January 28, 2013

News in brief

There was a 'Blast' at Iranian nuclear facility and the Israelis are responding with "Gosh, that's interesting. Wonder who coulda done it?" I'll leave it to you to connect those dots.

Why not a waiting period for laws? asks Instapundit.

I’d like to propose a “waiting period” for legislation. No bill should be voted on without hearings, debate and a final text that’s available online for at least a week. (A month would be better. How many bills really couldn’t wait a month?)

And if the bill is advertised as addressing a “tragedy” or named after a dead child, this period should double.

Yes please. Add to it a committee of repeal who's sole function is to repeal old and outdated laws.

Yes, I know The Sun is something of a rag but this story has a point. Which way should we go as a nation? I'll note also that the spongers are natives and the woman with the work ethic is an immigrant.

Here's a post about why employment is dead in the water. ZeroHedge is something of a scattershot on some things but this one is fairly compelling.

The crux of the argument is this:

The only way to understand why employment is dead in the water is to stand in the shoes of a potential employer or entrepreneur. Remarkably, this perspective is unknown to economists and progressive politicians because they have never been an employer (and no, hiring a grad student to grade papers or an illegal nanny to watch your kids does not make you an employer.)

I have described this vast divide between small business employers, entrepreneurs and the self-employed and those working in government or Corporate America as one of the least explored social/economic divisions in the nation.

Those who have spent their careers in government or academia have little idea what it takes to hire more people. Number one is a business with strong demand for one's products or services. In a developed world with too much of everything except energy, that is no small challenge: the world is awash in over-capacity in every field except niche industries such as deepwater oil rigs.

Second, you need a process that generates so much value (specifically surplus value) that you will generate immediate profits by hiring more people.

If the value added by additional labor is low, then you have no reason to hire more employees, even if Ben Bernanke personally knocked on your door begging you to borrow a couple million dollars at low rates of interest.

If an additional unskilled worker will cost $10 an hour and might generate $100 a day in additional gross revenues, that is $20 in gross profit. But the overhead costs of operating a business are rising faster than inflation: junk fees imposed by cities, counties and states, workers compensation and disability premiums, healthcare costs (if you hire full-time workers), energy costs, and so on.

For most businesses, overhead costs 50% to 100% of total employee compensation--wages plus benefits and payroll taxes. So adding another employee to gross 20% more doesn't make it worthwhile--it actually generates a loss once overhead costs are paid.

The only time it makes sense to hire another worker is if that worker will create 100% or more surplus value from their labor. For example, a worker paid $200 a day in total compensation generates $400 more in gross revenues--enough to not only support the added overhead but net the business a profit.

In a global economy, competition constantly lowers the premium most businesses can charge. That places most businesses in the vice of declining gross margins and higher labor/ overhead costs. The only way to stay solvent is to grow revenues and slash costs so declining gross margins are still enough to pay the bills and leave some return on capital/time/risk invested.

Cheap credit doesn't create surplus value, increase gross margins or get rid of over-capacity. It is a financial non-sequitur for all but a relative handful of enterprises. The only firms interested in borrowing money for expansion are those relative few in sectors that are not burdened with overcapacity. That might include oil services, network security and a handful of others.

Indeed if only Kavips and other hyper Keynsians would occasionally drink from the Cup of Truth (The Austrian School) they might actually learn something. They won't. They're Statists through and through and anything that runs counter to the increase in state power is samizdat.

This is very worrisome:

The man is fearless and clearly knows that there will not be any repercussions for enforcing his set of "laws". Multiculturalism gone mad. If we're not careful, this will spread. I'm not going to go all Mark Steyn on you but this country only functions properly if there's one set of laws for everybody. Not a set for David Gregory, and one for me, and another one for me when I'm in Dearborn, Michigan.

Posted by Duffy at January 28, 2013 03:33 PM | TrackBack

Comments  (We reserve the right to edit and/or delete any comments. If your comment is blocked or won't post, e-mail us and we'll post it for you.)

I would never go to Detroit or Dearborn in this day and age. Even Detroit's police department has said, "come here at your own risk."

Posted by: Carl at January 28, 2013 04:38 PM

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