Paul Ryan's Exhilirating Speech As Romney's Running Mate

Obama: Let's repeat auto industry success

Politico, among other websites is relating Barack Obama's latest outrageous commentaries. So, now we should bailout the entire manufacturing sector. Hell, why not have the FEDS manage all industry? Isn't this gaffe really just an honest assessment by Obama of private enterprise?

Americans Joining Disability Now Outpacing Americans Finding Jobs

From: The Weekly Standard

A new chart set to be released by the Republican side of the Senate Budget Committee details an alarming fact: In the last three months, more Americans have joined disability than have found a job:

Car Company Gets U.S. Loan, Builds Cars In Finland

From: ABC News

With the approval of the Obama administration, an electric car company that received a $529 million federal government loan guarantee is assembling its first line of cars in Finland, saying it could not find a facility in the United States capable of doing the work.

Vice President Joseph Biden heralded the Energy Department's $529 million loan to the start-up electric car company called Fisker as a bright new path to thousands of American manufacturing jobs. But two years after the loan was announced, the job of assembling the flashy electric Fisker Karma sports car has been outsourced to Finland.

"There was no contract manufacturer in the U.S. that could actually produce our vehicle," the car company's founder and namesake told ABC News. "They don't exist here."

Henrik Fisker said the U.S. money so far has been spent on engineering and design work that stayed in the U.S., not on the 500 manufacturing jobs that went to a rural Finnish firm, Valmet Automotive.

"We're not in the business of failing; we're in the business of winning. So we make the right decision for the business," Fisker said. "That's why we went to Finland."

The loan to Fisker is part of a $1 billion bet the Energy Department has made in two politically connected California-based electric carmakers producing sporty -- and pricey -- cutting-edge autos. Fisker Automotive, backed by a powerhouse venture capital firm whose partners include former Vice President Al Gore, predicts it will eventually be churning out tens of thousands of electric sports sedans at the shuttered GM factory it bought in Delaware. And Tesla Motors, whose prime backers include PayPal mogul Elon Musk and Google co-founders Larry Page and Sergey Brin, says it will do the same in a massive facility tooling up in Silicon Valley.

An investigation by ABC News and the Center for Public Integrity's iWatch News that will air on "Good Morning America" found that the DOE's bet carries risks for taxpayers, has raised concern among industry observers and government auditors, and adds to questions about the way billions of dollars in loans for smart cars and green energy companies have been awarded. Fisker is more than a year behind rolling out its $97,000 luxury vehicle bankrolled in part with DOE money. While more are promised soon, just 40 of its Karma cars (below) have been manufactured and only two delivered to customers' driveways, including one to movie star Leonardo DiCaprio. Tesla's SEC filings reveal the start-up has lost money every quarter. And while its federal funding is intended to help it mass produce a new $57,400 Model S sedan, the company has no experience in a project so vast.

There is intense scrutiny of the decisions made by the Department of Energy as it invests billions of taxpayer dollars in alternative energy. The questions come in the wake of the administration's failed $535 million investment in solar panel maker Solyndra. The company's collapse, bankruptcy and raid by FBI agents generated a litany of questions about how the Energy Department doles out billions in highly sought after green energy seed money.

A key question, experts and investigators say, is whether another Solyndra is in the offing.

In interviews, executives with Tesla and Fisker said comparisons to Solyndra are unfounded. Each said the government's investments will ultimately pay off by supporting a fleet of electric cars that will ease the nation's dependence on fuel and benefit the environment.

"It's absolutely a worthwhile risk," said Diarmuid O'Connell, vice president of corporate and business development for Tesla Motors. "I absolutely believe it was a good bet for American taxpayers." Tesla has said its mass production of the sedan will ultimately lead to profitability.

Henrik Fisker, the renowned auto designer who founded the car company that carries his name, said his company holds tremendous promise and has accumulated $600 million in private financing.

When asked directly by ABC News if taxpayers should worry about the more than $500 million in federal funds on the line, he was emphatic: "No, I don't think they need to worry about it," Fisker said. When asked if Fisker might be the next Solyndra, he said, "Absolutely not."

