Job Killer in Chief
Many on Wall Street were stunned by the big fat zero put up by the August jobs report, the worst showing in 11 months. The data convinced many previously optimistic economists that the United States will slip back into recession. I believe that we have been in one giant recession all along that was only temporarily interrupted by trillions of dollars in useless and destructive deficit and stimulus spending. Unfortunately, the August numbers will increase the talk of government efforts to stimulate the economy.
But while President Obama prepares to unveil a new plan for the Federal Government to create jobs, evidence is rapidly piling up on how his Administration is actively destroying jobs with stunning efficiency. Recent examples of this trend are enough to make anyone with even a casual respect for America's former economic prowess hang their head in disgust.
The assault on private sector employment began in April when the Democrat controlled National Labor Relations Board (NLRB) issued a complaint seeking to force Boeing aircraft to move Boeing's newly opened non-union production facilities in South Carolina back to its union controlled plants in Washington State. Although Boeing simply says that it is looking to open a cost effective domestic manufacturing facility (an endangered species) to employ American workers, the NLRB alleges that the company was punishing union workers in Washington for past strikes. Despite a lack of any direct evidence that Boeing was being punitive, and the fact that the company was not laying off any union workers, the NLRB has not backed down. Against little public support and nearly universal revulsion among business leaders, the NLRB is continuing its campaign to keep Boeing from exercising its freedoms and to employ people in a manner that makes sense for its business.
The Boeing move served notice that Obama's loyalties were firmly tied to the union interests that were so critical to his election in 2008. This week, the anti-business tendencies of the administration came into even sharper focus.
In the telecommunications industry, service provider AT&T made the seemingly essential move in its attempt to acquire wireless specialist T-Mobile. But the Justice Department sued to block the $39 billion deal on antitrust grounds, saying that the merger between the second and fourth largest cell phone providers would unfairly restrict competition and raise prices.
In so doing, the DOJ seems to be operating under the assumption, without any direct evidence, that at least four companies are needed to provide healthy choice in the marketplace, and that three providers simply won't cut it. More broadly, competition may increasingly come from outside the telecommunications sector (in particular from cable and satellite industries). Plus, with the speed of technological change, who knows what types of competitors will arise in the years to come? The situation reminds me of the broken merger in 2004 and 2005 between Blockbuster Video and Hollywood Video. Based on antitrust concerns emanating from the Justice Department, Blockbuster backed off from the deal. Of course, just a few years later the whole sector was made obsolete by Netflix, and any advantage Blockbuster would have gained would have only been temporary.
In light of the current and future competition that is sure to change the way consumers talk with one another over great distances, AT&T and T-Mobile are much better positioned to survive as a combined entity. In any event if AT&T can't buy T-Mobile, someone else will. The company's parent, Deutsche Telecom, has stated its intention to divest itself of its American subsidiary.
So why not help American business survive in an increasingly competitive market? Most likely antitrust lawyers at the DOJ have been otherwise bored with the lack of merger deals to scrutinize (another downside to a weak economy), and this transaction just happened to be in the wrong place at the wrong time. But the legal activism will certainly cost jobs. Even the unions recognize this and have supported the merger.
But the absurdity of the current environment reached a peak when the DOJ, and agents from - get this - the US Fish and Wildlife Service, raided the Nashville factory of the legendary Gibson Guitar company. The raid resulted in agents carting off more than a half million dollars of supplies and essentially shutting the company down. The takedown of one of America's commercial icons apparently resulted from Gibson's purchase of partially finished ebony and rosewood guitar fingerboards (these endangered trees are carefully managed) from an Indian supplier.
Now here's the interesting part. The Indian government had issued no complaint about the transactions and there was no evidence that the company had violated US law. The DOJ acted simply on suspicion that Gibson had violated Indian law. Since when do US companies have to make sure that they comply with laws of every country in the world before they produce a product?
I had the good fortune of interviewing Henry Juszkiewicz, the CEO of Gibson, on my radio show this Thursday.
After speaking to him, I didn't know whether to laugh or cry at the stunning economic incompetence of our government officials, who in the cause of arbitrary regulatory nitpicking seem willing to sacrifice the reputation and prospects of one of the few remaining American manufacturers. God help us all.
On the other side of the coin, the government's own efforts to create jobs in the private sector have met with little success. It was announced yesterday that Solyndra LLC of Fremont California, a manufacturer of solar panels, has filed for bankruptcy protection and has laid off its remaining 1,100 workers. The development is notable because the company was a veritable poster child of the Obama Administration. The president himself visited their facilities in May of 2010 and touted the company as the template for America's "green technology" future. As a result of its politically advantageous profile the company was able to secure $535 million in loans guaranteed by the government.
But apparently government blessing does not guarantee market success. Unfortunately, Solyndra could not sell its products profitably despite the government support and cheerleading. Instead, $535 million in investment capital was diverted from potentially money-making enterprises to a money-losing enterprise. This is what happens when government calls the shots.
When it comes to the financial sector, the government can't seem to decide whether it wants to preserve jobs or destroy them. After bailing out the banks three years ago (and making some of them too big to fail), it was reported today that the government is preparing to launch a multi-billion dollar lawsuit to recoup losses that Fannie Mae and Freddie Mac suffered on mortgage backed bonds (loans that the government itself encouraged the banks to make). If the government were to prevail, job losses would surely emerge in the sector, and the government may need to bail out the banks once again!
