Tuesday, August 12, 2014



Business Startups Dwindle as Government Jobs Thrive

Rabi Molla at the Wall Street Journal notes, "Nearly 1 in 6 jobs in the U.S. are working for the government, more than any single private industry." The number actually peaked in 2009, then took a bit of a nosedive that caused panic—not in the streets, but in punditry hallways. But it's rising again, largely because of state and local government hiring. By contrast, at the beginning of the 20th century, "one out of 24 workers was on a government payroll," according to an economic paper published in 1949, with only 1 out of 15 taking goverment paychecks right after World War I.

So, blips aside, the state has been a growth industry.

The people taking government jobs certainly aren't matched by counterparts starting new businesses. The U.S. economy is increasingly dominated by older, established firms, according to a new Brookings Institution study.

Like the population, the business sector of the U.S. economy is aging. Our research shows a secular increase in the share of economic activity occurring in older firms—a trend that has occurred in every state and metropolitan area, in every firm size category, and in each broad industrial sector.

The share of firms aged 16 years or more was 23 percent in 1992, but leaped to 34 percent by 2011—an increase of 50 percent in two decades. The share of private-sector workers employed in these mature firms increased from 60 percent to 72 percent during the same period. Perhaps most startling, we find that employment and firm shares declined for every other firm age group during this period.

What's causing the ossification of American enterprise? Authors Ian Hathaway and Robert Litan say "a secular decline in entrepreneurship is playing a major role." What they refer to as "business dynamism" has been on the decline for three decades.

Hathaway and Litan don't have a clear explanation for the decine in entrepreneurship, though they note that business failure rates have been on the rise for younger firms, while flat for already established businesses. That suggests that starting and running a new firm has become more difficult than in the past.

Hathaway and Litan refer to this development as "especially disturbing" because of the innovative breakthroughs made by startups. They suggest we "find ways to encourage and make room for the startups of the future," but don't go into detail about what that means.

It's worth pointing out here that the United States has been sliding on both major international rankings of economic freedom. The Index of Economic Freedom puts the U.S. in 12th place, behind Estonia, and notes, "The U.S. is the only country to have recorded a loss of economic freedom each of the past seven years."

The Fraser Institute's Economic Freedom of the World: 2013 Annual Report (PDF) is even tougher, noting that the U.S. slid from third place to 19th place from 2000 to 2011. While there was widespread slippage, the biggest problem, noted the report, was with eroding government respect for legal systems and property rights.

Is declining economic freedom smothering the entrepreneurial spirit that once made the United States such a hotbed of innovation? That looks suspiciously likely. And we'll all suffer if, instead of creating new businesses, Americans flock to safe government sinecures instead—paid for by whoever remains in the sclerotic private sector.



Live by Big Government, Die by Big Government

Given that our commander in chief is a surprisingly decent firearm salesman, it’s a little odd that one of America’s most prolific gun manufacturers might soon be facing an agonizing financial death. But, that’s exactly where Colt’s Manufacturing Company is headed if things don’t change drastically.

It takes a very specialized form of failure for a gun company to miss out on the President Obama-inspired run on guns, the “assault weapon” craze of the 2000s, and the proliferation of concealed carry in the 1990s, but that’s exactly what happened. And, worse, this isn’t Colt’s first foray into fiscal failure.

In fact, this tendency of Colt to stumble onto hard times has a name in the industry: It’s called the “Colt curse.” It’s been around since Samuel Colt first bankrupted his hopeful arms company in the 1830s. God may have made man, and Samuel Colt may be credited with making men equal; but, it has always been an uphill battle. It turns out Colt was pretty good at making guns, but he was a failure at marketing and selling his contribution to the world of weaponry.

Lucky for Colt (and the generations that would later benefit from his contribution to the industry), the war with Mexico broke out in the 1840s. The aspiring gunsmith quickly found an audience in the U.S. Army for his innovative firearm designs. Realizing the full potential of crony-capitalism, the entrepreneur almost went broke entertaining politicians, generals, and frontiersmen. He was, undoubtedly, the Solyndra lobbyist of his day. With the helpful contract from America’s military, Colt quickly etched his name in America as the creator of the “gun that won the West.”