In a lengthy interview, Fisker said he apprised the Department of Energy of his decision to assemble the high-priced Karma in Finland after he could not find an American facility that could handle the work. They signed off, he said, so long as he did not spend the federal loan money in Finland -- something he says the company has taken care to avoid. He said the decision, ultimately, was to help prevent his company from following the path of Solyndra, which exhausted nearly all of its loan money on a high-tech solar manufacturing plant in Freemont, California.

"If you just start doing like what Solyndra did, making a factory in a place where it was too expensive to manufacture … [you] obviously fail," he said.

By some key measures, Tesla is ahead of Fisker. More than 2,000 of its first electric car, the Tesla Roadster, are on the road, while Fisker is just starting to get its first car into showrooms. And Tesla is further along in advancing a second, lower-cost car, the Model S. While both firms boast of big dollar private investments, Tesla's vulnerabilities are more publicly visible through its SEC filings, in contrast to the privately held Fisker.

Chelsea Sexton, a 20-year veteran of the electric car movement and an outspoken advocate for alternative fuel vehicles, said she can plainly see the risks, even though her husband works for Tesla.

"None of us with any experience in the industry think there's any sort of guarantee they'll make it," Sexton said of Tesla. "It looks pretty good right now, they're building out their plant, things seem to be on track, so we're all encouraged. But you know, we watched GM and Chrysler go bankrupt."

Energy Department officials said such loans, by their nature, are risky because the department is financing innovative, potentially game-changing technologies that could deliver long-term benefits. They said neither firm has missed a loan payment, or sought help from the department to restructure their lending agreements.

"Two years ago, critics said we shouldn't be investing in American auto manufacturing at all because the industry wouldn't survive," said Damien LaVera, an Energy Department spokesman. "They were wrong then and they're wrong today. From well-established names like Ford to innovative startups like Tesla and Fisker, America's auto industry is being reinvented. Continuing this turnaround demands more innovation, not defeatism. While supporting innovative technologies always carries a degree of risk, these investments deliver long-term benefits."

Yet an audit this year by the Government Accountability Office, the investigative arm of Congress, criticized the Energy Department for not keeping close enough tabs on its fleet of auto loans -- including those to Fisker and Tesla -- to ensure they meet benchmarks. The funding was issued under the $25 billion Advanced Technology Vehicles Manufacturing loan program, one piece of a giant umbrella of DOE loans and loan guarantees going out the door.

"DOE cannot be assured that the projects are on track to deliver the vehicles as agreed," said the GAO report examining the department's ATVM program. "It also means that U.S. taxpayers do not know whether they are getting what they paid for through the loans."

Tesla and Fisker stand in rare company in securing the ATVM loans. To date, records show, more than 95 percent of applicants are still awaiting approval or have been rejected from the loan pool.

Between them, Fisker, at $529 million, and Tesla, at $465 million, have secured nearly $1 billion to jump-start production of their cars. Combined, the companies have already drawn down more than $300 million, Federal Financing Bank records show.

Industry watchers question whether the Department of Energy had the auto industry know-how to make an informed choice, and they worry that another government-backed failure could damage the very industry the program intended to help.

"I think we'll absolutely end up having our version of Solyndra in the transport world based on the way the DOE has, and seems to still be executing its loan program without enough veteran diligence in the process," Sexton said.

The majority of the DOE funding for Fisker is earmarked for the company to develop a less costly, mass market sedan, called Project Nina. Energy officials issued the loans for a car that, even two years later, has not been publicly revealed.

"A half billion dollars for a car that no one has seen a picture of, in the Fisker Nina, was a bit more surprising to people," Sexton said.

Fisker said the mass market car Nina has been designed and built, but it remains under wraps to maintain a competitive edge.

Heavyweight Support

Standing in a shuttered General Motors plant in Wilmington, Del., Vice President Biden proclaimed that a half-billion-dollar Department of Energy loan would transform the idled site into a production line for electric cars.

"Folks, we're making a bet," Biden said on Oct. 27, 2009. "We're making a bet on the future, we're making a bet on the American people, we're making a bet on the market, we're making a bet on innovation."

The announcement that the plant would re-open followed a heavy lobbying push by Delaware politicians from both parties, who cited the news as a sign of industry's turnaround. In September 2009, Republican Rep. Mike Castle wrote directly to Energy Secretary Steven Chu, saying the Fisker proposal had "great merit," and urging Chu to give the company "careful consideration" for the loan.

