Commentary Magazine


Topic: manufacturing

Take Half a Loaf, and Demand the Rest

Obama, eight weeks before the election, has decided to adopt one of many ideas the Republicans put forth in February 2009: a tax break for businesses. As this report explains:

Companies can now deduct new investment expenses, but over a longer period of time—three to 20 years. The proposed change, which would let companies keep more cash now, is meant to give companies who may be hesitant to invest an incentive to expand, acting as a spur to the overall economy. …

Under current law, if a company spends $10 million on a new factory, it gets to deduct the full amount of the cost over a period of between three and 20 years, depending on the investment. So it cuts its stated pre-tax profits by a varying amount each year, thus reducing taxes until the cost of the investment has been written off.

Under the new proposal, the company would get to deduct the full $10 million in the first year. That would give it an immediate cash infusion to offset the costs of investment. It would also give certainty that the full tax benefit would be realized. Companies often don’t get to write off the full cost of an investment over an extended time.

It is not a bad idea, but it simply isn’t as critical as an extension of the Bush tax cuts. Republicans and business leaders were quick to point this out:

“The White House is missing the big picture. These aren’t necessarily bad proposals, but they don’t address the two big problems that are hurting our economy—excessive government spending, and the uncertainty that Washington Democrats’ policies, especially their massive tax hike, are creating for small businesses,” said House Minority Leader John A. Boehner (R, Ohio). …

The best thing to do is to get rid of uncertainty, and that includes the cliff we’re falling off with all these [tax] provisions that are expiring,” said Bill Rys, tax counsel for the National Federation of Independent Business, a small-business group.

Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service, he added. He questioned whether many business owners would choose to buy more equipment, at least until sales pick up.

It is, on the one hand, a giant concession that tax cuts matter. On the other hand, it leaves the Obama team without any reasoned defense for letting the Bush tax cuts expire — or, for that matter, loading up employers with new mandates. (“Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service.”) As one businesswoman put it, “If this will be offered as a tradeoff for raising the top two rates, it’s a non-starter.”

Nor is it even clear that this is all that helpful at this point:

N. Gregory Mankiw, of Harvard University, and another former CEA chairman under President Bush, questioned whether the Obama proposal would have a big impact. Businesses can already take out a bank loan at extremely low interest rates to pay for new investments in plants and equipment, but they are not doing so, he said. It’s unclear why they would make those investments for a tax break.

And it is even less clear why we should be giving with one hand and taking away with the other. (Jay Timmons, executive vice president of the National Association of Manufacturers: “The good news [is that] the administration recognizes that manufacturing is key to getting the economy back on track and ensuring we are able to sustain economic growth and job creation. But you can’t do that if you’re penalizing one sector of manufacturing while trying to incent another.”)

The most principled position for conservatives is to accept the president’s tax cut (on the Milton Friedman theory that we should support any tax cut, any time) and demand that the Bush tax cuts be retained. Really, if tax cuts are good and the economy is in the tank, why not?

Obama, eight weeks before the election, has decided to adopt one of many ideas the Republicans put forth in February 2009: a tax break for businesses. As this report explains:

Companies can now deduct new investment expenses, but over a longer period of time—three to 20 years. The proposed change, which would let companies keep more cash now, is meant to give companies who may be hesitant to invest an incentive to expand, acting as a spur to the overall economy. …

Under current law, if a company spends $10 million on a new factory, it gets to deduct the full amount of the cost over a period of between three and 20 years, depending on the investment. So it cuts its stated pre-tax profits by a varying amount each year, thus reducing taxes until the cost of the investment has been written off.

Under the new proposal, the company would get to deduct the full $10 million in the first year. That would give it an immediate cash infusion to offset the costs of investment. It would also give certainty that the full tax benefit would be realized. Companies often don’t get to write off the full cost of an investment over an extended time.

It is not a bad idea, but it simply isn’t as critical as an extension of the Bush tax cuts. Republicans and business leaders were quick to point this out:

“The White House is missing the big picture. These aren’t necessarily bad proposals, but they don’t address the two big problems that are hurting our economy—excessive government spending, and the uncertainty that Washington Democrats’ policies, especially their massive tax hike, are creating for small businesses,” said House Minority Leader John A. Boehner (R, Ohio). …

The best thing to do is to get rid of uncertainty, and that includes the cliff we’re falling off with all these [tax] provisions that are expiring,” said Bill Rys, tax counsel for the National Federation of Independent Business, a small-business group.

Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service, he added. He questioned whether many business owners would choose to buy more equipment, at least until sales pick up.

It is, on the one hand, a giant concession that tax cuts matter. On the other hand, it leaves the Obama team without any reasoned defense for letting the Bush tax cuts expire — or, for that matter, loading up employers with new mandates. (“Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service.”) As one businesswoman put it, “If this will be offered as a tradeoff for raising the top two rates, it’s a non-starter.”

