Tag Archives: unions

An Obama Referendum in Colorado

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On November 1, Colorado voters faced a handful of off-year ballot issues, including a ‘tax the rich’ measure and a pro-union measure local to Denver. While the local media worked overtime to spin the issues as not being a referendum on Pres. Obama’s policies, the measures seemed custom designed to let the President know where Coloradans stand on his agenda. The fact that these measures, that mirrored Obama’s policies, resoundingly failed augers poorly for his 2012 chances in Colorado.

The tax increase, Prop. 103, would have raised the state income tax by 8% and the state sales tax by 3.4%. Pushed by Colorado’s most leftist State Senator, Rollie Heath (D, Boulder), the new tax revenues were earmarked for the teachers’ unions (e.g. ‘for the children’). Well, Obama has just completed a southern bus tour touting his own tax increases and stimulus spending earmarked for the teachers’ unions. Despite early PPP poling suggesting that Prop. 103 was too close to call, the real voters brushed aside the education canard to defeat the tax increase nearly 2 to 1.

The Denver union measure, Prop. 300, sought to force even tiny businesses to provide generous sick pay of 5 to 9 days per year. Supported primarily by two Wisconsin unions, the measure went down nearly 2 to 1 in a left wing, pro-union city that voted 3 to 1 for Obama in 2008. Unions and their politician allies seek to force union rules like sick pay on non-union employers to level the playing field for their members. Denver voters saw through the niceties of ‘giving’ employees sick pay as a threat to Denver’s competitiveness in industries where sick pay is not justified or is open to abuse. Obama has used his executive powers to reward the unions that back him by making unionizing unfairly easy. If left-wing Denverites realize that union policies are job-killers, Obama’s aggressive pro-union policies may drag him down.

Naturally, the local Old Time Media outlet, the Denver Post was having none of that. The Post went out of its way to mischaracterize the election results, saying they were “an election for no change, “and “it would be a mistake to look at the results . . . as an indicator for the 2012 election.” Despite the Post’s front page editorializing, the election did mirror national issues, and it was a stunning blue-state rebuke of Obama’s tax and union policies.

A realistic assessment of the November 1 election is that the 2010 elections were a fluke. The election of a serial tax raiser to Governor and an inexperienced teachers’ union flack to the US Senate were due solely to the GOP’s internal divisions that put exceptionally weak candidates on the ballot. The left-wing activism of Tim Gill, who turned Colorado from red to deep blue, has crashed on the shore of independence minded voters.

While the Obama agenda mirrors Props. 103 and 300, his is much more aggressive. Obama wants much higher tax increases, and his union agenda is a frightening threat to free enterprise. Colorado’s strong rejection of the comparatively modest Props. 103 and 300 suggests a defeat in 2012 for a President that effortlessly carried the state in 2008.

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Everything I Learned In MBA School Was Wrong

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To some, a MBA is a yardstick of business acumen or a launch pad for great accomplishments. While graduate students are expected to exercise increased independent and critical thought, the amount of leftist indoctrination that goes unchallenged is startling. In nearly every department, the MBA curriculum has got it wrong.

Keynesianism:

MBA programs teach that government spending and expansive monetary policy stimulates GDP expansion. Keynesian formulas suggest that recessions can be cured by stimulus spending and money supply growth. Stimulus ‘primes the pump’ of the economy. Well, no, stimulus has never worked, but MBA professors fail to mention this, as they also fail to mention other economists like Hayek, Taylor, and Hazlitt whose theories refute Keynes.

Keynesian stimulus does not work for two real world reasons: 1. When the government stimulates, it almost always procures things nobody needs or wants. The government spends based on political favoritism, and those items are unlikely to stimulate further productive economic activity (e.g. bridge to nowhere); and 2. People don’t measure their wellbeing by GDP growth, they measure their wellbeing by prosperity. The fact that Pres. Obama’s stimulus grew the public sector component of GDP did nothing for regular Americans. People do not really want more money; they really want things like food, houses, cars, and TVs. Stimulus is largely busywork that creates nothing, especially in the short term, to increase real prosperity. Paul Krugman’s recent ludicrous endorsement of government spending on alien invasion preparedness as a way to grow the economy is the perfect example of Keynesianism’s fatal flaw.

Currency Devaluation:

MBA programs teach the IMF mantra that when a country has a trade deficit, or it can’t pay its obligations, it should devalue its currency. The theory posits that after a devaluation, the troubled country’s exports will be more competitive, imports less competitive, and soverign debt more affordable. As Argentina and every other test case has shown, this never works. MBA professors cite a ‘J-Curve’ effect whereby devaluation causes the opposite of its stated goals in the short term, but as consumption and production shift, the devalued economy will reach a balance. The J-Curve must take a long time, because devalued economies continue to suffer for a long time.