The company, however, was never quite capable of shaking their addiction to government contracts. In fact, it quickly became a centerpiece of their business model.

In the 1970s firearm manufacturing in the U.S. was adopting the model of America’s automotive giants. Unionization was prolific, and innovation was an afterthought. It didn’t work out for Detroit, and it almost ended in disaster for the firearm industry as well.

While most American companies scrambled for ways to avoid the Union-led decline into mediocrity, Colt happily hummed along with the help of military contracts and large government shipping orders.

The iconic manufacturer’s business was booming, right up until the moment that unions decided to do what they do best: go on strike. By 1988, the company had lost a number of high-dollar contracts, and the end of their beginning was clearly at hand.

In the decade to follow, their competitors warmly embraced America’s new-found fascination with the civilian market, concealed carry, and home defense. Colt, on the other hand, decided to take a more pragmatic approach. And, by pragmatic, I mean liberal approach:

A wealthy industrialist from the heart of a non-gun-owning Manhattan family decided he could steer the company to better times. With a man who knew nothing about guns at the helm, Colt embarked on their reimagined path to prosperity by introducing (and supporting) the idea of smart guns and federal gun permits.

As strange as it might seem, telling your most ardent customers that they should ask a fickle and hostile federal government for permission to handle your product isn’t a great business practice.

The new CEO (the last one was fired pretty quickly) still decided to put civilian ownership on the back-burner as he focused on appealing to the same Pentagon cronies that nearly drove the company into the trash-bin of history. There are only a handful of industries that relish the advent of war, and they all have something in common: they work for the Pentagon. As the Iraq War picked up, and with their sudden boom in government contracts, it looked like good times might finally be on the horizon.

In fact, good times seemed inevitable. Well, at least in theory. But if Colt had proven anything in its 178 years of existence, it’s that turning a profit is kinda tough sometimes. The company’s decision to whittle their civilian division down to a few obligatory 1911s wasn’t really doing them any favors, given that their competitors were rushing to fill the demand of a gun-hungry republic.

While Vice President Joe Biden, Obama, and Senate Majority Leader Harry Reid (D-NV) rambled on about gun control, Colt casually dismissed the idea of focusing on the civilian market. Heck, it was only within the last few years that Colt finally got around to deciding that a pocket pistol (the .380 Mustang) might be a good idea.

Today, the industry is seeing a decline from last year’s boom in sales. Colt’s civilian offerings are proving to be “too little, too late” for a market that is currently saturated with high-quality alternatives. And so, with a very specialized degree of failure, Colt has managed to paint itself into near bankruptcy. Their corporate bonds are rated as junk, and they’re continuing to pile on millions of dollars’ worth of debt.

The company might still survive. After all, they represent a history, a quality, and a heritage that is rare in today’s world. Their guns are quality products (even if you do pay a premium for those ponies on the slide) and their reputation is strong. But the company embraced too many values of the Left to survive long in a world that has proven to be hostile to their industry.

In the end, there are really only three things that are responsible for killing Colt: cronyism, support for gun control, and unions. You would think a gun manufacturer would know better than to sleep with government. I guess nobody shared that lesson with Colt’s management.



Federal Court Refuses To Block N.C. Voter ID Law

At Netroots Nation, liberals slammed voter ID laws, labeling them something akin to “Jim Crow” laws. Yesterday, the U.S. District Court For The Middle District Of North Carolina refused to block the state’s voter ID law, which will be enforced in the upcoming midterm elections.

Here's what the Court said in their opinion:

"After careful consideration, the court concludes that Defendants’ motion for judgment on the pleadings should be denied in its entirety. Plaintiffs’ complaints state plausible claims upon which relief can be granted and should be permitted to proceed in the litigation. However, a preliminary injunction is an extraordinary remedy to be granted in this circuit only upon a “clear showing” of entitlement.

After thorough review of the record, the court finds that as to two challenged provisions of SL 2013-381 [ NC’s voter ID law], Plaintiffs have not made a clear showing they are likely to succeed on the merits of the underlying legal claims. As to the remaining provisions, the court finds that even assuming Plaintiffs are likely to succeed on the merits, they have not demonstrated they are likely to suffer irreparable harm - a necessary prerequisite for preliminary relief - before trial in the absence of an injunction. Consequently, the motions for preliminary injunction and the United States’ request for federal observers will be denied. This resolution renders the motions to exclude expert testimony moot."