Nor is it even clear that this is all that helpful at this point:

N. Gregory Mankiw, of Harvard University, and another former CEA chairman under President Bush, questioned whether the Obama proposal would have a big impact. Businesses can already take out a bank loan at extremely low interest rates to pay for new investments in plants and equipment, but they are not doing so, he said. It’s unclear why they would make those investments for a tax break.

And it is even less clear why we should be giving with one hand and taking away with the other. (Jay Timmons, executive vice president of the National Association of Manufacturers: “The good news [is that] the administration recognizes that manufacturing is key to getting the economy back on track and ensuring we are able to sustain economic growth and job creation. But you can’t do that if you’re penalizing one sector of manufacturing while trying to incent another.”)

The most principled position for conservatives is to accept the president’s tax cut (on the Milton Friedman theory that we should support any tax cut, any time) and demand that the Bush tax cuts be retained. Really, if tax cuts are good and the economy is in the tank, why not?

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Flotsam and Jetsam

Bleak: the generic congressional polling numbers for the Democrats.

Appalling: “Two multinational corporations that have earned millions of dollars in U.S. government contracts are conducting business with Iran in violation of the recently signed sanctions law, according to an Iran watchdog group that has provided its research to FoxNews.com. United Against Nuclear Iran, a non-profit devoted to monitoring the rogue nation, claims that the Danish shipping giant Maersk and Komatsu, a Japanese firm that specializes in construction equipment manufacturing, are flouting U.S. law by continuing to do business in Iran.”

Shaky: “The U.S. economy continued to grow during the second quarter, the government reported Friday. But the pace slowed more than economists were expecting, raising concern about growth — or even another recession — in the months ahead. Gross domestic product, the broadest measure of the nation’s economic activity, rose at a 2.4% annual rate during the three months ended June 30, the Commerce Department said. The sluggish pace was down from the upwardly revised 3.7% growth rate in the first quarter, and missed economists’ forecast for a 2.5% increase.”

Duh: “The problem with Mr. [Oliver] Stone’s ‘Secret History’ goes far beyond the issue of his anti-Semitic screed. The real issue is why a major television network would ask Oliver Stone — a man well known for his belief in preposterous conspiracy theories — to direct a nonfiction film about history.” Well, we all know that lefty Hollywood execs just can’t resist “one more narrative about America’s villainous role in the world and our enemy’s righteous responses.”

Vacuous: The State Department spokesman says something or other about North Korea’s nuclear proliferation, “We don’t see the transparency in that relationship that we’d like to see. North Korea is a serial proliferator. North Korea is engaged in significant illicit activity. Burma, like other countries around the world, has obligations, and we expect Burma to live up to those obligations.” Think that has them shaking in their jackboots?

Huffy: “African-American lawmakers are irate that the Obama administration has promised Sen. Blanche Lincoln (D-Ark.) $1.5 billion in farm aid while claiming it can’t pay a landmark legal settlement with black farmers.” Besides, isn’t it throwing good money after bad to try to rescue Lincoln from her constituents?

Swell: “Rep. Maxine Waters (D-Calif.) has chosen to go through an ethics trial, like the one lined up for New York Rep. Charles Rangel, rather than accepting charges made by an ethics subcommittee, a source familiar with the process tells POLITICO. … Waters’s case revolves around allegations that she improperly intervened with federal regulators to help a bank that her husband owned stock in and on whose board he once served.”

Bleak: the generic congressional polling numbers for the Democrats.

Appalling: “Two multinational corporations that have earned millions of dollars in U.S. government contracts are conducting business with Iran in violation of the recently signed sanctions law, according to an Iran watchdog group that has provided its research to FoxNews.com. United Against Nuclear Iran, a non-profit devoted to monitoring the rogue nation, claims that the Danish shipping giant Maersk and Komatsu, a Japanese firm that specializes in construction equipment manufacturing, are flouting U.S. law by continuing to do business in Iran.”

Shaky: “The U.S. economy continued to grow during the second quarter, the government reported Friday. But the pace slowed more than economists were expecting, raising concern about growth — or even another recession — in the months ahead. Gross domestic product, the broadest measure of the nation’s economic activity, rose at a 2.4% annual rate during the three months ended June 30, the Commerce Department said. The sluggish pace was down from the upwardly revised 3.7% growth rate in the first quarter, and missed economists’ forecast for a 2.5% increase.”

Duh: “The problem with Mr. [Oliver] Stone’s ‘Secret History’ goes far beyond the issue of his anti-Semitic screed. The real issue is why a major television network would ask Oliver Stone — a man well known for his belief in preposterous conspiracy theories — to direct a nonfiction film about history.” Well, we all know that lefty Hollywood execs just can’t resist “one more narrative about America’s villainous role in the world and our enemy’s righteous responses.”

Vacuous: The State Department spokesman says something or other about North Korea’s nuclear proliferation, “We don’t see the transparency in that relationship that we’d like to see. North Korea is a serial proliferator. North Korea is engaged in significant illicit activity. Burma, like other countries around the world, has obligations, and we expect Burma to live up to those obligations.” Think that has them shaking in their jackboots?