The governor and state politicians took turns, along with Biden, to proclaim the project to cheering blue-collar workers clad in jeans, caps and jackets. They said it would produce thousands of jobs and have cars rolling off the line by next year. Fisker said he remains convinced those jobs will come. While he has hired marketing, design and engineering teams in the U.S., the auto plant jobs in Wilmington right now number about 100.

The Department of Energy loan to Fisker closed in April 2010, and again Biden took center stage in a department statement announcing the loan. "The story of Fisker is a story of ingenuity of an American company, a commitment to innovation by the U.S. government and the perseverance of the American auto industry," said the vice president.

ABC News sent questions to the White House Monday and requested an interview with the vice president. Biden was not made available, but an official in his office said "the Office of the Vice President did not encourage the Department of Energy to choose any particular company over any other but, like others in the Administration, supported the Department's loan program and the creation of car manufacturing jobs in the United States."

Energy Department officials have been steadfast that politics never entered the picture and each project was screened by professionals and secured on the merits. And executives from Tesla and Fisker said they won government support because their projects had the best shot at success. They said the involvement of well-connected figures in their companies should not suggest they attempted to use special influence to secure the loans.

Both companies have political heavyweights behind them. One of Fisker's biggest financial supporters, records show, is the California venture capital firm Kleiner Perkins Caufield & Byers. The firm financially supports numerous green-tech firms, records show.

Kleiner Perkins partner John Doerr, a California billionaire who made a fortune investing in Google, hosted President Obama at a February dinner for high-tech executives at his secluded estate south of San Francisco. Doerr and Kleiner Perkins executives have contributed more than $1 million to federal political causes and campaigns over the last two decades, primarily supporting Democrats. Doerr serves on Obama's Council on Jobs and Competitiveness. Doerr has not replied to interview requests since March.

Former Vice President Al Gore is another Kleiner Perkins senior partner. Gore could not be reached for comment.

"Their major venture investor is Kleiner Perkins, who has Al Gore as a partner and is certainly politically connected in general," said industry observer Sexton. "Whether that played a role or not is up to the DOE to explain."

Tesla brings political pull, as well. A former Tesla board member, Steve Westly, is an Obama bundler who raised hundreds of thousands of dollars for the president in 2008 and for his 2012 re-election campaign. His Westly Group was also a financial supporter of Tesla Motors until Tesla went public in 2010, and Westly continues to back the company. Westly has declined interview requests since February, but has appeared in multiple conferences, forums and TV interviews publicly praising Tesla Motors.

Tesla's founder and CEO, Elon Musk, is a hearty political contributor who has primarily backed Democrats, including Obama. According to published reports, another Tesla investor is Nick Pritzker, a donor to Obama and a cousin of Penny Pritzker, the national finance chair of Obama's 2008 campaign.

O'Connell, the Tesla executive, said political muscle played no role in the company's award of the $465 million in loans, noting that the initial application was filed under Bush -- though landed under Obama.

'Demonstrated Track Record'

In Tesla's case, as in Fisker's, the government loan was broken into two parts.

The first chunk, for $365 million, is to finance a manufacturing facility for the Tesla Model S sedan, Tesla's lower-cost answer to its pricey Roadster.

The other $100 million funded a facility to manufacture battery packs and electric drive trains used by Teslas and other automakers, including the Smart For Two city car by Daimler. Tesla points to such partnerships - along with investments from Toyota and Panasonic - as signs that long established companies believe in its cars.

"We have a demonstrated track record on the financial side," O'Connell said, "that should give great comfort to the American taxpayer, as they think about a loan that's helped us to accelerate our business model."

Unlike Fisker, Tesla is a public company. Its SEC filings offer a more sober assessment of the obstacles it faces on the road to profitability.

Tesla has yet to turn a profit and suffered net losses in each quarter. "Since inception and through the three and six months ended June 30, 2011, we had accumulated net losses of $522.8 million," its most recent 10-K form shows.

It has no experience in high-volume manufacturing of electric cars, its filings say -- the very project it sees as the road toward profitability. Tesla said it encountered "significant delays" in launching the Roadster - and acknowledges that developing the Model S will be a more complex undertaking. The newer car is the project financed by DOE.