Devaluation does not work because, as with Keynes, people do not want money, they want goods. No magic wand increases the real efficiency of a labor force. Further, when a government inflates its currency (devaluation), it makes foreign capital formation less attractive. Without capital formation, modern economies cannot grow, and real prosperity becomes impossible. Currency devaluations are just a form of surprise inflation, which is stealing from those who save to pay off government debt. Only an ivory tower academic can think that is the path to prosperity.

Union Management Partnerships:

MBA academics are big on labor partnerships. True to their socialist instincts, they can’t believe that unions are bad for business. They laud each effort to find a new way to harmonize union and shareholder interests. In the real world, these partnerships never work. UAL gave its unions ownership and board seats, and GM’s Saturn division gave unions decision authorities, but both of these experiments failed, resulting in bankruptcy. The steadily declining private sector union ranks prove that unions cause business failure wherever they take root, otherwise businesses would be inviting unions to form and their ranks would be growing. There is no aligning union and shareholder objectives; shareholders seek to avoid Ch. 11 bankruptcy at all costs, while unions see Ch. 11 as at most a temporary setback.

Efficient Market Hypothesis:

MBA professors hate Wall Street traders because academics think that what they do is impossible. The religion of MBA finance professors is that the markets are efficient (i.e. their prices always reflect true value and that without inside information nobody can make a supernormal profit). Securities’ prices fall along a line that sets their price relative to their risk, so stock picking is a waste of time.

Shout Bits apologizes for the following obscure references, but every assumption underlying the efficient market hypothesis is wrong. Investors are not objectively rational; their decisions are based on needs other than risk adjusted return. Stocks’ returns are not a random walk; returns are auto-correlated. Stock returns’ correlations are not constant; in times of extreme gains or losses, correlations increase. Likewise, betas are not constant and are difficult to predict. Every foundation of the efficient market hypothesis is bunk. The efficient market hypothesis is a classic example of MBA professors living within their walls of assumptions and formulas while those less constrained by theory make a killing.

The list of MBA fallacies goes on (e.g. more regulation creates more safety, the green movement and its economy, strategic reorganization creates value, Japan’s model of government / private partnerships). Of course a lot of smart people earn their MBAs, but they would have been smart without them. As with liberal arts BAs, the hidden price for expanding minds at an MBA program is the indoctrination into left wing and academic fantasies that have no use in the real world. The best business education is getting one’s teeth kicked in by tough competitors who know their trade and know how to win. That is a lesson that no MBA program can teach.

NLRB – Graft Enforcer

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Earlier this month, the National Labor Relations Board (NLRB) and Pres. Obama showed their hand as union enforcers. The NLRB barred Boeing from expanding its existing operations in South Carolina because it would take union jobs away from Washington State. Pundits have already exposed Obama’s hypocrisy and violations of the law, along with the clear evidence that workers in states like SC do better than in forced unionization states like Washington. These policy arguments are true and fine, but another revelation of NLRB v. Boeing is that the US is a country that runs on graft.

As businessmen who transact around the world know, most countries run on graft. A salesman is required to donate to the ‘employee holiday fund,’ or a general is concerned for the welfare of some small village that happens to be run by his relative. To do business, palms require grease. The US will not tolerate such overt bribery; indeed US businesses are often punished for paying foreign graft. Still, the NLRB affair proves that the US, in its own sanitized way, is a land of graft.

The cycle of graft at Boeing and other union shops works with unions acting as politicians’ bag men. Boeing is forced to overpay union employees with inflexible work rules. Union employees are forced to pay dues, much of which is then returned to the politicians that enforce the cycle of graft. The only winners are the politicians. While this cycle seems sanitized compared to outright bribery, the result is the same – in order to do business, Boeing must divert money to politicians they do not necessarily support. That is graft.

With SC, Boeing made the obvious choice – expand their manufacturing to a state that has stopped the cycle of graft through right to work laws. SC would allow Boeing to operate more efficiently and become more competitive against Airbus and AVIC, the Chinese newcomer. However, Boeing underestimated Obama’s will to maintain union power, and it may have an empty factory as a result. As a national leader, Obama might have hailed new jobs in any location, but instead he put his union ties forefront, and it does not help that Obama will almost certainly lose SC in 2012. The message is clear – graft first, economic recovery second.

Unions and their politician puppets know that investment, jobs, and families are moving from forced union states to right to work states. Private sector unionization continues to collapse as manufacturing moves to the South. These trends are direct threats to the long term viability of the union graft cycle. Obama’s NLRB action against Boeing is a full force defense of corruption’s status quo. Even if Boeing wins an expected victory over this decision, look for unions to smear the SC factory as unsafe and other federal regulators to scrutinize its products. The Federal Government does not generally lose, and it especially does not like to lose when its politicians’ graft is at stake.