Laffer: Right-to-Work a Beneficial Economic Tool for States

A few Chamber staffers joined hundreds in attendance at today’s Economic Club of Indiana luncheon featuring Arthur B. Laffer, an economist, author and former member of President Reagan’s Economic Advisory Policy Board (though he also asserted that Bill Clinton was "a great president"). When asked about right-to-work legislation, he lauded Indiana’s efforts to become the 23rd right-to-work state. Back in May, he co-wrote an editorial on the issue in the The Wall Street Journal. An excerpt:

The Obama administration’s National Labor Relations Board filed a complaint last month against Boeing to block production of the company’s 787 Dreamliner at a new assembly plant in South Carolina—a "right to-work" state with a law against compulsory union membership. If the NLRB has its way, Dreamliner assembly will return to Washington, a union-shop state, along with more than 1,000 jobs.

The NLRB’s action, which Boeing will challenge at a hearing next month, is a big deal. It’s the first time a federal agency has intervened to tell an American company where it can and cannot operate a plant within the U.S. It lays the foundation of a regulatory wall with one express purpose: to prevent the direct competition of right-to-work states with union-shop states. Why, as South Carolina Gov. Nikki Haley recently asked on these pages, should Washington have any more right to these jobs than South Carolina?

A recent New York Times editorial justified the NLRB decision by arguing that unions are suffering from "the flight of companies to ‘Right-to-Work’ states where workers cannot be required to join a union." That’s for sure, and quite an admission. We’ve been observing that migration pattern for years, but liberals have denied it’s actually happening—until now.

Every year we rank the states on their economic competitiveness in a report called "Rich States, Poor States" for the American Legislative Exchange Council. This ranking uses 15 fiscal, tax and regulatory variables to determine which states have policies that are most conducive to prosperity. Two of these 15 policies have consistently stood out as the most important in predicting where jobs will be created and incomes will rise. First, states with no income tax generally outperform high income tax states. Second, states that have right-to-work laws grow faster than states with forced unionism.

As of today there are 22 right-to-work states and 28 union-shop states. Over the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls.

For years, unions argued that right-to-work laws were bad for workers and for the states that passed them. But with the NLRB complaint, they’ve essentially thrown in the towel. If forced unionism is better for the economy of a state, why would the NLRB need to intervene to keep Boeing from leaving Washington? Why aren’t businesses and workers moving operations to heavily unionized places like Michigan, New York, Ohio and Pennsylvania and fleeing states like Georgia, Tennessee, South Carolina and Texas?

In reality, the stampede of businesses from forced-union states like Washington has accelerated in recent years. A 2010 study in the Cato Journal by economist Richard Vedder of Ohio University found that between 2000 and 2008 4.8 million Americans moved from forced-union states to right-to-work states. That’s one person every minute of every day.

Right-to-work states are also getting richer over time. Prof. Vedder found a 23% higher per capita income growth rate in right-to-work states than in forced-union states, which over the period 1977-2007 amounted to a $2,760 larger increase in per-person income in those states. That’s a giant differential.

So now the unions concede that this migration is indeed happening, but they say that it is unhealthy and undesirable because workers in right-to-work states are paid less and get worse benefits than the workers in union states. Actually, when adjusting for the cost of living in each state and the fact that right-to-work states were poorer to begin with, a 2003 study in the Journal of Labor Research by University of Oklahoma economist Robert Reed found that wages rose faster in states that don’t require union membership.

Employers that move away from forced-union states mainly do so not to scale back wages and salaries—although sometimes that happens—but to avoid having to deal with intrusive union rules, the threat of costly work stoppages, lawsuits, worker paychecks going to union fat cats, and so on.
 

C-SPAN Founder Lamb Looks at Past & Future of Network at Economic Club

Presidential Medal of Freedom winner and famed journalist Brian Lamb began Wednesday’s Economic Club of Indiana presentation in Indianapolis by poking fun at the C-SPAN networks he created and runs. The audience rolled with laughter as Lamb played satirical journalist Jon Stewart’s commentary on the admittedly dry nature of C-SPAN’s 24-hour congressional coverage.