"We have no experience to date in high volume manufacturing of our electric vehicles," Tesla's SEC filings say. "Our future business depends in large part on our ability to execute on our plans to develop, manufacture, market and sell our planned Model S electric vehicle."

The Roadster was produced in small quantities with the body assembled by Lotus in the United Kingdom and final assembly by the company at its facility in Menlo Park, Calif. The Model S, by contrast, will have much greater volume and be manufactured in Fremont, Calif. The company said production will begin next year.

Industry observers say Tesla's grand plan to lunch the Model S is fraught with challenges.

"They want to scale up production from 1,000 cars a year to 20,000 cars a year, [and] that's going to be a very hard trick for them to do," said Alex Taylor, a veteran auto industry analyst and writer. "They want to make most of their own parts; Detroit can't do that because it's too inefficient. And Tesla wants to own its own dealerships. Henry Ford tried that back in the 1920s and gave it up because it was too difficult."

O'Connell said the SEC filings present worst case scenarios. He said the company, and its major investors, believe the risk will reap rewards.

"It is a risky venture in the best heritage of some of the other great companies that have grown up in the Silicon Valley," he said. "This is a place where people propose ideas, finance those ideas, achieve milestones, attract a greater finance, and succeed along the way."

Dem Mayor Pleads for Obama to Stop New Regulations Driving Small Busines...

Joe Biden Stands By Rape Reference to GOP

Reid signals government jobs must take priority over private-sector jobs

From: The Hill's Floor Action

Senate Majority Leader Harry Reid (D-Nev.) on Wednesday indicated Congress needs to worry about government jobs more than private-sector jobs, and that this is why Senate Democrats are pushing a bill aimed at shoring up teachers and first-responders.

"It's very clear that private-sector jobs have been doing just fine; it's the public-sector jobs where we've lost huge numbers, and that's what this legislation is all about," Reid said on the Senate floor.

Reid was responding to recent comments from Senate Minority Leader Mitch McConnell (R-Ky.), who accused Democrats of purposefully pursuing higher taxes as part of the teacher/first-responder bill, S. 1723, so that Republicans would oppose it. McConnell said the bill was meant to fail in order to give Democrats an issue to run on in the 2012 election, but Reid said the Republicans are simply trying to defeat President Obama any way they can.

The legislation Reid is defending is part of Obama's jobs package. Vice President Biden was in Pennsylvania, an important election state, on Tuesday to push for the administration's plan on increasing the number of teachers.

Reid reiterated his emphasis on creating government jobs by saying Democrats are looking to "put hundreds of thousands of people back to work teaching children, have more police patrolling our streets, firefighters fighting our fires, doing the rescue work that they do so well … that's our priority." He said Republicans are calling the bill a "failure" because they are "using a different benchmark for success than we are."Private-sector jobs have increased over the last 19 months, while government jobs have lagged. They've also seen cuts in several states that are struggling to balanced their books.

Despite these comments, a spokesman for Reid pointed out that Senate Democrats have tried to pass several bills aimed at spurring private sector job growth, but have been blocked by Republicans. Among other things, Democrats have proposed tax cuts to help companies hire workers and write off expenses, as well as infrastructure jobs that would add to private construction payrolls.

"Senator Reid believes that Congress must work to spur job-creation in the private sector, which is why he's working to pass tax cuts for small businesses to hire new workers, tax cuts for small businesses to write off business expenses, and investments to create private-sector construction jobs," Spokesman Adam Jentleson said. "Republicans are blocking all of these proposals to create jobs in the private sector because they care more about defeating President Obama than putting Americans back to work."

Reid also said a majority of people polled support the bill, and that the tax hike needed to fund the $35 billion spending program is minimal.

"My friend, the Republican leader … is complaining about a tax of one-half of 1 percent … on people who make more than $1 million a year to pay for a program that would stop teachers from being laid off and rehire some of the teachers that have been laid off," Reid said.

Democrats who support the bill have said it would help save 400,000 teacher jobs and thousands of first-responder jobs that have either been cut or could soon be cut. Reid said Wednesday that these layoffs are "rooted in the last administration," but did not explain further.

Senate Democrats are hoping to pass S. 1723 as early as this week, although votes could be delayed until early November, depending on the progress made on passing a 2012 spending bill.

