Tim Pawlenty’s economic plan

GOP presidential candidate Tim Pawlenty, the former governor of Minnesota, laid out an ambitious and unusually specific plan to get the economy going again:

“Growing at 5 percent a year rather than the current level of 1.8 percent would net us millions of new jobs, trillions of dollars in new wealth, put us on a path to saving our entitlement programs,” Pawlenty said in his first detailed speech on economic policy since he formally declared his White House ambitions a little over two weeks ago.

The economy averaged 4.9 percent growth between 1983 and 1987, and grew at a 4.7 percent rate between 1996 and 1999. A sustained annual growth of 5 percent for a decade would be unprecedented in modern times. . . .

Pawlenty said such growth eventually would translate to $3.8 trillion in new tax revenue that would reduce the deficit by 40 percent.

Pawlenty’s plan also would simplify individual tax rates to just three options and cut taxes on business by more than half. His cuts go further than House Republicans’ recent proposal, which the Tax Policy Center said would cost about $2.9 trillion over the next decade. . . .

In a speech heavy on specifics, Pawlenty proposed a three-tier income tax system:

• The estimated 45 percent of U.S. households that did not pay income taxes in 2010 would see no change in their tax rates.

• Individuals would pay 10 percent tax on the first $50,000 of income. Couples earning $100,000 would also pay that rate.

• “Everything above that would be taxed at 25 percent,” Pawlenty said.

He said he wants to cut business taxes from the current rate from 35 percent to 15 percent, and he called for dismantling vast pieces of the government.

“We can start by applying what I call the Google Test,” he said. “If you can find a service or a good on Google or the Internet then the federal government probably doesn’t need to be doing that good or service. The post office, the government printing office, Amtrak, Fannie Mae and Freddie Mac were all built for a different time in our country and a different chapter in our economy when the private sector did not adequately provide those services. That’s no longer the case.”

via Pawlenty’s economic plan aims for 5 pct. growth – Yahoo! News.

Democrats are savaging the plan, calling it “ridiculous.”  But what do you think?

30% of health plans to be dropped under Obamacare

Another reason the new national health care bill will have a hard time working:

Once provisions of the Affordable Care Act start to kick in during 2014, at least three of every 10 employers will probably stop offering health coverage, a survey released Monday shows.

While only 7% of employees will be forced to switch to subsidized-exchange programs, at least 30% of companies say they will “definitely or probably” stop offering employer-sponsored coverage, according to the study published in McKinsey Quarterly.

The survey of 1,300 employers says those who are keenly aware of the health-reform measure probably are more likely to consider an alternative to employer-sponsored plans, with 50% to 60% in this group expected to make a change. It also found that for some, it makes more sense to switch.

“At least 30% of employers would gain economically from dropping coverage, even if they completely compensated employees for the change through other benefit offerings or higher salaries,” the study says.

It goes on to add: “Contrary to what employers assume, more than 85% of employees would remain at their jobs even if their employers stopped offering [employer-sponsored insurance], although about 60% would expect increased compensation.”

via Firms to cut health plans as reform starts: survey – MarketWatch.

So if that happens, the Democrats will have no choice but to nationalize the whole thing, if they can.  Or would it be worth it to be paid more money and buy one’s own health insurance, especially if the government makes it cheap?

China dumping U.S. treasuries

What if everyone stops lending the U.S. government money?

China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of the Treasury report linked here.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S. Treasury securities. Thus, until October, China’s overall holdings of U.S. debt continued to increase.

Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March.

via China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills | CNSnews.com.

India companies hiring Americans for call centers

Free market economics has a way of evening things out.  A country with low labor costs can attract lots of employers, who bid up the price of labor.  And as that country prospers, it may start looking for cheaper labor in countries that have high unemployment.  Some of that appears to be happening, as call center companies in India are opening up operations in the United States:

India’s outsourcing giants — faced with rising wages at home — have looked for growth opportunities in the United States. But with Washington crimping visas for visiting Indian workers, some companies such as Aegis are slowly hiring workers in North America, where their largest corporate customers are based. In this evolution, outsourcing has come home.

Capuana, a manager for Aegis in New York, motivates this U.S. office with dress-down days and the prospect that workers could, one day, earn a stint training call center workers in Goa, India. One of his tasks is to staff 176 cubicles, where workers make or take calls for customers of prescription drug plans or Medicare contracts and enter and verify information. The pay runs $12 to $14 an hour, with bonus checks of up to $730 a month.

“Our recruitment model is simple,” says Capuana, who played Division III college football, wears rosary beads on his wrist and has a picture of Jesus above his desk. “I don’t care if you come from Park Avenue or the park bench. If you can do the job, we want you.”

Aegis, a subsidiary of India’s Essar Group, an energy, telecom and metals conglomerate, says it’s pioneering the next generation of outsourcing: putting the work close to its global customers. Its executives call the practice “near-sourcing,” “diverse shoring” and, sometimes, “cross-shoring.”

Madhu Vuppuluri, chief executive and dealmaker for the Americas division of Essar Group, remembers watching outsourcing grow in India in the late 1990s and early 2000s and thinking that the decline of U.S. call centers was overdone. He persuaded the billionaire Ruia brothers, Essar’s Indian owners, to let him make a counterintuitive bet: In 2000, he bid on the bankrupt assets of Telequestion, a 500-person call center in Arlington, Tex., for $2.5 million.