With all joking aside, Lamb, a Lafayette native and Purdue alum, used archived C-SPAN video to share a variety of Hoosier success stories. Lamb demonstrated the massive archives’ true value with his uncanny ability to connect incredible happenings with the often tiny details of their origin. Lamb recently made C-SPAN’s entire 30 years of video history free and available online in hopes that educators will start making similar connections for young minds.

Going where cameras have never gone before

C-SPAN is regularly credited with gaining unprecedented government access for all media outlets – increasing the public accountability of elected officials. Not all of this access has been welcome or easily won.

“Our whole effort is public meetings and you would be surprised how hard it is to get into public meetings,” Lamb explains.

Lamb described how resistance from congressional leadership has increased over the past couple of years, but stated his belief in the need for private meetings to occur.

The times they are a changin’

Lamb, well known for avoiding even the slightest hint of his personal political views, did comment on broad changes in political media and the increasingly argumentative tone.

“I think we’re probably better off when people are at each other’s throats and challenging each other on bills,” Lamb offered, adding, “The stronger the voices are, the better…”

Lamb spoke of the three networks that dominated news when he was growing up and how much government happened behind closed doors because of the lack of available coverage. He welcomes the advent of blogging and social media outlets such as Facebook and Twitter.

One aspect of media evolution that Lamb views as negative is the increasing impact of money on the trade – pointing to Walter Cronkite’s hiring of a talent agent in 1952 as the first link in this chain.

The next Economic Club event is scheduled for Tuesday, May 4 and will feature Mark Miles, president of the Central Indiana Corporate Partnership discussing economic development in Central Indiana. 

Learn more about the Economic Club of Indiana.

Ivy Tech President Tom Snyder Discusses Your Tax Money at Work

For Tom Snyder’s Economic Club of Indiana speech Tuesday, it was largely a story of numbers (along with some video clips of Ivy Tech graduates telling their personal success stories).

Before going into the details of Ivy Tech’s growth, Snyder shared one statistic that affects all Indiana taxpayers – you are paying half of Ivy Tech students’ tuition. For that reason, Hoosiers need to know what’s happening with the community college, Snyder notes.

The school has seen an enrollment increase of more than 40,000 students since 2008. No longer can high school students decide between college and a high-paying factory job. Employers are calling for everyone to have some postsecondary education – whether it’s a four-year or two-year degree, Snyder states.

He offered this profile of the Ivy Tech student body:

  • Average age is 27
  • 25% are single mothers
  • 60% receive financial aid
  • 10,000 students are on food stamps
  • 25% transfer to a four-year school
  • 25,000 are enrolled at the Indianapolis campus (that’s more students than at Ball State University, Snyder asserts.)

Noting the high number of students who need remediation in math and English, Snyder turned to the audience to prove his point. Through an interactive demonstration, audience members took a five-question quiz based on math placement tests.

The audience used small remote control buzzers to answer questions such as: What is the smallest prime number? (Answer: 2) On most questions, about 60% or less answered correctly.

Snyder reminded the audience that while half of the tuition at Ivy Tech is covered by taxpayers, all of it is covered at the K-12 level. He shared his five steps to success in educating Indiana:

  1. Children are prepared for kindergarten
  2. Third grade students are reading at third grade level
  3. Students decide to go to college while in the eighth grade
  4. Students take math during their senior year of high school (helping prevent the need for remediation)
  5. Graduates continue on to earn a post K-12 credentials

Snyder concludes education is a shared responsibility; everyone is an educator.

After all, you’re footing the bill.

Showing Students the College Door a Little Earlier

In his recent Economic Club of Indiana speech, education reformer Kevin Chavous offered a pretty simple criteria he uses to determine if he will support a new education initiative. If it helps students learn, it’s got his support.

I have a feeling Chavous likes this one. Sure, the details are yet to be played out and a pilot program will debut in 2011in eight states, but letting qualified students leave high school early (after two years) to begin college seems to have strong possibilities. As some excerpts from news articles below explain, others may pass the required tests but opt to stay to engage in more college preparation. Something that offers options and opportunities has the makings of a winner.