Huffy: “African-American lawmakers are irate that the Obama administration has promised Sen. Blanche Lincoln (D-Ark.) $1.5 billion in farm aid while claiming it can’t pay a landmark legal settlement with black farmers.” Besides, isn’t it throwing good money after bad to try to rescue Lincoln from her constituents?

Swell: “Rep. Maxine Waters (D-Calif.) has chosen to go through an ethics trial, like the one lined up for New York Rep. Charles Rangel, rather than accepting charges made by an ethics subcommittee, a source familiar with the process tells POLITICO. … Waters’s case revolves around allegations that she improperly intervened with federal regulators to help a bank that her husband owned stock in and on whose board he once served.”

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Good News: Climate Bill Dead

The economy is reeling under the weight of new mandates, regulations, and tax hikes (with potentially more on the way). The last thing investors or employers want to see is a jumbo energy tax disguised as a “climate-control” bill. So there are smiles all around with this news:

After a meeting of Senate Democrats, party leaders on Thursday said they had abandoned hope of passing a comprehensive energy bill this summer and would pursue a more limited measure focused primarily on responding the Gulf oil spill and including some tightening of energy efficiency standards. …

While Mr. Reid criticized Republicans, it is clear he did not have sufficient support in his own party for a broad energy bill. A number of Democratic lawmakers from manufacturing and coal-producing states were expected to oppose such a bill.

That hasn’t and won’t stop Reid and the White House from blaming Republican lawmakers. But this is one accusation to which Republicans should be glad to plead guilty. If Reid wants to accuse them of stopping another job-killing, tax-hiking, mammoth piece of legislation, I don’t think Republicans will mind.

The economy is reeling under the weight of new mandates, regulations, and tax hikes (with potentially more on the way). The last thing investors or employers want to see is a jumbo energy tax disguised as a “climate-control” bill. So there are smiles all around with this news:

After a meeting of Senate Democrats, party leaders on Thursday said they had abandoned hope of passing a comprehensive energy bill this summer and would pursue a more limited measure focused primarily on responding the Gulf oil spill and including some tightening of energy efficiency standards. …

While Mr. Reid criticized Republicans, it is clear he did not have sufficient support in his own party for a broad energy bill. A number of Democratic lawmakers from manufacturing and coal-producing states were expected to oppose such a bill.

That hasn’t and won’t stop Reid and the White House from blaming Republican lawmakers. But this is one accusation to which Republicans should be glad to plead guilty. If Reid wants to accuse them of stopping another job-killing, tax-hiking, mammoth piece of legislation, I don’t think Republicans will mind.

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RE: ObamaCare Hits Home

Verizon and Caterpillar aren’t the only employers warning of rising health-care costs due to ObamaCare:

Deere & Company, Iowa’s largest manufacturing employer, said in a statement this morning that the recently-passed health care legislation will cost the company $150 million after tax this year.The company said the impact would be felt primarily in the second quarter, between April 1 and July 1.

Deere spokesman Ken Golden said the charge would be taken as a one-time cost to cover the new tax the Health Care bill imposes on subsidies paid to corporations for retiree prescription costs under a 2003 Medicare bill.

“The 2003 legislation encouraged companies to stay in the game and continue to fund their retirees’ prescriptions,” Golden said. “Otherwise, the retirees would go onto the Medicare prescription program which would cost the government more money.”

Manufacturers of medical devices are also sending out warnings. (“Medical-device maker Medtronic warned that new taxes on its products could force it to lay off a thousand workers.”) The Boston Herald explains:

A dire warning from Bay State medical-device companies that a new sales tax in the federal health-care law could force their plants — and thousands of jobs — out of the country has rattled Gov. Deval Patrick, a staunch backer of the law and pal President Obama.

“This bill is a jobs killer,” said Ernie Whiton, chief financial officer of Chelmsford’s Zoll Medical Corp., which employs about 650 people in Massachusetts. Many of those employees work in Zoll’s local manufacturing facility making heart defibrillators. “We could be forced to (move) manufacturing overseas if we can’t pass along these costs to our customers,” said Whiton.

The threat — echoed by others in the critical Massachusetts industry — had the governor vowing to intervene to block the sales tax impact. “I am obviously concerned about the medical device burden here on the commonwealth, which has a very robust industry around medical devices,” Patrick said yesterday.

Well, he wasn’t concerned enough to lobby against the bill before it was passed. But this issue and other predictable consequences of ObamaCare will no doubt absorb much of the debate between now and November. Hey, if Deval Patrick thinks it’s a jobs killer, perhaps “Repeal and Reform” isn’t so far-fetched after all.

Verizon and Caterpillar aren’t the only employers warning of rising health-care costs due to ObamaCare:

Deere & Company, Iowa’s largest manufacturing employer, said in a statement this morning that the recently-passed health care legislation will cost the company $150 million after tax this year.The company said the impact would be felt primarily in the second quarter, between April 1 and July 1.

Deere spokesman Ken Golden said the charge would be taken as a one-time cost to cover the new tax the Health Care bill imposes on subsidies paid to corporations for retiree prescription costs under a 2003 Medicare bill.

