Jobs! (But how do you get them?)

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Every politician is talking about jobs this year. With 400,000 North Carolinians out of work, you have to talk about jobs. There are a lot more promises, however, than actual plans—especially at the state level where we don’t really have the tools to influence the economy that the federal government has. So how *do* we make jobs for North Carolina?
The easiest way for a politician to claim they are making jobs it to hire a bunch of new state workers or let out some large new state contracts. That makes the politician look good, but doesn’t really make jobs. The money they spend making the “new” jobs has to come out of the economy from somewhere else and you are simply costing jobs somewhere else in the state. I am not saying that we don’t need state employees—my Dad was a state employee all of his career—but we can’t get out of the mess just by hiring a bunch of government funded employees.
The only way to create new jobs is to grow the economy!
What can we do at the state level?
1. Infrastructure! Roads, education, courts, etc. Every dollar that is well-spent on appropriate state services drives cost out of doing business in this state. Good roads reduce logistics costs and vehicle repairs. Good education reduces training expenses and the costs of mistakes. Good courts make business predictable and reduce risk. And everyone else benefits too!
Business goes where the costs of doing business are lower.
2. Pay attention to fundamentals! Post-WWII America had it pretty good. There were a lot of things that we didn’t have to pay attention to—because we could afford a little bit of waste. An easy example: every other major country taxes the consumption of goods (such as sales taxes). The United States and North Carolina primarily tax production of good (that is, income taxes). What difference does it make? Isn’t a tax, a tax? No! What it means is that something produced in North Carolina is automatically about 5% more expensive overseas even if all other costs are the same. Likewise, a product made in China is automatically about 5% cheaper here. That 5% translates to wages that North Carolina companies can’t afford to pay here. We aren’t talking about changing the amount of taxes paid, just how they are collected. (And, yes, we understand that we can’t just increase our current sales taxes because that would work against the poor because they spend a higher percentage of their income on taxable items).
3. Learning—to take advantage of North Carolina strengths! During the dust bowl years, the agricultural extension service grew as a resource to help farmers understand how best to utilize their land; to leverage what other farmers had learned about things like erosion, crop rotation, and so forth; and to give farmers the advice they needed to make it through—and to advocate for farmers back to the government. We need to take a similar approach to small business: people that small business (or future small businesses) can go to for advice, to understand local business conditions and regulations, who can help them understand what is coming down the road at them. There doesn’t need to be a lot of them, just as the Agricultural Extension is not large. Low cost, high value support for small business.

The Light Rail

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Lay $50 bills on the ground 20 feet wide by 30 miles long—the distance from Chapel Hill to downtown Durham—and that gives you a good idea of the planned cost of building the proposed light rail system. (You would actually need to put an additional $5 on top of each $50 to make the math work). And when you are done, you will have a system that will likely cost about $38 per person for everyone who rides from Chapel Hill to Durham (based on San Jose’s experience with a somewhat more dense population).
If we are going to spend $1.4 Billion on a transit system that will take at least 10 years to build, wouldn’t a much better investment be to make UNC Chapel Hill tuition free for all in-state undergraduates over the same period of time? This is a lot of money and there are a lot better things things that we can do with it besides make a worthless dinosaur of a transit system.

Understanding Counter-Cyclical Economics

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Economists like big words. It makes them feel smart. But you have known about counter-cyclical economics since you were a child:

“Seven years of great abundance are coming throughout the land of Egypt, but seven years of famine will follow them. Then all the abundance in Egypt will be forgotten, and the famine will ravage the land. The abundance in the land will not be remembered, because the famine that follows it will be so severe.
“Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine.” (Exodus 41:29-36)

The idea that government should use the increased tax money during good years to help the people during the bad is what economists call “counter-cyclical,” that is, it works to make business cycles less painful. That is a good thing.

The way politicians usually work, however, is that during good years, they want to believe that those years will never end. Not only don’t they save the tax money that comes in, they borrow money against future taxes. When the business cycle turns down, those politicians suddenly don’t have the money and they either have to make really painful cuts in government or transfer the pain to the people by raising taxes. Both hurt the economy and hurt people. This approach is called “pro-cyclical” because this makes business cycles worse.

Unfortunately, we have had Congresses and Legislatures that have taken the pro-cyclical approach and we are feeling the pain now.

There is another approach: one can borrow money during good times and borrow even more money during bad times. Economists call this “Stupid.”