Kentucky, Maine, Connecticut, New Hampshire, New Mexico, Pennsylvania, Rhode Island and Vermont will participate in the program, which will be operated through the National Center on Education and the Economy in Washington, D.C. A grant from the Bill and Melinda Gates Foundation will pay for the pilot program.

It’s scheduled to begin in the 2011-2012 school year, with 10 to 20 high schools participating in each of the eight states. It’s not yet known which Kentucky schools might join the program, the state department of education said.

Marc Tucker, president of the National Center for Education and the Economy, said the effort ultimately would "prepare dramatically more students for college success, and greatly reduce the high number of students who now take remedial courses in college."

The program wouldn’t be for everybody, but could appeal to young, high-achieving students who are bored with high school and want to move on, said Cindy Heine, associate executive director of Kentucky’s Prichard Committee for Academic Excellence.

"We’ve been concerned for many years about students who find high school to be not challenging enough or irrelevant for their future plans," Heine said. "This could be a good option, because they could move right on into really relevant material for future jobs or other opportunities."

Each state participating in the initiative would approve as many as five "board examination" programs, such as the the College Board’s Advanced Placement program or the ACT’s QualityCore.

High school students in those states could then take one of the exams at the end of 10th grade. Those who passed would receive a high school diploma, and could choose to enroll as full-time students in any two- or four-year, open-enrollment college in their state without having to take remedial courses, officials said.

Sophomores who passed the exams also could elect to stay in high school and take classes designed to prepare them for selective college enrollment later on.

Braly: Tackle Both Health Care Coverage and Costs

Angela Braly, CEO of the largest health insurance provider in the country in Indianapolis-based WellPoint, wanted to make two things clear during her Economic Club of Indiana speech today. At some point, the debate that is taking place in Washington and around the country has shifted from health care reform to health insurance reform — and it needs to shift back. Braly, in her remarks before a sellout crowd, said:

  • Inefficiencies in health care are driving up costs at an unsustainable rate
  • Current incentives are wrong in the traditional Medicare system with payment for quantity instead of quality — and she fears the same cost shifting that takes place now would occur in a public option plan
  • "We won’t solve the problem by only focusing on the insurance side of the equation."

Braly notes that Massachusetts has made progress in reducing the number of uninsured in its state, but that system costs have increased from $630 million in 2007 to an estimated $1.3 billion this year. The lesson for the federal level, she adds, is that coverage and costs must be tackled together.

An important topic that has been lost in the shuffle, Braly says, is malpractice reform. The fears of legal action "prevent more disclosure and communication about what might have went wrong. There are tests that are probably unnecessary and diagnostic tools used excessively because of the fears of medical malpractice." The arguments, however, have "fallen on deaf ears" on Capitol Hill.

The WellPoint leader opened her remarks by stating she is an advocate for reform, that all people should have insurance coverage and that insurers should offer coverage to all, including those with pre-existing conditions. But to make all of that possible, that shift in focus must take place. In answering questions, she defended her company’s 4.1% profit margin, said that WellPoint and the industry were prepared to continue to innovate and closed with her thoughts on one action item if she were leading the way in Congress.

"Focus on what is driving costs and how we can affect that. There are great discussions happening, but it doesn’t always make it to the bill." Earlier, she had ended her prepared remarks by saying about reform: "It won’t be easy, and it should not be quick."

Braly’s speech is available here and on the Economic Club of Indiana site. John Stossel of ABC News’ "20/20" is up next on October 6.

Lunch, Listen and Learn: Big Names on Economic Club Lineup

One venue, nine top-notch speakers. Congratulations to the Economic Club of Indiana program committee for putting together a very intriguing lineup for the 2009-2010 season.