Over at PJ Media, J. Christian Adams, who served as an election lawyer in the Voting Rights Section at the U.S. Department of Justice, wrote that the DOJ actually spent tax dollars on a "turnout-doesn’t-matter-because-life-is-harder" expert to help make their argument:

"The Justice Department had actually argued that even if black voters turned out at higher rates under voter ID (which they do), because blacks have to take the bus more and their life is generally harder, then voter ID and curtailing early voting violates the Voting Rights Act....

The Justice Department actually used your tax dollars to pay for an expert to introduce the turnout-doesn’t-matter-because-life-is-harder argument. Enterprising folks will submit a Freedom of Information request to find out how many tens of thousands of dollars that nonsense costs you.

Hans von Spakovsky, former DOJ voting official, says it is going to be a very bad weekend for lawyers at the Justice Department Voting Section. “Eric Holder has been beaten now twice in the Carolinas on voter ID. Today’s ruling shows just how wrong he is when it comes to election law.”



Three Reasons Why It's No Surprise Hamas Violated the Latest Ceasefire

I think they continue to attack because they are enraged by the neutering of their tunnel strategy -- JR

(1) By my unofficial count, this is the seventh ceasefire or truce that Hamas has rejected, violated, or broken since the current conflict began last month. The genesis of this war, by the way, was the kidnap and murder of three Israeli teenagers, perpetrated by a Hamas-funded terrorist cell in the West Bank. When Israeli entered the West Bank in search of the perpetrators (local Palestinians pelted the ambulance carrying the boys' bodies with rocks), Hamas stepped up its rocketing campaign targeting Israeli civilians. That bombardment has been going on for years, ticking up ever since Israel unilaterally pulled out of Gaza in 2005.

Israel responded with force, culminating in the land incursion aimed at destroying Hamas' network of terror tunnels -- the purpose of which was to bypass Israel's weapons blockade, and to allow militants to slip into Israel to carry out attacks. The tunnels were built over a period of years, using supplies earmarked for projects such as schools and infrastructure construction. Child labor was reportedly exploited to built the passageways, reportedly resulting in approximately 160 deaths during the treacherous process.

(2) Hamas explicitly warned that it was preparing to resume its rocketing as soon as the latest 72-hour ceasefire expired. In fact, it looks like a miscue may have accidentally blown up a few of their own men in preparation for the resumption of hostilities. They ended up not just breaking the pause, but outright violating the temporary truce. Again. Perhaps they don't have functioning clocks, or perhaps they had itchy trigger fingers, or perhaps Hamas doesn't have control over the hive of violent radicals that pervade the Gaza strip.

Israel, the Palestinian Authority and the Egyptian government were all in favor of an unconditional extension of the truce. Hamas said no. Israel is now fighting back.

By the way, a New York Times analysis of recent casualties in Gaza determines that the most disproportionately represented demographic group among the dead are…young men in their 20's -- a.k.a. the people most likely to fit the militant profile. Women and children under the age of 15, meanwhile, "were the most underrepresented." Why, it's almost as if Israel has been going to extraordinary lengths to narrowly target terrorists and avoid civilian collateral damage -- even as Hamas uses the latter group as human shields, firing salvos from crowded neighborhoods, storing rockets inside UN schools, and using a crowded hospital as a command center.

(3) The most depressing and most elementary reality is this: The Hamas radicals don't want peace. Their demands are slippery and ever-shifting; most recently, they're insisting that Israel lift its blockade in such a way that would allow Hamas to re-arm, unfettered, so they could gear up for the next war. (Israel already allows food, medicine, fuel, and legitimate commercial goods to pass through. Israel also provides much of the strip's electricity).

The spokesman that Hamas has selected to represent them in Western media has been unable to answer questions about his own insane blood libel against Jews, nor has he backed away from they group's charter, which openly calls for genocide. If Hamas would simply acknowledge Israel's right to exist as a Jewish state and renounce violence, they would have peace. But they don't. People who reflexively blame Israel for the other side's genocidal hatred are flat-out siding with terrorism and barbarity over pluralism, peace and democracy.



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