“The 2003 legislation encouraged companies to stay in the game and continue to fund their retirees’ prescriptions,” Golden said. “Otherwise, the retirees would go onto the Medicare prescription program which would cost the government more money.”

Manufacturers of medical devices are also sending out warnings. (“Medical-device maker Medtronic warned that new taxes on its products could force it to lay off a thousand workers.”) The Boston Herald explains:

A dire warning from Bay State medical-device companies that a new sales tax in the federal health-care law could force their plants — and thousands of jobs — out of the country has rattled Gov. Deval Patrick, a staunch backer of the law and pal President Obama.

“This bill is a jobs killer,” said Ernie Whiton, chief financial officer of Chelmsford’s Zoll Medical Corp., which employs about 650 people in Massachusetts. Many of those employees work in Zoll’s local manufacturing facility making heart defibrillators. “We could be forced to (move) manufacturing overseas if we can’t pass along these costs to our customers,” said Whiton.

The threat — echoed by others in the critical Massachusetts industry — had the governor vowing to intervene to block the sales tax impact. “I am obviously concerned about the medical device burden here on the commonwealth, which has a very robust industry around medical devices,” Patrick said yesterday.

Well, he wasn’t concerned enough to lobby against the bill before it was passed. But this issue and other predictable consequences of ObamaCare will no doubt absorb much of the debate between now and November. Hey, if Deval Patrick thinks it’s a jobs killer, perhaps “Repeal and Reform” isn’t so far-fetched after all.

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Wanted: Fact-Checker for China Enthusiast

Thomas Friedman, New York Times, January 12, 2010:

More and more Chinese students educated abroad are returning home to work and start new businesses. … One of the biggest problems for China’s manufacturing and financial sectors has been finding capable middle managers. The reverse-brain drain is eliminating that problem as well.

David Wessel, Wall Street Journal, January 26, 2010:

Most foreigners who came to the U.S. to earn doctorate degrees in science and engineering stayed on after graduation—at least until the recession began—refuting predictions that post-9/11 restrictions on immigrants or expanding opportunities in China and India would send more of them home. … Among 2002 graduates, 92% of the Chinese and 81% of the Indians were in the U.S. after five years; in contrast, 41% of South Koreans and 52% of Germans were.

Brain drain, indeed.

Thomas Friedman, New York Times, January 12, 2010:

More and more Chinese students educated abroad are returning home to work and start new businesses. … One of the biggest problems for China’s manufacturing and financial sectors has been finding capable middle managers. The reverse-brain drain is eliminating that problem as well.

David Wessel, Wall Street Journal, January 26, 2010:

Most foreigners who came to the U.S. to earn doctorate degrees in science and engineering stayed on after graduation—at least until the recession began—refuting predictions that post-9/11 restrictions on immigrants or expanding opportunities in China and India would send more of them home. … Among 2002 graduates, 92% of the Chinese and 81% of the Indians were in the U.S. after five years; in contrast, 41% of South Koreans and 52% of Germans were.

Brain drain, indeed.

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Still Shedding Jobs

The job news is not good — still :

U.S. job losses resumed in December after revisions showed payrolls rose in November for the first time in nearly two years, the Labor Department estimated Friday. Nonfarm payrolls fell by a seasonally adjusted 85,000 in December following a revised 4,000 gain in November. During 2009, payrolls fell by 4.2 million. Since the recession began two years ago, payrolls have fallen by 7.3 million. Next month, the government will incorporate annual benchmark revisions that will likely push the total job loss to more than 8 million. The official unemployment rate remained at 10% in December. Details of the report were weak, with few signs of further improvement in labor conditions. One bright spot: temporary help jobs rose by 46,500, a leading indicator of permanent employment.

However, fewer industries were hiring in December than in October, and the number of discouraged workers rose by 287,000 to 929,000. The employment participation rate fell to 64.6% from 64.9%. Total hours worked in the economy were unchanged. The average workweek was unchanged at 33.2 hours.

The prospect of long-term, sky-high unemployment is a daunting one for Americans, as well as for those in office. As the White House persists in its dogged pursuit of ObamaCare, looks forward to the day when it can raise taxes by allowing the Bush tax cuts to expire, and insists that climate-change legislation is still on the table, the public may come to see the Obami as increasingly out to lunch. The insistence by the president on pursuing anti-growth and anti-jobs policies while sprinkling in small-beans jobs initiatives (another one is set to be announced today on “clean technology manufacturing jobs”) suggests that he really doesn’t grasp the fact that job producers in the private sector need more than dog-and-pony shows to get them to jump-start their hiring. The administration might start with “doing no harm” — committing to raising no taxes on any American until the economy recovers. Now that would be a change we could believe in.

