from what we have now.

End all support for for-profit colleges

I'm not sure about this one...on one hand, the "University of Phoenix" type schools are thought of as lower-quality, but, in the right environment a for-profit school could be superior.

Revise corporate tax laws

No brainer.

Stop corporate tax repatriation holidays

Are they saying to TAX repatriation or NOT TAX them? Not taxing makes more sense - to bring the money back to our shores.

Slash military spending. The US can no longer afford to be the world's policeman.

Agreed with a caveat: We still need to beef up border control and anything directly related to terrorism, and I think we need to stay with Israel, but Germany doesn't need a US military base anymore...

It seems that basically, we have to make a choice...if we want good wages we have to educate ourselves properly, not get 4 year, $80,000 degrees in basket weaving or liberal arts. The only degrees really worth the money are in law (but we have too many in this field), sciences, medicine, and, business to some degree. Even these professions don't necessarily need 4 years in all the excess crap, focus instead on what they are planning to do.

Instead of this, there can be a higher focus on educating for specific trades and skills.

As far as being "well-rounded" - this stuff should really be established in high school and prior. Even some trades can be done at the high school level, IMHO.

I have an MBA, and while I think I did learn a lot from it, it so far hasn't been worth the student loan I'm paying off.

[RockinRight]

A big part is kids choosing the wrong majors - American kids often opt for more “easy” or “fun” stuff, while Asian kids are taking the hard sciences, engineering, technology, etc.

[Vigilanteman]

Most of this analysis is spot on. This statement, however, is incomplete:

3.U.S. universities are run for the benefit of teachers, teachers' unions, and administrators, not for the benefit of students

This problem actually starts much earlier with publically funded kindergarten.

Hillsdale College actually has a successful student loan model in place to replace the government debt slave model. They have lined up their own set of lendors to offer their students something better. Their default rate is virtually non-existent because their kids actually learn something useful.

If a tiny little liberal arts college in Michigan can do it, then it can go nationwide.

[Amerikan_Samurai]

“I’d have a shovel in the hands of the long-term unemployed from 8am to noon, and from 1pm to 5pm I’d have them studying algebra, physics, and geometry.”

---

How’s that going to work when the majority of these long term unemployed have not even mastered the basics of Fractions?

[RC one]

Any politician that tells you that he/she has a plan to create jobs is blowing smoke up your butt. There is no fixing the job situation. It isn’t going to happen-not by any act of congress anyways.

[arrogantsob]

“How about those on the other end of the bell curve?”

They will tout that bale and carry water as they always have. Is there something different for them?

[RC one]

that isn’t 100% true. Plenty of highly educated people are finding themselves unemployed or underemployed. This is about competition amongst a growing pool of job seekers in a climate of decreasing employment opportunities.

[junta]

College is a scheme to finance the lives of stupid liberals way beyond what they are worth.

[central_va]

The biggest thing that would correct almost every problem wiht the US labor market would be to repeal Duke Power vs. Griggs

[ex-snook]

They will tout that bale and carry water as they always have. Is there something different for them?

---

I was hoping there would be jobs in private industry instead of living off the government. Workers with mind have a future, workers using muscle are not needed as they once were.

[arrogantsob]

Nope, but that is irrevocable without an entire economic and technological collapse. The former is close and the latter not inconceivable considering the growth of Neo-Luddite views and appalling ignorance of the masses.

[rdb3]

How about those on the other end of the bell curve?

Who are you referring to, might I ask?

If you can't appreciate the pure beauty of the violin after hearing this, something's wrong with your ears.

Or you can get raw with these strings. Either way, the violin is sweet yet lethal.

Do it!

[ex-snook]

How about those on the other end of the bell curve?

---

Who are you referring to, might I ask?

---

Those without the ability to get a college degree. There used to be manual jobs in manufacturing but they don’t exist in this country as they once did. What will those people do to earn a living and support a family if we are not going to bring the factories back.