A strong mix of Indiana leaders (Angela Braly, WellPoint, and Thomas Snyder, Ivy Tech Community College); former Hoosiers coming home (C-SPAN founder Brian Lamb and school reformer Kevin Chavous); more media giants (Steve Forbes, John Stossel and Gwen Ifill); and leaders in business (Patrick Michael Byrne of Overstock.com) and education/politics (Harvard economics professor Martin Feldstein).

All will be at the Indiana Convention Center for the monthly luncheon programs, starting with Braly on September 1. Not familiar with the Economic Club, an Indiana fixture for 35 years? Check out this excerpt from the organization’s 25th anniversary for some history on how it all got started and some of the big events over the years.

Fort Wayne area leaders, we’re not forgetting about you. John Norquist, former Milwaukee mayor and urban design/school reform authority, comes your way on August 28 to wrap up the inagaural summer series. Merrillville and Evansville enjoyed earlier visits from Scott Hodge (Tax Foundation) and Jim Morris (Pacers Sports and Entertainment and longtime civic leader), respectively.

Check out some or all of the upcoming events. Thought-provoking presentations are assured.

Hodge at Economic Club: U.S. Tax Policy More Progressive Than You Think

Scott Hodge, president of the Tax Foundation, spoke to the Economic Club of Indiana today in Indianapolis. He offered some enlightening quotes:

  • "According to the Paris-based Organization for Economic Cooperation and Development (OECD), the U.S. has a more progressive tax system than Sweden or France or many other European countries we associate with oppressive tax systems. The U.S. already places a higher income tax burden on the top 10% of taxpayers than any industrialized country."
  • The irony is this:  "Despite the fact that we try more than any other country to use the tax code to reduce inequality, the OECD found that we have one of the highest levels of inequality among industrialized countries. Only Portugal, Turkey, and Mexico have higher levels of inequality."
  • "According to Gallup, 68% of Americans think wealth should be more evenly distributed and 51% think that should be done via higher taxes on the rich. Yet in 1939, only 39% favored higher taxes on the rich."
  • "One-third of all so-called taxpayers pay zero in income taxes because of the generosity of the credits and deductions that are currently in the tax code. Many of these folks not only don’t have an income tax liability, but they receive generous cash payments through “refundable” tax programs such as the Earned Income Tax Credit. In fact, the government gives out more than $50 billion in these refundable tax credits each year; in essence, we’ve turned the IRS into an ATM machine for welfare benefits." Continue reading

It’s All in the Timing: Kristol, Chicago Fed President on Tap for Econ Club

The Economic Club of Indiana has a who’s who of community volunteers who take their role and the fortunes of the Club most seriously. We can be thankful that’s the case.

While the history of the Club is intriguing, this season’s lineup of speakers is a blockbuster. There were early signs that Eli Lilly chief John Lechleiter was going to use his opening address to tackle a large topic — the company’s future. He did. WFYI has the archived speech.

Coming up: political commentator William Kristol (agree or not with his philosophies, he is an equal-opportunity criticizer) on October 27 (that’s eight days before the election) and Federal Reserve Bank of Chicago President and CEO Charles Evans on November 21. Do you think he’ll have anything to talk about?

Sounds like a good way to spend 90 minutes at lunch time.

Lilly’s Future: Not a Bad Economic Club Start

If you weren’t paying attention to John Lechleiter’s Economic Club of Indiana speech on Wednesday about the future of Eli Lilly and Company, you appear to have been one of the few.

More than 800 people attended the season-opening event at the Indiana Convention Center. Media coverage was far and wide, especially when it was anticipated that Lechleiter would deliver a hard-hitting commentary on the company’s future direction. He delivered.

Industry innovation, the company’s staggering stock price and the negative pharmaceutical image are the "800-pound gorillas" awaiting action. Lilly, like it has during its long history, has a plan and is implementing it. Will it mean fewer jobs in the future? Likely. Will the company remain a local, state, national and international powerhouse? We hope so.

Michael Snyder, principal of The MEK Group, writes an informative weekly column for MidwestBusiness.com. Check out his summary for a good review of what Lechleiter had to say.

Next up for the Economic Club: William Kristol on October 27, eight days before the election. Sounds like another great one.