Reid also dismissed efforts by the Republican House to ease environmental regulations as a way to create jobs.

"The Republican response has been cutting back environmental health safeguards, I guess hoping that a sicker, more polluted country is a better place to create jobs, and it's not," Reid said.

The Austerity Myth: Federal Spending Up 5% This Year

From: Investors.com

When Republicans took control of the House in January, they pledged to make deep cuts in federal spending, and in April they succeeded in passing a bill advertised as cutting $38 billion from fiscal 2011's budget. Then in August, they pushed for a deal to cut an additional $2.4 trillion over the next decade.

Some analysts have blamed these spending cuts for this year's economic slowdown.

But data released by the Treasury Department on Friday show that, so far, there haven't been any spending cuts at all.

Higher Spending, Deficits
In fact, in the first nine months of this year, federal spending was $120 billion higher than in the same period in 2010, the data show. That's an increase of almost 5%. And deficits during this time were $23.5 billion higher.
These spending hikes haven't stopped many analysts from claiming that the country is in an age of budget austerity, one that's hurting economic growth.

A July article in USA Today, for example, claimed that "Already in 2011, softer government spending has sapped growth."

Jared Bernstein, former chief economic adviser to Vice President Biden, wrote over the summer that "government spending cutbacks have been a large drag on growth in recent quarters and have led to sharp losses in state and local employment."

Economist and New York Times columnist Paul Krugman argued in September that "the turn toward austerity (is) a major factor in our growth slowdown."

If government spending is related to growth, as these and others claim, then the economy presumably should be growing faster, not slower, given the current higher rates of federal outlays.

State Spending Higher Too
Nor does the claim that state governments sharply cut spending stand up well to closer scrutiny.

Overall state spending continued to climb right through the recession, when all money from state general funds and other funds, federal grants and state bonds is combined.

Total state outlays in 2010 were almost 10% higher than in 2008, according to the National Association of State Budget Officers' annual State Expenditure Report.

And general fund spending — which makes up about 40% of total state spending — is expected to climb 5.2% in 2011 and 2.6% next year, according to the association's latest survey.

NASBO says that states were able to sustain spending growth through 2010 only because the federal government was pumping more money in via the $830 billion stimulus, and that these funds are now all but exhausted.

As the survey report notes, the tapering off of the stimulus "combined with a slow recovery in state revenue collections, will continue the tight resource environment for states in fiscal 2012."

Meanwhile, the claim that state and local government jobs have been severely cut is, at the very least, open to some debate.

"We know that the biggest problem that we've had in terms of unemployment over the last several months has not been in the private sector," President Obama said at a recent press briefing. "It's actually been layoffs of teachers and cops and firefighters."

Monthly data from the Bureau of Labor Statistics do show that from December 2007 — when the recession officially started — until the end of 2010, state and local governments shed 221,000 jobs. And they've cut another 234,000 jobs so far this year.

But a separate annual survey from the Census Bureau shows that "full-time-equivalent" state and local employment climbed 200,000 between 2007 and 2010 (the latest year for which these census data are available.) The differences come from the methodologies used.

In any case, even using BLS data, the number of state and local government jobs has fallen just 2.3% since December 2007. That compares with a decline of 5.4% for private-sector jobs.

Club for Growth defends Cain's 9-9-9 tax plan

From: Washington Times

The influential anti-spending Club for Growth defended Republican presidential contender Herman Cain's 9-9-9 tax plan against attacks from his GOP rivals, saying that those who warn the federal sales tax component would simply hand Congress another way to levy taxes on citizens "miss the mark."

"Of course a future Congress could raise taxes above the 9 percent levels, but under our current monstrosity of a tax system, Congress already can raise taxes at any time and often has," said Chris Chocola, president of the Club for Growth. "It is on a path to do so yet again next year with the expiration of the Bush tax cuts."

Mr. Cain's plan, he said, may not be perfect, but "it is a truly revolutionary tax reform that would amount to a massive job creating tax cut on investments, savings and income."

"Instead of tearing down ideas that would create economic growth and jobs, the other Republican presidential candidates should produce their own plans to achieve a flatter and more growth-oriented tax code," Mr. Chocola said.