The job news is not good — still :

U.S. job losses resumed in December after revisions showed payrolls rose in November for the first time in nearly two years, the Labor Department estimated Friday. Nonfarm payrolls fell by a seasonally adjusted 85,000 in December following a revised 4,000 gain in November. During 2009, payrolls fell by 4.2 million. Since the recession began two years ago, payrolls have fallen by 7.3 million. Next month, the government will incorporate annual benchmark revisions that will likely push the total job loss to more than 8 million. The official unemployment rate remained at 10% in December. Details of the report were weak, with few signs of further improvement in labor conditions. One bright spot: temporary help jobs rose by 46,500, a leading indicator of permanent employment.

However, fewer industries were hiring in December than in October, and the number of discouraged workers rose by 287,000 to 929,000. The employment participation rate fell to 64.6% from 64.9%. Total hours worked in the economy were unchanged. The average workweek was unchanged at 33.2 hours.

The prospect of long-term, sky-high unemployment is a daunting one for Americans, as well as for those in office. As the White House persists in its dogged pursuit of ObamaCare, looks forward to the day when it can raise taxes by allowing the Bush tax cuts to expire, and insists that climate-change legislation is still on the table, the public may come to see the Obami as increasingly out to lunch. The insistence by the president on pursuing anti-growth and anti-jobs policies while sprinkling in small-beans jobs initiatives (another one is set to be announced today on “clean technology manufacturing jobs”) suggests that he really doesn’t grasp the fact that job producers in the private sector need more than dog-and-pony shows to get them to jump-start their hiring. The administration might start with “doing no harm” — committing to raising no taxes on any American until the economy recovers. Now that would be a change we could believe in.

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Why State Budgets Are so Deep in the Red

A clear majority of the public, according to Rasmussen, thinks that the federal government should not bail out the state of California but rather let it declare bankruptcy. Even when told that the state might have to slash welfare and medical care for the disabled and elderly and cut state salaries by 14 percent, 53 percent favored that outcome over a federal bailout. Only 33 percent want the feds to help.

Bloated state payrolls are a large part of the problem with state budgets. While revenues have stagnated or fallen, employees have not been laid off, and salaries and benefits have continued to increase. These expenses now make up half of all state spending. As a Cato Institute report makes clear, state employees make out much better than do private-sector ones. In total compensation, state and local workers earn $1.45 for every dollar private workers earn. State workers get $2.18 in health benefits for every one dollar their private-sector counterparts earn. For every dollar in defined-benefit pension benefits given to private-sector workers, public-sector workers get $6.95. Some states allow workers to retire early, begin to collect a pension, and then go back to work for the state at their old job, earning a salary as well as a pension.

Federal workers do even better, earning more than twice what equivalent private-sector workers do. No wonder the ratio of government workers to the total population has been steadily falling. In 1940 there were about 31 Americans for every government worker. By 1970 the ratio was 18.5-to-1. Today it is 13.7-to-1. In this decade, the number of government workers exceeded the number of those in manufacturing. Part of the reason for that, of course, has been the great increase in productivity in manufacturing in recent decades. No such productivity increase in government, however.

And the most frequent non-governmental visitor to the White House since Obama became President? Andy Stern, president of the Service Employees International Union, which represents 1.8 million mostly government workers. It’s the largest and fastest growing union in the country. Its political clout is legendary, thanks to $60 million in contributions in the last election cycle and the ability to turn out large numbers of union workers at rallies.

The states cannot hope to regain fiscal health until the wages and benefits of state works are more nearly in line with those of the private sector.

A clear majority of the public, according to Rasmussen, thinks that the federal government should not bail out the state of California but rather let it declare bankruptcy. Even when told that the state might have to slash welfare and medical care for the disabled and elderly and cut state salaries by 14 percent, 53 percent favored that outcome over a federal bailout. Only 33 percent want the feds to help.

Bloated state payrolls are a large part of the problem with state budgets. While revenues have stagnated or fallen, employees have not been laid off, and salaries and benefits have continued to increase. These expenses now make up half of all state spending. As a Cato Institute report makes clear, state employees make out much better than do private-sector ones. In total compensation, state and local workers earn $1.45 for every dollar private workers earn. State workers get $2.18 in health benefits for every one dollar their private-sector counterparts earn. For every dollar in defined-benefit pension benefits given to private-sector workers, public-sector workers get $6.95. Some states allow workers to retire early, begin to collect a pension, and then go back to work for the state at their old job, earning a salary as well as a pension.

Federal workers do even better, earning more than twice what equivalent private-sector workers do. No wonder the ratio of government workers to the total population has been steadily falling. In 1940 there were about 31 Americans for every government worker. By 1970 the ratio was 18.5-to-1. Today it is 13.7-to-1. In this decade, the number of government workers exceeded the number of those in manufacturing. Part of the reason for that, of course, has been the great increase in productivity in manufacturing in recent decades. No such productivity increase in government, however.

And the most frequent non-governmental visitor to the White House since Obama became President? Andy Stern, president of the Service Employees International Union, which represents 1.8 million mostly government workers. It’s the largest and fastest growing union in the country. Its political clout is legendary, thanks to $60 million in contributions in the last election cycle and the ability to turn out large numbers of union workers at rallies.

