Get well soon ... or else

Got a cold? If you live in North Carolina, you might just receive a "get well soon ... or else" card from the State Bureau of Investigation (SBI).

The North Carolina General Assembly is poised to pass HB 12, a bill that would require drug stores to

before completing a sale of a product containing a pseudoephedrine product, electronically submit the required information to the National Precursor Log Exchange (NPLEx) administered by the National Association of Drug Diversion Investigators (NADDI)... The seller shall not complete the sale if the system generates a stop alert.

The bill further requires that the information retailers provide to the NADDI on North Carolina residents be forwarded on a weekly basis to the SBI.

All that state cold sufferers need to do to make it into the NADDI and SBI databases and be treated as criminal suspects is purchase medicine with pseudoephedrine (e.g., Sudfed).

So much for the NC GOP wanting to reduce regulations for businesses and get "big government" off our backs. Democrats can share the blame as well.

Senate votes to continue throwing $6 billion a year down the ethanol rabbit hole

There are precious few occasions where I find myself in agreement with both Tom Coburn and Richard Burr, but today's Senate vote on ending ethanol subsidies was one of those occasions. Sadly, their amendment went down in flames due mostly to overwhelming support by Democrats, including Kay Hagan.

Shame on Kay for supporting this wasteful, budget-busting measure.

Kudos to Coburn, Burr and 33 other GOP senators who showed courage by not only rejecting this tax break but also by breaking with the Americans for Tax Reform and not requiring an offsetting tax break.

I hope that we can agree again under more successful circumstances.

Republicans agree that some state workers are underpaid--their own staff!

Most state workers in North Carolina have gone three years without a raise, have been hit with higher contributions, deductibles and co-payments on their health insurance, and have even had a short furlough. However, the News & Observer reports that some state workers have done much, much better.

House Speaker Thom Tillis in the last few months handed out raises as high as 27 percent to half his staff after vowing in January to set an example for others in state government by cutting his office payroll.

Tillis' general counsel Jason Kay got a 27 percent raise, from $110,000 a year to $140,000.

Chief of staff Charles Thomas got a 25 percent, $30,000-a-year increase, from $120,000 to $150,000.

Policy advisers Christopher Hayes and Amy Hobbs received $12,000 raises, both going from salaries of $70,000 to $82,000 a year. Kay, Hayes and Hobbs are all new hires who joined the state payroll for the first time in January. Thomas is a former state House member from Asheville.

In all, Tillis gave raises to seven members of the 14-person staff he had before April. He hired an additional employee in May, paying him $70,000 annually.

Far from cutting his own office payroll, the News & Observer found that Rep. Tillis' was at least 10 percent higher than his Democratic predecessor.

So much for shared sacrifice.

Bitterness & division

A story linked from CNN's main page asks "After 50 years of racial strife: Why is Greensboro still so tense?"

The story plumbs the depths of nearly every bit of nastiness over the years, from the KKK shootings 32 years ago to the current controversies over reopening the White Street landfill and moving city council boundaries. Only the Wray fray seems to be left out.

The story misleadingly depicts a mostly seamless pattern of tension. Milestones such as the election of a black mayor and appointment of a black police chief are ignored other black city leaders are mentioned but not examined closely.

Sadly, the central premise of the story is spot on. The question is what to do about it?

Correction (June 8, 2011): The second paragraph of the CNN states that "African Americans have won unprecedented positions of political power in Greensboro in the past four years, including mayor and city manager." (Thanks to Jeff Sykes for alerting me to my poor reading skills.)

Real job-killing government policies

Add sharp cuts in state and local employment to the list of economic headwinds. CNNMoney reports

Don't look to state and local governments to prop up the job market.

To the contrary, this cash-strapped sector is set to go on a record-breaking layoff binge when the new fiscal year starts on July 1.

State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the blood-letting has risen into the triple digits, according to IHS Global Insight.

Nationally, the number of state employees peaked at 5.2 million in August 2008, and the number of local government employees peaked at 14.6 million in September 2008. Since then, state governments have shed 100,000 jobs, while local governments have shed 450,000.

Parents and students will feel the cuts in terms of more-crowded classrooms, fewer class choices, and reduced school services (who needs those pesky nurses, librarians or guidance counselors). Other taxpayers will notice the cuts in terms of longer lines at the DMV and longer waits for tax refunds.

Less noticeable but as important will be the overall drag on local economies.

Slashing jobs doesn't make much sense in a weak employment market.

Less dynamism in the U.S. job market

Last week the Washington Post's Steve Pearlstein had an interesting column on the decline in dynamism in the U.S. job market. The column describes the research of John Haltiwanger from the University of Maryland and his colleagues on job flows. By coincidence, I had an opportunity to see one of Haltiwanger's co-authors, Javier Miranda from the U.S. Census Bureau, present some of their research while I was in Denmark.

"Job flows" are technique for breaking net employment growth down into four components:

• Jobs added by brand new employers (establishment births),
  
• Jobs added by existing employers (establishment expansions),
  
• Jobs lost because of employers shutting down (establishment deaths), and
• Jobs lost because of employers contracting (establishment contractions).

By simple arithmetic, if you add the jobs created by new and expanding employers and subtract the jobs by "dying" and contracting employers, you get the net change in the number of jobs. While much attention is paid to the net employment change (e.g., the paltry 54,000 jobs added last month), we actually learn quite a bit by examining changes in the separate components. The latest figures from the U.S. Bureau of Labor Statistics, which extend through the third quarter of 2010, are shown below.


The figures show that there is tremendous dynamism in the labor market. While the overall number of jobs might change by a few hundred thousand in a given quarter, there are actually several million jobs being created and lost. Also, though we tend to think about jobs changing from businesses opening or shutting down, far and away the lion's share of job changes occur among continuing employers.

The decrease in dynamism that Pearlstein and Haltiwanger refer to is the overall downward trend in all four job flow components. The downward trend is even more pronounced when you consider that the U.S. population has grown and when the flows are expressed in per capita terms.

Employer "births" and "deaths" have trended steadily downward. However, employer expansions and contractions have also trended downward.

Some of this is a new phenomenon. Prior to the Great Recession, expansions were not viewed as being especially cyclically sensitive. However, during the Great Recession, employment growth associated with expansions fell by more than one million and has yet to recover. The credit crisis offers one explanation for the plunge and the incomplete recovery. Many firms have had a difficult time borrowing and issuing commercial paper, and firms that have had funds have either built up cash reserves or used their funds to buy back stock and to buy out competitors.

More interesting, though, is that the downward trend in dynamism pre-dated the recession. During the 2000s, taxes were cut, and the government followed an unabashed pro-business policy. These advantages for businesses and entrepreneurs, however, did not translate into increased job creation.

Haltiwanger offers a novel "too big to grow" explanation. His research shows that "young" firms contribute disproportionately to job growth. As older behemoths, like Walmart, come to dominate local markets, they take the air out of other newer but potentially faster-growing firms. More generally, the abandonment of anti-trust policy may be keeping new entrepreneurs from entering markets and may be robbing the economy of a prime source of job creators.

If Haltiwanger's hypothesis is correct, you can add "too big to grow" to a host of other problems associated with businesses being "too big," including moral hazard ("too big to fail"), undue political influence ("too big to play nice in elections"), and undue influence in markets ("too big to pay fair wages or prices").