Mr. Cain's plan vows to eliminate taxes on capital gains and dividends, combined with the proposed reductions in corporate and income tax rates would "create an unparalleled economic boom," Mr. Chocola said.

Illinois Loses Most Jobs in the Nation

From: Illinois Policy Institute

In a trend that continues to worsen, more Illinoisans found themselves unemployed in the month of July.

Illinois lost more jobs during the month of July than any other state in the nation, according to the most recent Bureau of Labor Statistics report. After losing 7,200 jobs in June, Illinois lost an additional 24,900 non-farm payroll jobs in July. The report also said Illinois’s unemployment rate climbed to 9.5 percent. This marks the third consecutive month of increases in the unemployment rate.

Illinois started to create jobs as the national economy began to recover. But just when Illinois’s economy seemed to be turning around, lawmakers passed record tax increases in January of this year. Since then, Illinois’s employment numbers have done nothing but decline.

Data released today by the bureau confirms this downward trajectory. When it comes to putting people back to work, Illinois is going backwards. Since January, Illinois has dropped 89,000 people from its employment rolls.

It’s too early to know conclusively the full impact of the tax hikes on the Illinois economy. Nevertheless, Illinois’s employment numbers serve as a good reminder that public policies have dramatic consequences for the daily lives of Illinoisans. A combination of high taxes, overspending and red tape do nothing but chase away job creators and leave too many citizens without jobs. Springfield needs to act now and reverse course.

Desperately Seeking Skills

From: NationalJournal.com

Eric Spiegel dwells in an alternate universe. The hulking 53-year-old Ohioan, a former Harvard University offensive tackle, follows the headlines from Washington about America’s “jobless recovery” and the agonizingly high unemployment rate of 9.2 percent. But that’s almost the mirror opposite of the problem that faces Spiegel, president of Siemens Corp., the U.S. subsidiary of the German engineering conglomerate. He has jobs galore to offer, more than 3,000 of them nationwide, but he can’t find people with the skills to do them. He’s not just looking for engineering Ph.D.’s, either. He needs hundreds of technicians, welders, and machinists. He has even hired a crew of headhunters to scour the nation for prospects. “We didn’t have to do that a couple of years ago,” he says. “But our human-resource managers are under a lot of pressure from the businesses to fill these positions.”

So, in September, Siemens is launching a new strategy that draws on a very old practice from its parent company in Germany: apprenticeships. In Charlotte, N.C., where Siemens is building the nation’s largest gas-turbine plant and hopes to hire some 800 people next year, the company is opening a pilot program that will pluck non-college-track seniors from nearby Olympic High School; Siemens will pay them an hourly wage to work part-time and will also pay their way through a two-year college program at nearby Central Piedmont Community College.

Why? Because existing technical and vocational schools were not teaching the precision machining skills needed to make the steam turbines and electrical generators, says Mark Pringle, director of the company’s operations in Charlotte. Mike Panigel, Siemens’s chief of human resources, adds, “The bulk of the people, we’ll end up employing; and to those who have not proved to have the necessary skills, we can at least say, ‘You’ve been trained.’ ”

The challenge that Siemens faces highlights the nation’s large and growing “skills mismatch,” a widening gulf between the businesses that are hiring and the skills of millions of Americans who are looking for work. A big debate is raging about how much of today’s unemployment results from the skills mismatch. It’s clear that the Great Recession contributed most to the high jobless rate, despite the “recovery” that officially began two years ago. The weak recovery is nothing less than a total inversion of the debt-inflated consumer bubble of the 2000s.

Consumers, with their wealth reduced and their incomes often stagnant or falling, are reluctant to buy, and stores are unable to sell. Not surprisingly, employers are reluctant to hire.

But beneath that overarching problem, one startling figure jumps out. Educated workers with the right skills are, for the most part, doing all right—far better, at least, than those with little education. “Since the start of the recovery, the economy has created something like 1.5 million to 2 million net new jobs, and of these the vast majority have been ‘high-skilled,’ ” says Susan Lund, head of research for the McKinsey Global Institute.

The most recent population survey by the Labor Department’s Bureau of Labor Statistics offered this striking contrast: Since the recovery began producing jobs in January 2010, the United States has suffered a net loss of 500,000 jobs among people with high school diplomas or less, but a net gain of 1.2 million jobs for college grads. “During the entire recession, the unemployment rate for college graduates never exceeded 5 percent, while the unemployment rate for people without a high school degree soared to 15 percent,” Lund says. Of the 9.2 percent of Americans who are currently unemployed, 78 percent did not finish high school.