The states cannot hope to regain fiscal health until the wages and benefits of state works are more nearly in line with those of the private sector.

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Re: Axis of Uranium Meets Middle East Peace Process

How many Middle Eastern leaders have to visit Brazil in one month for the U.S. State Department to figure out something’s going on? More than three, apparently. After I wrote Friday’s post on the serial visits of Peres, Abbas, and Ahmadinejad, Rick Richman called my attention to the exchange in the State Department briefing on Ahmadinejad’s visit:

QUESTION: Ahmadinejad is going to be visiting Brazil in a couple of days. Is the fact that a friendly government like that welcoming Ahmadinejad – does that tend to dilute international solidarity on the nuclear issue?

MR. WOOD: Well, President Ahmadinejad going to Brazil, that’s an issue between the Government of Brazil and the Government of Iran. What we would hope is that the Government of Brazil would raise some of these concerns that we have, many of which I’ve just laid out here, about Iran in those meetings. But beyond that, I don’t have anything to add to that.

So: Brazil is hosting the three major regional players in Middle Eastern dynamics this month. One of them is the president of Iran, the revolutionary, terrorist-sponsoring state Obama is trying to pressure on its nuclear program. Brazil – a nuclear client of Russia – has been following Venezuela’s path toward “increased economic ties” with Iran, which in literal terms means banking arrangements that circumvent sanctions, plus plenty of “legitimate” manufacturing and container shipping to obscure trade in prohibited goods. And the views of our State Department on these circumstances boil down to an absurdly banal bromide (the Ahmadinejad visit is “an issue between Brazil and Iran”) and a “hope” that Brazil will raise some of our concerns with the Iranian president.

Far from acting as our deputy, Brazil seems to be positioning itself to gain leverage with Iran regardless of how its policies undermine the P5+1’s threat of sanctions. Mahmoud Abbas probably overestimates the leverage Brazil already has with Iran, but in requesting Lula da Silva’s help with discouraging the Iran-Hamas link, he has shown a keener understanding of this month’s diplomatic flurry than Foggy Bottom.

One projection seems sound: if Brazil does go through with a line of credit for Iran, we should expect that move to bring Brazil into conflict with the U.S. Treasury Department, as Venezuela’s similar activities have in the past. What we do about such a financial arrangement between Iran and Brazil will tell both parties – and all our negotiating partners – everything they need to know about the credibility of Obama’s threats of sanctions.

How many Middle Eastern leaders have to visit Brazil in one month for the U.S. State Department to figure out something’s going on? More than three, apparently. After I wrote Friday’s post on the serial visits of Peres, Abbas, and Ahmadinejad, Rick Richman called my attention to the exchange in the State Department briefing on Ahmadinejad’s visit:

QUESTION: Ahmadinejad is going to be visiting Brazil in a couple of days. Is the fact that a friendly government like that welcoming Ahmadinejad – does that tend to dilute international solidarity on the nuclear issue?

MR. WOOD: Well, President Ahmadinejad going to Brazil, that’s an issue between the Government of Brazil and the Government of Iran. What we would hope is that the Government of Brazil would raise some of these concerns that we have, many of which I’ve just laid out here, about Iran in those meetings. But beyond that, I don’t have anything to add to that.

So: Brazil is hosting the three major regional players in Middle Eastern dynamics this month. One of them is the president of Iran, the revolutionary, terrorist-sponsoring state Obama is trying to pressure on its nuclear program. Brazil – a nuclear client of Russia – has been following Venezuela’s path toward “increased economic ties” with Iran, which in literal terms means banking arrangements that circumvent sanctions, plus plenty of “legitimate” manufacturing and container shipping to obscure trade in prohibited goods. And the views of our State Department on these circumstances boil down to an absurdly banal bromide (the Ahmadinejad visit is “an issue between Brazil and Iran”) and a “hope” that Brazil will raise some of our concerns with the Iranian president.

Far from acting as our deputy, Brazil seems to be positioning itself to gain leverage with Iran regardless of how its policies undermine the P5+1’s threat of sanctions. Mahmoud Abbas probably overestimates the leverage Brazil already has with Iran, but in requesting Lula da Silva’s help with discouraging the Iran-Hamas link, he has shown a keener understanding of this month’s diplomatic flurry than Foggy Bottom.

One projection seems sound: if Brazil does go through with a line of credit for Iran, we should expect that move to bring Brazil into conflict with the U.S. Treasury Department, as Venezuela’s similar activities have in the past. What we do about such a financial arrangement between Iran and Brazil will tell both parties – and all our negotiating partners – everything they need to know about the credibility of Obama’s threats of sanctions.

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What Is Wrong With Wisconsin?

