The American Dilemma and How We Can Fix It

Posts tagged ‘the economy’

OVERTIME

When I was in grammar school, high school and college I always held part-time jobs.  Of course, these were hourly positions – in other words, I traded my services to my employer in exchange for an agreed upon rate they paid me per hour.  I’m sure everyone is familiar with this arrangement.

What I never understood was the concept of being paid at an “overtime rate”.  Yes, I knew that it was Federal law.  The last time I looked, employers were required to pay overtime (generally one and one half time the normal hourly wage, but it could be as high as twice or three times as much) if an employee worked more than eight hours in one day or forty hours in one week.

I guess the “logic” behind this is that if an employer asked one of his workers to spend that much time on the job, he was penalizing that person from spending time with his family and this was a way of compensating for it.  On one level it does make some sense.

I was never in a position where I worked enough to earn overtime in these part-time jobs so in essence the point was moot to me.  But I do remember a full-time co-worker clucking about the size of her check one week because she had nine hours of overtime pay on it.  Even as a youngster this caused me to think about the concept.

I knew from my experience that when I started work on a given day I was fresh, rested and ready to get the job done.  Generally, I only worked a few hours so nothing really changed for me in terms of my level of energy or focus.  But I also noticed that my full-time counterparts would start yawning as the afternoon progressed.  They had been at work all day and were simply getting tired.  Of course, if they had to work beyond their normal schedule – into “overtime territory” -they would continue to tire further.

I don’t think that it’s an earth shattering statement to say that if you’re tired and less alert the quality of what you do, whether it’s work, sports, driving or any other activity is probably poorer than when you’re awake and more alert.  This was why I never understood the concept of overtime.

What overtime does is reward a person with a premium wage for an inferior work product.

Please understand that I’m not trying to overturn the payment of overtime – merely point out one of its inherent flaws.  But I do know that if I purchased a garment and in the shirt pocket I found one of those little stickers that says “Inspected by No. 4 During Overtime Hours,” I’d probably take it back to the store and exchange it for one that was inspected during that employee’s regular work schedule.

This brings me to a news item that comes from my original home state, New York.  Apparently, PAPD, the Port Authority Police Department is not clear on the value of the services they receive when they pay their employees overtime.

One of the supervising policemen, Edwin Rivera earned in excess of $166,000 in overtime pay in 2011.  This is in addition to his base salary of $108,000 per year.  Not too shabby.  Apparently this gentleman’s services are so invaluable that he has earned over $200,000 per year for each of the last three years.  That’s not too bad for someone who is directing traffic – or more correctly, directing people who are directing traffic.

By contrast, although his base salary is less than theirs, Officer Rivera is reporting more income on his Form 1040 than either New York’s Governor or a member of the New York State Supreme Court.   If you’ve ever been tied up in a traffic jam in New York City you certainly appreciate how annoying that can be.   So I guess directing it is a pretty important job too.

Well, this led me to a thought.  If you accept my premise that overtime pay rewards poorer performance with more money; if you believe the government statistics that our unemployment rate is 8.2% (and who doesn’t believe the government), then there may be a way to get more productivity out of our workforce and at a lower cost, lowering the unemployment rate in the process.

Let’s take a mid-sized company that runs 1000 hours of overtime per week among its clerical staff.  I’m using a figure of $10 per hour as an average in this example.  I think if anything that’s probably low since I just met a young man the other day who was hired by a Strip property to switch out their one and one half million light bulbs for LED’s at a wage of $16.50 per hour.

Since we know that overtime is paid at a minimum rate of one and one half times the base wage, that employer is spending five dollars per hour times 1000 hours per week – a total for the year of nearly $300,000 when you include FICA and Medicare, etc.  Assuming a 40 hour work week, those overtime hours would allow that employer to add 12 full time people – or 25 part time people each working 20 hours per week – and get a better work product.

One of the frustrations that the OWS movement’s members have expressed is that they can’t find a job – despite having spent years getting an education.  I understand that sense of frustration.  And while doing clerical work may not be their life’s ambition, at least it would provide them with some income until things improve and a position opens up in their chosen field of endeavor.

The employer benefits by getting an improved work product at no additional cost.  Any training of the new staff should be minimal since I suspect anyone with a college degree knows how to type and file.

The new employees obviously benefit because they are now earning an income and paying their own way.

The country benefits because we would reduce the rate of unemployment thus alleviating the strain placed on the Unemployment Insurance system at both the Federal and State level.

Of course, this idea is intended solely for use in the private sector.  I suspect that if government tried to implement it, by the time all the supernumeraries were added to oversee the project, we would be further in the hole.

I wrote this post late last night after a long day taking care of things that needed to be done.  In addition, the temperature got up to 106 degrees – and I wilt rather quickly at those levels.  Heat seems to wreak havoc on the few remaining brain cells I have left.