This exactly what has happened however. The Federal Government has borrowed about $17,000 in your future taxes ($67,000 if you are a family of 4) over the last 3 years to stimulate the economy. A fair argument can be made that however stupid it was that we got into that situation, we needed to do something. Fair enough. However, if we were going to borrow that much money, it should have really been able to help the North Carolina economy—at least until we started trying to pay it back. When you borrow money on a credit card, at least you expect to get the value of what you spent it on.

So why didn’t it?

Obama helped bankers, not people. For all his claims about being “for the people,” Obama bailed out the banks so they wouldn’t go under when people defaulted, rather than helping people not to default. The result was that banks survived (and ultimately paid back the bailout), but 3,000,000 homes went into foreclosure in 2010.

Your money was not invested in North Carolina. 2.6% of the stimulus money was spent in North Carolina according to recovery.gov (the official site for the recording stimulus money) creating 5,788 jobs (against 439,000 unemployed in this state). North Carolina received about $580 per person compared to $22,823 per person for a Congressional District in California (CA-05) or $21,533 per person in Washington, DC. Not exactly equal.

Only a small percentage went to jobs. According to recovery.gov (the official government source for stimulus money spending), $217,771,973,710 has gone into the stimulus and it reports that 154,600 jobs have been created. That works out to $1.4 Million per job. Obviously, a very small part of that money went into wages. While this isn’t tracked so there isn’t an exact number, reading through many of the grants, it is clear that this money went into buying things—often electronics.

The money wasn’t spent fast enough. To be effective as a stimulus, money needs to be added to the economy at the right pace. Obama tried to imitate a FDR program, the CCC. But the CCC was started in the middle of the depression when people were already out of work. When Obama started the stimulus, he had the opportunity to stop people from losing their jobs in the first place.

It didn’t solve the real problem. The stimulus was about buying time to fix the problem. The problem was that American wages peaked in 1998. The problem was that middle class jobs were being sent to India. The problem was that Chinese currency manipulation was sucking the life out of American manufacturing, especially out of smaller craftsman manufacturing like was found in North Carolina. The problem was that debt was soaring at all levels of society, business, and government as everyone tried to make ends meet. International Monetary Fund economists started writing about the danger in 2004, but U.S. political economists continued to declare that the fundamentals were sound even during 2008 when the market was in free fall. Even today, many of them won’t admit that there was a problem.

Ok, but what do we do now? We can’t fix what was done.

Much of the fix has to happen at the Federal level and I am not running for Federal office. However, at that level they need to focus on fundamentals: they need to stop talking about a “strong dollar” philosophy and move to a “neutral dollar” to counter currency manipulation. They need to stop favoring futile big business interests ambitions to gain trade access in Asia and stop sacrificing American interests in jobs to get that access. They need to work on fair taxes to reduce the excess investment income that is creating investment bubbles like the dot-com bust and the mortgage fiasco. They need to regain control over big finance both from the perspective of ethics and responsibility and also reduce its drain on GDP. They need to evaluate tax systems that don’t double tax our exports so that American manufacturing becomes more competitive overseas.

What do we do in North Carolina?

We need to focus on fair markets. There is a myth that the free market system means a system that favors business over consumer and big business over small business, employer over employee. That is exactly the opposite of a free market. A free market, by definition, needs to be fair, balanced and neutral. There needs to be real penalties for cheating. The markets need to be open for new businesses. Businesses that play fair with their employees and customers need to be encouraged and not disadvantaged.

We need to focus on people. One of the definitions of economics is the science of organizing people’s labor and production. Often that part of economics is forgotten about in favor of the monetary aspects. That is unfortunate. Unemployed workers sitting idle with critical skills and knowledge deteriorating is a highly inefficient use of labor. Now is the time for CCC type programs that take unemployed workers and give them something useful to do to keep their skills up until they can find more productive work. Because of state budget issues, we need to do this within existing programs.

Government needs to focus on being efficient for business and user. “Government efficiency” is often measured by keeping down program cost. What this often translates to is transferring the cost and pain to the users of government services. It costs money for state agencies to be open more hours, to coordinate services better, to be less bureaucratic. “Big Government” can mean a government that is too intrusive and financially irresponsible. “Big Government” can also mean a government that is simply clumsy and difficult to work with. When these costs are transferred to businesses they fall proportionally smaller businesses and startups.