Why isn’t Hillary Clinton competing more strenuously in Wisconsin? She camped out in Texas last night and is not setting foot in Wisconsin until Saturday. This seems unwise. I think the decision (made before Tuesday’s election returns, I believe) betrays a lack of appreciation for the degree to which her campaign is in peril. It makes sense to “skip” a poor state if you think it might trip you up on your way to victory, but now Clinton, more than anything else, needs Obama to fall short of expectations. Even a close second in Wisconsin might look pretty good now. It is not a bad place to make a run. She trails in the last poll (albeit before Tuesday night’s results) by less than 5 points. Yes, Obama has college kids galore, lots of anti-Iraq war sentiment and tons of momentum. However, John Coleman, Wisconsin University political science professor and guru on state politics, reminds me: “Wisconsin is not a high income state and manufacturing is still important here. She has been doing better among those who see the economy as the number one issue, and this is a state in which the economic news has been on the downslide lately. There is a populist streak in the state, and she might be able to fine tune her economic message to tap into that.”
She is down on money, excitement and positive media spin, but it won’t get any better after she loses big in Wisconsin. So, doesn’t it make sense to make a run there?
Why isn’t Hillary Clinton competing more strenuously in Wisconsin? She camped out in Texas last night and is not setting foot in Wisconsin until Saturday. This seems unwise. I think the decision (made before Tuesday’s election returns, I believe) betrays a lack of appreciation for the degree to which her campaign is in peril. It makes sense to “skip” a poor state if you think it might trip you up on your way to victory, but now Clinton, more than anything else, needs Obama to fall short of expectations. Even a close second in Wisconsin might look pretty good now. It is not a bad place to make a run. She trails in the last poll (albeit before Tuesday night’s results) by less than 5 points. Yes, Obama has college kids galore, lots of anti-Iraq war sentiment and tons of momentum. However, John Coleman, Wisconsin University political science professor and guru on state politics, reminds me: “Wisconsin is not a high income state and manufacturing is still important here. She has been doing better among those who see the economy as the number one issue, and this is a state in which the economic news has been on the downslide lately. There is a populist streak in the state, and she might be able to fine tune her economic message to tap into that.”
She is down on money, excitement and positive media spin, but it won’t get any better after she loses big in Wisconsin. So, doesn’t it make sense to make a run there?

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The Shiny Shekel

A few economics-related items today: Fox Business has a glowing piece on the booming Israeli hi-tech market, entitled “Israel’s Technology Creates an Investment Goliath.”

[Israel] is third only to America and Canada in the number of companies listed on the Nasdaq, ahead of economic powerhouses like Germany, England and China. …
“Israel is the Silicon Valley of the Mediterranean,” said David Anthony, a partner in 21 Ventures, a venture capital company that has invested $75 million in Israeli companies.

A few days previously, CNN noted the story:

The country’s economy grew more than five percent last year — faster than the U.S., Europe, UK and Japan. …

“Our strength on the food chain is usually in the very early stages where you have to come with ideas, innovation and take great risks,” Yossi Vardi says.

“The hi-tech industry is not a monolithic thing. In China, they do manufacturing. In India, they do coding. We are very good in the early stages, like Silicon Valley. And this is what the world is looking for in Israel.”

And wine news:

According to the 2008 edition of Rogov’s Guide to Israel Wines, written by Ha’aretz newspaper wine critic Daniel Rogov, the number of wineries in Israel has grown dramatically, particularly since 2001. In a country about the size of New Jersey, there are now about 130 wineries. Sales of Israeli wines reached about $140 million in 2007. According to the Israel Export Institute, wine exports hit $21 million in 2007, up 42% from 2006.

Another good reason to keep the Golan, as if any were needed.

The amazing thing about all of this growth is that it is taking place in an economy that the just-released Heritage Foundation Index of Economic Freedom ranks as only the 46th freest in the world — less free than a good number of the most sclerotic and torpid socialist leftovers in the western world.

A few economics-related items today: Fox Business has a glowing piece on the booming Israeli hi-tech market, entitled “Israel’s Technology Creates an Investment Goliath.”

[Israel] is third only to America and Canada in the number of companies listed on the Nasdaq, ahead of economic powerhouses like Germany, England and China. …
“Israel is the Silicon Valley of the Mediterranean,” said David Anthony, a partner in 21 Ventures, a venture capital company that has invested $75 million in Israeli companies.

A few days previously, CNN noted the story:

The country’s economy grew more than five percent last year — faster than the U.S., Europe, UK and Japan. …

“Our strength on the food chain is usually in the very early stages where you have to come with ideas, innovation and take great risks,” Yossi Vardi says.

“The hi-tech industry is not a monolithic thing. In China, they do manufacturing. In India, they do coding. We are very good in the early stages, like Silicon Valley. And this is what the world is looking for in Israel.”

And wine news:

According to the 2008 edition of Rogov’s Guide to Israel Wines, written by Ha’aretz newspaper wine critic Daniel Rogov, the number of wineries in Israel has grown dramatically, particularly since 2001. In a country about the size of New Jersey, there are now about 130 wineries. Sales of Israeli wines reached about $140 million in 2007. According to the Israel Export Institute, wine exports hit $21 million in 2007, up 42% from 2006.

Another good reason to keep the Golan, as if any were needed.