I try in these posts to be creative and thoughtful.  Sometimes I succeed more than at other times.  So if this post is less than up to the standards I try to set for myself, I apologize to my readers.

Please understand, I wrote it on overtime.

CLINTON VERSUS OBAMA

By way of full disclosure let me say that I have voted in every primary and general election since I was twenty-one and eligible to do so.  Despite the fact that I identify more with the stated ideals of one of the two major parties than the other, I have never voted a straight ticket in any of those general election contests.

Both parties have their share of hacks and heroes – and I have always tried to find the best candidate for each office irrespective of whether their name on the ballot had a (D) or (R) by it.  I realize that puts me in the minority of voters.  Now that I think about that, I wonder if that entitles me to some kind of government subsidy.  I’ll have to check that out.

I will never forget doing precinct work, going door to door and speaking with registered voters about their choice for governor in a contest in which then Illinois Gov. Ogilvie was trying to get re-elected versus a populist Democratic candidate, Dan Walker.

I had a voter list of the precinct I was canvassing and knew who were the registered Republicans and Democrats and those who had declared no party affiliation.  My goal was to speak to every one of these voters and get an indication of whom they supported in this race.  Then on election day, to make sure that the Governor’s supporters got out and voted.

I knocked on one man’s door – a registered Democrat – and as I was wearing my Ogilvie button he knew why I was there and wanted to speak with him.  But he was surprisingly receptive and cordial to my interrupting his prime time television viewing.

After a few minutes in which I talked about the things that the governor had done for Illinois I asked him if we could count on his support.  Much to my surprise, the accomplishments I had listed were dwarfed by this man’s praise for the governor and his enumeration of other things that he thought the governor had achieved.

So I said, “Well, sir that’s great.  Then can we count on your vote on election day?”

He said, “No, I have to vote for Walker – even though I think he’s a jerk.  I’m a Democrat and I work for the city.”

I mention this experience for one reason.  So many of us cling to a political sense of partisanship that goes beyond reasonable expectation.  And this is even more true of those politicians who are members of that party.  They will defend to the death the most outrageous and egregious behavior of other members of their party rather than betray their allegiance.  And with that as background, we now come to the subject of this post.

In the last week former President Clinton has twice made statements that conflict with the stated goals and policies of President Obama.  The latest of these was his endorsement of extending the Bush tax cuts – an idea which the current president opposes.

Why this break in Democratic party solidarity?  Certainly, President Clinton knows better.  So is there something else behind this?  I would like to suggest a possible scenario.

We all know that the November, 2012 election is going to be a close one.  In large measure the outcome will depend on how the economy improves or fails to do so.  So what could make the difference in who gets the votes necessary to administer the country for the next four years?

One of the claims coming out of the negative campaign which President Obama is conducting is that things were Utopian under Clinton (a Democrat), got bad under Bush (a Republican) all of which he inherited and that his opponent Mitt Romney (a Republican) was an evil doer as Governor of Massachusetts and as a private businessman following the Bush rather than the Clinton tradition.

Now if former President Clinton (the standard bearer for truth, virtue and prosperity) breaks with President Obama – doesn’t that cast a shadow of doubt for those who can see that the economy simply is not recovering despite government bailouts, massive Federal Reserve intervention and Congressional stimulus plans all endrosed by Obama?

Now into this fray enters Obama’s opponent, Governor Romney.  He has a record both in the public and private sector – of which you might either approve or disapprove.  He has standards which you might or might not share.  And given the tepid reception that he has received even within the Republican party, it would be fair to say that voters view him as uninspiring.  Governor Romney doesn’t have the same media appeal that President Regan or even President Obama have.

So here’s my thought.  In a tight election anything can happen and most likely will.

Here are two possible outcomes.

1)  Obama wins re-election.  We continue down the same path which we have seen for three and one half years or speed down it at an even faster pace.  The country and economy continue to flounder.  We are now at the election of 2016 and the country has woken up to the fact that Obama’s (the Democratic Party’s) way of doing things has been a dismal failure.  No matter how appealing the Democratic candidate might be in 2016, his or her election is impossible.

2)  Romney defeats Obama in November.  He provides competent though uninspiring leadership.  Things get  better – but President Romney never captures the hearts of the American electorate.  He is vulnerable in his re-election bid.  Enter Hillary Clinton as the nominee of Democrats in that election, a woman with certain credentials to her name – most recently as Secretary of State – a position in which she has earned both a title and a certain amount of obscurity.

It is seldom that I can speak honestly of our politicians having a long-term view of things.  But if there is one, it is in how they regard their own futures.  On that topic they are supremely prescient.

Could the reason for former President Clinton’s break with his party’s nominee, the sitting President have anything to do with his wife’s political aspirations?

It’s something to consider.