According to a study of major economies by the ManpowerGroup, a Milwaukee-based workforce consultant, 52 percent of employers in the United States complain that they can’t find the right talent—even at a time of sky-high unemployment. That’s a much higher share than the global average of 34 percent.

More alarmingly, the statistics suggest that the skills mismatch is becoming part of a deep structural problem in the economy. Despairing of finding work, many of the least employable people are simply dropping out of the workforce and swelling the pool of the “permanent” unemployed. As of this June, 43 percent of the nation’s 14 million unemployed workers were in the ranks of long-term unemployed (defined as more than 27 weeks).

That’s the highest level since the government began compiling that data in 1948, far exceeding the previous record of 31.5 percent in 2009, when the economy was near the trough of the recession; the number is likely to be even higher by the end of this year. Even during the great “stagflation” of the 1970s, the proportion of long-term unemployed was only about 18 percent.

The problem, economists warn, is that unemployment begets unemployment as skills atrophy. In a recent analysis, the Federal Reserve Board estimated that a person who has been unemployed less than four weeks has a one-in-three chance of landing a new job within a month. For a person who has been unemployed for 27 weeks or longer, the odds drop to one in 10.

Unemployment isn’t the only result of the skills mismatch. Another is the rising income inequality between people in skilled and less-skilled jobs. That’s already a long-running trend, with real incomes stagnating for much of population and climbing sharply for those at the very top. Worse yet, McKinsey predicts that the skills gap will widen. By 2020, the institute estimates, the United States will have 1.5 million too few college grads to meet employment demands, while nearly 6 million Americans who didn’t finish high school will probably still lack work.

LIP SERVICE FROM WASHINGTON

Washington has been almost useless on this issue. The federal government’s main job-training law, the Workforce Investment Act, is a bureaucratic mess.

The Obama administration has ramped up spending on education, and it pumped money into job training through the 2009 stimulus package. But most of the added training money has dried up. Total federal spending for job training adds up to a paltry $15 billion annually—about what it was in 2002, adjusting for inflation, according to Georgetown University professor Harry Holzer. “That’s one-tenth of 1 percent of the [gross domestic product],” he says. “That’s way less than virtually any country spends on this stuff.”

Employers, along with Holzer and other analysts, complain that federal job-training programs either don’t respond to their needs or do so only by accident. Washington is spending about $20 billion annually on Pell Grants for post-secondary education, but Holzer says that the money isn’t targeted enough to make a real difference. “Those people go off to community college. They get no guidance,” he said. “They get stuck in remedial classes that they can’t get out of, and eventually they kind of drop away.”

On Capitol Hill, a few legislators are pushing for a whole new approach to job training. “Everywhere I go, businesses say, ‘We have some job openings; the problem is, we don’t have a skilled workforce,’ ” Sen. Patty Murray, D-Wash., told National Journal. “You go and talk to people. They’ll do anything. They want a job, but they don’t have the skills to be able to get those jobs. And it’s because communities haven’t defined how they’re going to get those jobs that are needed.”

But progress is slow, and political interest is low. Lawmakers in both parties are fixated on cutting spending.

GAUGING THE MISMATCH

Economists agree that it’s nearly impossible to precisely quantify the skills problem. It may amount to no more than 2 percentage points of the 9.2 percent unemployment rate, says David Altig, director of research at the Federal Reserve Bank of Atlanta. “The unemployment rates for people with bachelor’s degrees or higher is still over double what it was right before the recession,’’ he notes. “It was down under 2 percent. It’s still up around 4.5 percent.” Proportionally, he says, that’s not much different from the rate for those with a high school education, which was about 5 percent before the recession and is about 10 percent now. In absolute numbers of people, though, the gap is widening between those with a college education and those with a high school education or less.

Businesses’ failure to hire more has economists puzzled. Analysts usually cite lack of consumer demand and uncertainty about the future. Some also theorize that the housing collapse made people less mobile and created a “geographic mismatch,” because many homeowners are underwater and can’t sell their homes for enough to pay off their mortgages. Another issue, some experts say, is that employers hold all the bargaining power and have been able to keep compensation low across the board. As a result, workers have fewer “wage signals,” as economists call them, to nudge them from declining industries to rising ones.