The amazing thing about all of this growth is that it is taking place in an economy that the just-released Heritage Foundation Index of Economic Freedom ranks as only the 46th freest in the world — less free than a good number of the most sclerotic and torpid socialist leftovers in the western world.

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Mattel in Hell

On Friday, the world’s largest toymaker humbled itself before the world’s most populous communist state, a move that Kitty Pilgrim called “an unbelievable act of appeasement.” While Thomas Debrowski’s apology to Beijing may not have the same significance as Neville Chamberlain’s deal in Munich, the CNN anchor certainly had a point.

“Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people and all of our customers who received the toys,” said Debrowski, Mattel’s executive vice president for worldwide operations, to Li Changjiang, the head of China’s product-safety agency. The California-based toymaker can’t be sorry enough when it comes to consumers, but the kowtow to Li and the Chinese people was a bit much. “It’s like a bank robber apologizing to his accomplice,” noted Senator Charles Schumer.

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On Friday, the world’s largest toymaker humbled itself before the world’s most populous communist state, a move that Kitty Pilgrim called “an unbelievable act of appeasement.” While Thomas Debrowski’s apology to Beijing may not have the same significance as Neville Chamberlain’s deal in Munich, the CNN anchor certainly had a point.

“Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people and all of our customers who received the toys,” said Debrowski, Mattel’s executive vice president for worldwide operations, to Li Changjiang, the head of China’s product-safety agency. The California-based toymaker can’t be sorry enough when it comes to consumers, but the kowtow to Li and the Chinese people was a bit much. “It’s like a bank robber apologizing to his accomplice,” noted Senator Charles Schumer.

It’s hard to create sympathy for a company that has just had to recall 19.6 million defective products intended for children, but the Chinese have done just that. For one thing, it was clear that Beijing was determined to humiliate Mattel. Debrowski was scheduled to meet with Li, but the Beijing official at the last moment said he would not get together unless reporters were present. Li, from his overstuffed chair, then administered a finger-wagging lecture to the obviously uncomfortable Debrowski as cameras rolled.

So the real story is not Mattel. It is China. China’s officials know they cannot solve the structural problems of Chinese manufacturing within the context of their one-party system, in which corruption runs rampant and central authorities have little control over local officials. Therefore, they are choosing to deal with a public relations nightmare by going on the attack against foreigners. Li Changjiang was angry because Mattel’s public comments in the United States did not always note that recalls involved products with defective designs—improperly secured magnets—when it talked about products with excessive levels of lead paint.

Yet Li’s tirade went well beyond this omission. He told Mattel in public that its stringent recall policy was “unacceptable.” Beijing may have the right to adopt whatever standards it wants for its own citizens, but it has no place telling American companies—and by implication the American government—what rules to apply to protect American consumers. Now that Chinese officials have used a public forum to try to dictate Washington’s products-safety policy, it is the responsibility of the Bush administration to demand publicly that China stop its interference in our efforts to look after the well-being of our own children.

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Praising Noam Chomsky

Osama bin Laden’s latest videotaped message, his first in three years, contains several pearls of wisdom. But the following is most apt:

This war was entirely unnecessary, as testified to by your own reports. And among the most capable of those from your own side who speak to you on this topic and on the manufacturing of public opinion is Noam Chomsky, who spoke sober words of advice prior to the war, but the leader of Texas doesn’t like those who give advice.

Two years ago, Chomsky was voted the world’s top public intellectual in a poll conducted jointly by the magazines Foreign Policy and Prospect, the latter a British publication (Vaclav Havel came in fourth). Chomsky is enormously popular on American college campuses, and loved especially by Europe’s chattering classes. And he is not just the favorite public intellectual of Osama bin Laden, but of Hugo Chavez, the caudillo of Caracas, as well.

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Osama bin Laden’s latest videotaped message, his first in three years, contains several pearls of wisdom. But the following is most apt:

This war was entirely unnecessary, as testified to by your own reports. And among the most capable of those from your own side who speak to you on this topic and on the manufacturing of public opinion is Noam Chomsky, who spoke sober words of advice prior to the war, but the leader of Texas doesn’t like those who give advice.

Two years ago, Chomsky was voted the world’s top public intellectual in a poll conducted jointly by the magazines Foreign Policy and Prospect, the latter a British publication (Vaclav Havel came in fourth). Chomsky is enormously popular on American college campuses, and loved especially by Europe’s chattering classes. And he is not just the favorite public intellectual of Osama bin Laden, but of Hugo Chavez, the caudillo of Caracas, as well.

Last September, in a speech before the United Nations General Assembly, Chavez waved around a copy of Chomsky’s Hegemony or Survival: America’s Quest for Global Dominance, while denouncing President Bush as “the devil.” “The people of the United States should read this. . .instead of. . .watching Superman movies,” Chavez told the assembled dignitaries.

Given his views of America and the West in general, it comes as no surprise that the MIT professor’s greatest fans are the Venezuelan military despot and the man responsible for the death of 3,000 on September 11, 2001. And with fans like that . . .

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