The state needs to provide infrastructure. Government cannot create a good economy. Government can help create and maintain an environment where business and employment can flourish. There are critical state services that business needs to have in place: roads, schools, courts, law enforcement, and a score of other government functions that allow business to function. North Carolina is blessed geographically and demographically but has struggled to take advantage of those assets.

And, yes, the state needs to build counter-cyclical economics for future cycles.

Justice

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Justice is not a social program. Providing justice to all citizens is core to the legitimacy of government. It is not the responsibility of the poor to be able to afford justice, but the responsibility of the state to provide justice. The State is obligated to fairness to both accused and victim, meaning access to justice through the courts, and protection from oppression by those who abuse the system.

Our legal system has become defined by managing caseloads rather than dispensing justice. 98% of criminal cases nationally end with a defendant pleading guilty to a lesser charge or for a lesser sentence. That is not justice for the victim. That is not justice for innocents who are accused. Even in cases where a defendant can absolutely prove innocence, it can take thousands of dollars and months of dragging witnesses to hearings (only to find out they have been continued) to get the 10 minutes of D.A. time necessary to realize that there is no case and drop the charges. That is beyond the reach of many North Carolinians.

Everybody knows that it isn’t worth it to sue for a few hundred dollars. It will cost more to sue than to let it go. But if you are in a minimum wage job, a “few hundred dollars” is much of your monthly paycheck. A few hundred dollars means going without food some meals, it means sitting cold in the dark because you can’t pay your electric bill, it can mean eviction. Justice cannot be only for those that can afford it.

It is also the responsibility of the State to provide protection for the poor against the abuse of bargaining position. This is particularly true where the state has interfered with free market economics by statute or regulation. The idea that the poor in this state should routinely have to pay 5x more than the rich for the same medical procedure by the same doctor is outrageous. “Hear this, you who trample the needy and do away with the poor of the land… skimping on the measure, boosting the price, and cheating with dishonest scales…. The Lord has sworn, ‘I will never forget anything they have done.’” (Amos 8:4-7). Large businesses—massive international banks, certain types of insurance companies, utilities—exist precisely to take advantage of bargaining position and depth of resources associated with being big. But allowing these organizations to form is anti-free market. It is an intrusion of the state to create bargaining strength on behalf of one side of the free market bargain. That creates an obligation against the state to protect its citizens against abuse by these organizations! 


Karrie Mead, Candidate for NC House, District 56

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I am Karrie Mead. My father was a road worker for his entire career. My mother worked as a grocery checker. I grew up poor, often eating whatever farmers would give to my father. I graduated from high school and worked my way through college, getting a degree in accounting. It was hard work then. With tuition increases and less support for public higher education, it would be harder now. My degree didn’t get me a job in a top accounting firm. Instead, I have worked for a variety of employers in responsible, but not necessarily exciting or high paying jobs. I have been unemployed. I know what it is like to worry about paying the rent. In other words, I am a lot like most people in North Carolina.
I am not a professional politician. This is the first time I have run for office. I believe that a Representative should represent the people. I don’t have decades of indebtedness to a political party. I don’t have a bunch of lobbyists or PACs or corporations giving me money in exchange for “my continued support.” I believe that the political system in this state is broken and that professional politicians are not the solution. I believe that the solution does include good people being willing to step out of their comfort zone to get involved. That is what I am doing.
I am not a great speaker, though hopefully I am getting better. The answer to our problems, though, is not in a great speech. I don’t have a pat answer to every question and I believe that solving real problems is more than a 15 second sound byte. If problems were really so simple they could be solved in 15 seconds, they should have been solved long ago. Many of the problems we face are hard and need people willing to consider all sides. I despise party politics. A representative represents the people, not a party.
I have been married to my husband for 22 years. I love him. When the company where he worked the last 14 years went bankrupt, he has been forced into the contract IT market and has to work where ever he can find a job. There are 440,000 unemployed workers in North Carolina. That doesn’t include people who have given up. That doesn’t include people, like my husband, that are underemployed or working in situations that are less than good, stable jobs appropriate to their skills. We need to fix our economy. Solving our economic problems is more important than retaining a seat in the legislature. Both parties need to understand that.
I have two children: a daughter at Carolina and a son at Durham Tech. I love them too. I worry about the increasing cost of tuition and the lack of opportunity when they graduate. There is a reason we have public education. It benefits our state and our economy to have well educated citizens.