Remarks by Alan Kruger on Rock n' Roll Economy

Alan Kruger, Chairman of the Presidents Council of Economic Advisers, discusses how the US economy has changed using musical artists as example.  It's an interesting example but very short on what to do about the market dynamics of the recording industry or what role government could play in helping artists who don't make it big.

Remarks by Alan Kruger on Rock n' Roll Economy

Senators propose amendment "to hire Americans before hiring foreigners on work visas."

Here is an immigration story that got no coverage.  Senators Sherrod Brown of D-Ohio and Chuck Grassley (R-Iowa) proposed an amendment to the immigration bill that would create a legal requirement that US companies hire American citizens before hiring foreign visa workers.  The amendment would also require companies to pay prevailing wages.

The H1-B Visa program has come under a lot of scrutiny lately because of high unemployment rates during the recession. The top 10 companies using H1-B visas are all outsourcing companies and they take more than 50 percent of the H1-B visa quota.

The H1-B visa program was supposed to be a short term fix for shortages in certain labor categories like software engineering and chemical engineering.  Instead it has been taken over by the outsourcing industry.  Much the way companies shed cafeteria and maintenance staff during the 1990s, they also shed IT staff during 2000s. The outsourcing industry is led by large consulting companies like IBM, Accenture, Infosys and EDS.

The amendment had the opposition from the business community for several reasons: it would raise labor costs of H1-B visa workers, it had enforcement provisions which would create a risk of non-compliance, and it would increase administrative cost.

Senator Sherrod Brown Press Release: Give American Workers a Fair Shot at High Skilled Jobs.

Senator Grassely works to eliminate fraud and abuse in H1-B visa program.

Cleveland Plain Dealer / Cleveland.Com: Sherrod votes Yes. 

The proposal is very much in line with the proposed immigration policy of the Evil Black Economist blog.  The policy is that immigrant must be tied to the general unemployment rate and specific industry need.  Guest worker programs like the H1-B visa program is needed but many companies are abusing the program to lower labor costs.

Second, the H1-B visa program ultimately stunts US long term competitiveness in an important and high paying sector of the economy. The consulting and outsourcing industry had deterred the entry of US workers into tech industry by reducing wages, requiring more experience and specialization and reducing R&D and training.

Thirdly, the reality of improved IT productivity for business is much more complicated. Business has saved much less money than they initially though while IT quality has slipped. Most of the excess profit for IT has instead gone to the large consulting companies and outsourcing firms and their owners and partners. Very little has gone to IT innovation, new IT products or new IT supported processes.

The amendment from senators Grassley and Sherrod is good balance between labor and business interests.  The amendment may appear again when the house of representatives debates immigration reform.

Defense and the National Interest: How to understand defense spending

The website Defense and the National Interest which is now hosted by POGO: The Project on Government Oversight, has a great series of in-depth articles on defense spending.  The articles cover how the priorities are set, how programs are evaluated, and how the money is appropriated and finally spent,

The ten articles together are called the Pentagon Labyrinth.

NPR: Black Unemployment

NPR had a story on Black Unemployment called, "Job Searching While Black: What's behind The Unemployment Gap ?"

Washington Post: North Carolina Tries Austerity

In North Carolina, unimpeded GOP drives state hard to the right.


I am glad some state is trying the Austerity path. The US is designed to support state level experiments with governance and this is one of them.  The Democrats have California.  So we will see which one does better.

The issue I have is that we cannot even agree on the goals.  Democrats will measure reduced unemployment, increased income after total taxes, reduced income inequality, increased life span and educational test scores. The GOP will measure total income growth, average income tax rate and total business investment.

AOL: Fast-Food workers strike in Milwaukee

Last week fast food workers in Milwaukee staged a strike. AOL covered the story in "Fast food workers strike 5th major city."

The Entrepreneurship Industry: Another annoying down side of US capitalism

There has been an explosion of entrepreneurship programs in the US.  It looks like everyone has some sort of "start-up" program, incubator or resource web-site. It's like everyone is trying to hit the lotto and a who industry has developed to sell people tickets and in some cases even "lucky" numbers.

Here are some examples:

Google has site focused on Entrepreneurship called Google Entrepreneur.
So does the City College of New York but on Facebook. Here is the link. 
There are also website that let you create business model like LeanLaunchLab.Com.

But you have to ask how much real, new value add are they creating and how much are they just stealing from one another. All this talk about entrepreneurship is great but it seems like a lot of "fake" PR with lots of smiling young people talking about "doing" good or "risking it all."

The truth is most businesses fail.

Another difficult truth is that the US economy is really a zero-sum game.  In order for you to get rich, someone else has be lose money or income. Despite what people are sold, money does not come from thin air.  It comes out of other peoples pockets.

And large businesses, especially retail, incredibly efficent at removing that money from other peoples pockets. Big box retailing has grown faster than the GDP for the past 30 years.  They have put department stores and mom and pop retailers out of business.  The competition is strong and vigorous   While average customer incomes are flat for the past 30 years.

So, lets be honest, in order for some business to succeed others must fail.

The real key in any business including small start-ups is a defensible niche; a natural or created monopoly that allows the owner to enjoy surplus profits. That can be the corner delicatessen  the local auto-repair business, a mid level medical instrument manufacturer or Amazon.com. (Ed. Note: It was really hard coming up with a mid-level factory example, they all have been pretty much wiped out)