But other important changes at the microeconomic level—in the workplace—are aggravating the effects of an anemic economy. For one thing, businesses are leery about hiring anyone but the “perfect candidate,” says Jeffrey Joerres, CEO of the ManpowerGroup. “All that does is exacerbate what’s happening. Companies are down to really analyzing all the elements of their workforce. Every position is carefully evaluated for productivity, even the janitors.”

Beyond being pickier, companies are demanding higher skills—even for jobs that once required no more than a high school diploma. “Take truck drivers,” says the Atlanta Fed’s Altig. “It used to be if a guy drove a truck, that was the end of it. Someone else would take over the other tasks. But one of the things the recession did was cause many companies to reorganize their processes. So that required people who can do multiple tasks. Truck drivers have to do paperwork. Or sales people in auto retailers—there used to be a back office to cut the finance deal. Now you’ve got to be able to do both. So for exactly the same jobs, you need a higher level of competency.”

The average sales rep today has to be much more than a Willy Loman type, “riding on a smile and a shoeshine”; he or she must also be a master of finance and product development. “Sales people are among the hardest to find,” Joerres says. “At the same time [that] their product is becoming more sophisticated to sell, you also now have to be more of a financial expert, because margins are reduced. You have to do deals yourself, do more of a consultative sell instead of just a relationship sell. Product cycles are shortened too, which means you have to refamiliarize yourself with the product catalog regularly. All of this has added to the complexity of the job.”

Nicholas Pinchuk, the CEO of Wisconsin-based Snap-on, which supplies automobile tools to 3,500 franchisees nationwide, says that as the number of computer codes in an average car has jumped from 200 in 1995 to 5,000 today, auto mechanics require the equivalent of an associate’s degree from a good vo-tech school. “Changing the headlight on a car used to be like changing a lightbulb. Now you have to apply a diagnostic tool, a kind of laptop for the car, that coordinates the lights with the control systems of the car, which for some cars means that high beams go on and off automatically or that the headlights move left and right as you go around a turn,” Pinchuk says. “Or take balancing tires. We used to be cavalier about it. But today, cars are lighter because of higher fuel economy. So tire balance is more important. You have to master the shape of the tires. Almost every tire has a high spot, and the rim has a low spot. To sense those, you need equipment skills and a general understanding of materials—for example, the different coefficients of expansion of aluminum and steel.”

With all that specificity cropping up in job descriptions, fewer young people heading into school know “what they need to study,” says Laszlo Bock, director of “people operations” at Google. “There is an information asymmetry.” So here, too, the market doesn’t seem to be adapting. And critics say that the Obama administration hasn’t put the right kind of programs in place to fix either the short-term mismatch or the longer-term college-education deficit. “We don’t even have a national jobs database,” Lund says.

California Raises Taxes and Texas Wins

From: Gay Patriot

A newly trentagenarian reader sent me a Steven Malanga’s piece about the outflow of jobs from the (once-)Golden State:

Over the last 15 years, California ranks as the third worst state in the country in terms of job migration, with a net outflow of jobs that is 1 percent greater than the flow of jobs into the state, according to the National Establishment Time Series database. Texas, by contrast, is 10th best in the nation in that period, with a plus 1.3 percent inflow of jobs from other states. Based on Vranich’s anecdotal list, Texas is the biggest beneficiary of jobs leaving California.
. . . .
There are many reasons for the cost differences between the states, but government clearly plays a role. The chief executive of CKE Restaurants Inc., a California based owner of restaurant chains, told Bloomberg News that it takes only six weeks to get approvals to open a new eatery in Texas, but up to two years in California. Given those dynamics, is it any wonder that Texas has been generating more net jobs through start-ups and expansions than California?

Unfortunately, it seems that the incumbent governor is clueless about the impact state regulation has on those costs. As Sonicfrog reminds us, Jerry Brown recently “signed into law legislation” mandating that “33% of all power generated in California was to be renewable.” Such a benchmark, Sonic adds, can only be met with “massive energy price increases by energy providers AND massive government subsidies”.