So as we wait with eager anticipation as to what the President may reveal in his jobs speech next week, you can be sure that it's not going to help America regain its competitive edge. The sooner we regard the government as a job killer rather than a job creator, the sooner we can all get back to work.
Posted by Melissa@coloradoprocessservers.net on 09/08/11 01:29 AM
Excellent article Peter! I'm a big fan of yours from Fox News!
Posted by NAPpy on 09/07/11 06:39 PM
I would argue that most monopoly could not occur if successful companies could not lobby government for shielding from competition. Eliminate government, and you eliminate most monopoly. Click to view link has some good writing on natural monopolies, and they'd argue that without a government shield from competition (the backing of guns), you could still compete with a monopoly.
Posted by apberusdisvet on 09/07/11 05:17 PM
The author neglects to mention that Solyndra is croney capitalism at its best (worst) since the $500 mill went to a conmapany largely controlled by an Obama campaign money "bundler", and just before filing Chapter instituted rules that gave the investors priority over the American taxpayer's investment. Shades of the GM deal.
Posted by kenn on 09/07/11 01:09 PM
Would not one corporation buying all its competition by definition constitute a monopoly? How do you eliminate monopolies in this manner without regulations?
Would this not kill entrepreneurship which most say creates the jobs?
[ When a company gets big and successful, they have earned it. ]
Would this go for Goldman Sachs, JP Morgan, GE, Verizon???
The largest and most successful companies now own governments and actually write the regulations which suppresses competition by making it too expensive for a start up to comply.
They pay the legislatures to enact/rescind laws that define fraud that make them immune to the crimes they're committing.
Their parasitic management eats most of the profits while brandishing their employees as evil, money hungry, lazy incompetents that for some stupid reason think they deserve a retirement too.
Using the Post Office for example: The CEO wants to void their contract,,, not pay into the retirement fund and lay off 120,000. No one apparently minds this CEO getting $800,000.00 a year in salary, retirement and health care, and perks usually reserved for heads of State. Awesome! and disgusting.
The only way I can see to prevent this is to prevent companies growing to this scale which throws a wrench into having a free market without regulation which I myself advocate. A real conundrum for me.
I really don't know what the real answer is. Perhaps DB or another poster more savvy than I can make suggestions. All I do know is the present dog eat dog system does not seem to work.
Posted by omegamensch on 09/07/11 12:15 PM
a third party may have a chance but doubtful against this entrenched establishment.I believe it will take a much greater groundswell than what we have seen so far. the naming of a third party is critical it can not be named tea party or conservative party as that is already devisive in my opinion it should have the word constitution in the name of it as that is what it needs to represent.
Posted by rossbcan on 09/07/11 11:30 AM
Telecommunications providers are highly regulated monopolies. Monopoly is the problem. Until monopolies are eliminated, the effects of state interference with them is both unpredictable and counterproductive. In fact, the outcome depends more on "greased palms" than anything else.
Eliminate the regulations and monopolies. When a company gets big and successful, they have earned it. Having eaten all the competition, they have a choice: provide competitively priced services even in the absence of competition and survive in the long term. OR, get greedy and create competition which will eat their lunch.
For the free market to function, it must be FREE of all constants except the ability to use force / fraud which is criminal.
Posted by kenn on 09/07/11 10:41 AM
I'm not sure how allowing the merger of T-Mobile and at&t (aka SW Bell) would create jobs. It would most likely reduce jobs as those duplicated would be eliminated. Mr Schiff has in the past advocated competition. In this write up he states:
["In so doing, the DOJ seems to be operating under the assumption, without any direct evidence, that at least four companies are needed to provide healthy choice in the marketplace, and that three providers simply won't cut it"]
Now he seems to be saying that evidence is required to prove competition is a good thing? Does he advocate that one giant corporation in the sky will be just as competitive? Competitive with whom?
Personally I would like to see 400 providers...
Posted by rossbcan on 09/07/11 07:33 AM
PS: "This is what happens when government calls the shots"
Whomever "calls the shots" will make calls based on their perceived "self-interest". Obama's political base (whom he must appease to feed his power addiction) are those who want to maintain their entitlements and, damn the rest. Obama is a "useful idiot", doing his job of destroying freedom because freedom is an impediment to central controllers and slavers. The more the "entitled" are appeased, the sooner collective ability to provide "entitlements" is destroyed. Then, the plan appears to be, the thwarted entitled will riot to make arbitrary power appear "necessary".
In general, whenever "the shots" are called by self-interested individuals and groups, backed up by coercive guns, pointed at the rest, you have "rule of tyrannical man", historical destroyer of civilizations.
If peace, a viable economy and civilization is to be restored, the "rule of law" MUST be restored since, it is what formerly defined western civilization and allowed all of the west's past glories, accomplishments, freedoms and economic power. At least before it was so ineptly rationalized away by predators on the bench and tolerated by the collective lobotomy of populations by centrally controlled / subverted education and media:
Click to view link
Then, along came the internet, allowing ad-hoc self organization in all endeavors...