As a footnote, in the election for Illinois Governor, Dan Walker defeated incumbent Governor Ogilvie by a very narrow margin.  He served only one term as the people of Illinois saw the economic disaster he wreaked on the State in those four years.

After leaving office he was indicted and convicted of bank fraud and served a prison term.

Partisan politics exacts a very expensive toll on each of us.  The people of Illinois came to realize that.  The question at issue this November is will the voters throughout our country have the wisdom to learn from their experience?

JUST MORE GAS

Recently Sen. Bernie Sanders (I-Vermont) spearheaded a letter-signing campaign whose signatories include 68 Members of Congress.  The impetus for the good Senator’s efforts is a report produced by the St. Louis Federal Reserve Bank that, after five years of study, suggest that 15% of the increase in the price of gasoline is due to “excessive speculation.”

As a result of this extensive study, Sen. Sanders is pushing for the CFTC, the federal agency that oversees (one could argue – overlooks) commodity trading to reduce the limit of the number of gasoline contracts that any one individual or institution could hold in order to curb this excess.  Sen. Sanders wants that agency to move faster than their time schedule in evaluating this (they planned on a one year study to accumulate data) – but that is not fast enough for the senator from Vermont.

The CFTC has shown itself to be rather ineffective in curbing “speculation.”  Take the case of MF Global (headed by former NJ Governor and Senator, Jon Corzine).  Here’s a case of a mere $1.6 Trillion missing-in-action which has still gone undiscovered since MF Global mentioned they had a “shortfall” on October 30, 2011.  Amazingly, no one has yet to be charged in this massive fraud.  Compare that with the swiftness the way the fraudsters in Enron were charged.  Some of you who are cynical would perhaps allege that CFTC Chairman Brad Chilton, a Democrat is offering preferential treatment to one of the former leading lights in his party – but I dismiss that as mere conspiracy theory combined with a smattering of political name-calling.

As you may be aware, the Federal Reserve does some of the most profound and excellent research in the world of economics.  You may also be aware that it has a dual-mandate – to set monetary policies to promote “full employment” – (currently in excess of 8%) and to reign in inflation.  (Those of you who purchase groceries or gasoline which have respectively increased by 25% – 30% and 35% – 40% during the last year may decide how good a job they are doing at that).

Of course one of the ways that government reports these inflationary pressures is to report them ex-food and energy.  By those measures the Fed is doing a good job – so much so that our elderly citizens received a 3.6% increase in their Social Security benefits this year – the first increase in three years.  (Interestingly, all Federal employees received an annual cost of living pay increase in each of the three years in which Social Security recipients were over-looked).

But back to Sen. Sanders’ letter.  Let’s assume that the Fed got it exactly right and that 15% of the price increase is due to excessive speculation.  Okay, by my math that leaves 85% of the price increase due to other factors.  Wouldn’t it be more productive to focus our attention to the overwhelming majority of the cause of the problem rather than addressing the periphery?

In the 1980’s with the oil embargo we saw long lines at the gas pumps.  There were days when you could pump gas (if the station had any) based on whether your license plate ended in an odd or even number.  There was a true shortage of imported oil and consequently of gasoline.  So the Congress did something intelligent (did I actually say that?)

They reduced the speed limit on federal highways to 55 mph.  The estimate was that this reduced gas consumption by over thirty percent – twice the amount that “speculation” accounts for under the St. Louis Fed study.  I have yet to hear either Sen. Sanders or anyone else in Congress or the White House offer that simple solution in today’s economic climate.  Why?

But even assuming that implementation and assuming further that the CFTC does enact new rules regulating gasoline “position limits” which actually save us fifteen percent of the impetus in increasing gasoline prices – that still leaves us with 55% of the problem unaccounted for.  What could be the cause of that majority remainders?  Simple.  Lack of a cohesive and well-thought  out and defined energy policy.

We have talked about formulating a comprehensive energy policy for twenty years.  Co-incidentally, Sen. Sanders has served that amount of time in Congress currently as a senator and previously as congressman.  I have done my best to try to review the legislation which Sen. Sanders has introduced during his twenty years of service and have yet to find an energy conservation bill which was authored by the gentleman from Vermont.

Although we have a superfluity of natural gas we are barely utilizing it and CNG is at historic lows in prices.  Switching our utilization of fossil fuel energy to natural gas could significantly reduce our dependence on foreign oil and benefit consumers.  But other than T. Boone Pickens – a man who has spent his whole life in the energy business – no one is talking about this untapped resource.

It would be too simplistic to believe that Sen. Sanders’ motivation in finally making some waves over “over-speculation” is motivated by his making points with the voters of Vermont as he seeks re-election on November 6th.  But if I were a voter in the  “Green Mountain State” I would be asking him for his vision of an energy policy for the country.  In fact, that’s an excellent question to ask all our representatives and senators.  Otherwise, their output is “just more gas.”

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