That led to other acquisitions in the United States and abroad. Today, Aegis employs 50,000 of Essar’s 70,000 employees on several continents. About 5,000 people work at nine U.S. call centers. Aegis, which is on the hunt for more acquisitions, has said it aims to triple its U.S. head count, to more than 15,000.

via As Indian companies grow in the U.S., outsourcing comes home – The Washington Post.

The new age of fossil fuels

Michael Lind, at Salon, no less, explodes the conventional wisdom:

Are we living at the beginning of the Age of Fossil Fuels, not its final decades? The very thought goes against everything that politicians and the educated public have been taught to believe in the past generation. According to the conventional wisdom, the U.S. and other industrial nations must undertake a rapid and expensive transition from fossil fuels to renewable energy for three reasons: The imminent depletion of fossil fuels, national security and the danger of global warming.

What if the conventional wisdom about the energy future of America and the world has been completely wrong?

As everyone who follows news about energy knows by now, in the last decade the technique of hydraulic fracturing or “fracking,” long used in the oil industry, has evolved to permit energy companies to access reserves of previously-unrecoverable “shale gas” or unconventional natural gas. According to the U.S. Energy Information Administration, these advances mean there is at least six times as much recoverable natural gas today as there was a decade ago.

Natural gas, which emits less carbon dioxide than coal, can be used in both electricity generation and as a fuel for automobiles.

The implications for energy security are startling. Natural gas may be only the beginning. Fracking also permits the extraction of previously-unrecoverable “tight oil,” thereby postponing the day when the world runs out of petroleum. There is enough coal to produce energy for centuries. And governments, universities and corporations in the U.S., Canada, Japan and other countries are studying ways to obtain energy from gas hydrates, which mix methane with ice in high-density formations under the seafloor. The potential energy in gas hydrates may equal that of all other fossils, including other forms of natural gas, combined.

If gas hydrates as well as shale gas, tight oil, oil sands and other unconventional sources can be tapped at reasonable cost, then the global energy picture looks radically different than it did only a few years ago. Suddenly it appears that there may be enough accessible hydrocarbons to power industrial civilization for centuries, if not millennia, to come.

So much for the specter of depletion, as a reason to adopt renewable energy technologies like solar power and wind power. Whatever may be the case with Peak Oil in particular, the date of Peak Fossil Fuels has been pushed indefinitely into the future. What about national security as a reason to switch to renewable energy?

The U.S., Canada and Mexico, it turns out, are sitting on oceans of recoverable natural gas. Shale gas is combined with recoverable oil in the Bakken “play” along the U.S.-Canadian border and the Eagle Ford play in Texas. The shale gas reserves of China turn out to be enormous, too. Other countries with now-accessible natural gas reserves, according to the U.S. government, include Australia, South Africa, Argentina, Chile, France, Poland and India.

via Everything you’ve heard about fossil fuels may be wrong – War Room – Salon.com.

The author goes on to deal discuss global warming concerns and how environmentalists are trying to shut down these new abundant sources of energy. But his conclusion is that the age of fossil fuels is just beginning.

Go East, young scientist

The United States is now facing a brain drain that threatens its traditional scientific and technological leadership, as more and more American scientists are heading for greater opportunities in China and other ambitious countries.  So says scientist Matthew Stremlau:

Twenty years ago, most molecular-science PhD graduates in the United States went on to start up their own labs at universities across the country. These labs drive innovation and keep the United States globally competitive. Today, however, only a handful of my friends will go on to run their own labs, though more would like to. Some go into industry or consulting or law. Others leave science altogether.

As public funding for science and technology shrinks, it just isn’t possible for people who want to become scientists in America to actually become scientists. So when a friend of mine who recently received her PhD in molecular biology asked for some career advice, the answer was easy. Go to China, I told her. . . .

The global science landscape is radically different from what it was when I started graduate school 10 years ago. Opportunities for cutting-edge science are sprouting in many other countries. China stands out. But there are plenty of others. India, Brazil and Singapore built world-class research institutes. Saudi Arabia aggressively recruits researchers for its King Abdullah University of Science and Technology. With a staggering $10 billion endowment there — larger than MIT’s — American scientists no longer need to suffer through Boston’s endless winters. Not to be outdone, Abu Dhabi opened the Masdar Institute of Science and Technology in 2009. These emerging powers have a voracious appetite for good scientists. So they’re trying to poach ours.

I spent nearly two years doing molecular biology research in China. I have worked at the National Laboratory for Agrobiotechnology and at Peking University in Beijing. The Chinese are serious about science. Government spending on research and development has increased 20 percent each year over the past decade. Even in the midst of the financial crisis of 2008-09, China continued to bet big on science and technology. China now spends $100 billion annually on research and development. The Royal Society, Britain’s national science academy, estimates that by 2013, Chinese scientists will author more articles in international science journals than American scientists do.

Chinese labs are cutting-edge intellectual melting pots of Chinese scientists trained in the East and in the West. This environment of creativity and hard work will produce big breakthroughs. Chinese universities aggressively recruit foreign scientists. The start-up packages can be generous and in some cases comparable to what a young faculty member receives in this country. In the future, China might be a better option for U.S. scientists desperate to fund their research. . . .

Talented scientists in this country often fall through the cracks because they can’t get funding. Agencies are deluged with applications and often have to reject as many as 90 percent of the proposals they receive. Unfortunately, the situation is likely to deteriorate further as budget cuts limit the resources available for research. So I’ve started encouraging my friends to think more creatively about their careers. Go to China, I tell them. Or Singapore or Brazil or the Middle East. If the United States can’t fund its scientific talent, find a country that will.

via Go to China, young scientist – The Washington Post.

Is this more evidence of American decline?  Or does it really matter in a global economy?