The Game IS Rigged

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerGot a connecting flight? As long as you’re continuing with the same airline, the gate can’t be THAT far away, right?

airportNot anymore. If you’ve flown through Detroit lately, you’re familiar with Delta’s McNamara Terminal. With 121 gates, the terminal boasts of 1.5 miles of moving walkway. That’s the good news. The bad news is that your connecting gate may be 1.5 miles away. Since merging with Northwest, Delta dominates flights through Detroit. Or how about Atlanta? Delta flies out of every one of Atlanta’s seven terminals, spread over nearly seven million square feet—60% larger than the Mall of America

Delta, now the oldest American airline (1924), was built from parts of Chicago and Southern, Northeast, Northwest, Republic, Hughes Airwest, Bonanza, Pacific, West Coast, North Central, American Overseas, National, Western and Standard airlines plus Southern, Pan American World, and Atlantic, Gulf, and Caribbean airways. Ranked by total passengers, Delta was the largest airline in the world in 2014. Read more »

Expand and Reform the Earned Income Tax Credit

Posted by & filed under CGR Staff, Rochester Business Journal.

Pete NaboznyKent GardnerGovernor Cuomo’s push for an increase in the minimum wage has a worthy goal—providing workers with enough income to support their families. That’s a goal most of us support.

Yet as an anti-poverty strategy, a $15 minimum wage has a number of flaws, the sum of which are fatal. First, it is a shotgun blast that helps ALL low wage workers, not just breadwinners of families in poverty. We’re effectively increasing the sales tax on consumers (as prices will rise) and taxes on business (as profits will fall) and distributing the benefit to the teenage children of the middle class as well as people in poverty. Second, it eliminates jobs for the most vulnerable. Those who are the most in need are often the least skilled, thus are the workers who will get passed over for jobs at the higher wage. The risk is greatest in sectors where technology is displacing labor—fast food comes to mind. The impact on employment is most assuredly negative, although we can debate the magnitude. These points (and others) have been made in this space before. Read more »

Canada Shows the Way on Immigration

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerIsolationism is a recurring theme within the United States. An advantage of our size, our rich stock of natural resources, the diversity of our people and our placement between two oceans is that we can afford to be more independent than, say, Belgium, a tiny nation nestled among France, Germany and the Netherlands, with the United Kingdom just over the Channel. Many Americans never visit our continental neighbors, Canada and Mexico, much less cross an ocean to see less familiar lands.

Immigration

Yet the world invades our homes through the media—a visual loop of terror, privation and menace. It also invades our work lives as global competition, supported by new technology, robs many of their occupations and threatens their well being. Read more »

Fear & the Electorate

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner TrumpFear sells. Ask Donald Trump. Or Rochester’s Democrat & Chronicle whose two-line headline of inch-high bolded capitals declared “SECOND ROCHESTER MAN LINKED TO ISIS.”

Terrorism is certainly real and frightening. The self-proclaimed Islamic State (ISIS), with its video beheadings and shrewd use of media (social and otherwise) must be taken seriously. And yet we can control our response to events and must avoid the temptation to overreact.

Consider the December 14 email sent to a number of school districts nationwide. Anonymously threatened with murder and mayhem, New York chose to treat this as a hoax. By contrast, Los Angeles cancelled school for 640,000 students, a decision that affected 1,087 schools. Events proved that NYC chose correctly. Students in LA learned a different lesson that day, that they are at risk and that any fears they may have are justified. “Why would the city have closed schools otherwise?

The D&C wasn’t alone in its breathless reaction to the “second ISIS recruit.” Rochester Police Chief Michael Ciminelli, in consultation with Mayor Lovely Warren, cancelled the scheduled New Year’s Eve fireworks celebration, as the chief wanted the officers on the streets, presumably looking for other terrorists. Like the 640,000 Los Angeles students, Rochester-area residents were put on notice—be afraid. Read more »

What’s happening to the middle class?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner As you’ve read elsewhere and heard from politicians ad nauseum, the middle class in America is shrinking. The consequences for society are significant and should not be underestimated. Let’s first review the facts, as reported recently by the Pew Research Center, then explore the reasons and possible consequences.

Share of adults living in middle-income households is fallingPew observes that the number of adults considered “middle class”—about 121 million—is now equal to the number both above and below them by income. Look back to 1971 and you’ll see a quite different distribution—instead of half, 61% of Americans were in the middle class.

Pause for definition: Pew considers “middle income” as two-thirds to twice the median household income. In 2014, the middle extended from $34,186 to $102,560 for a family of two. A family of four with income between $48,347 and $145,041 is “middle income.” You get the idea.

Middle income families today also take home a smaller share of total income. In 1971, with 61% of the adults, the middle class took home 62% of total income. Now 50% of adults, the middle tier takes home 43% of total income.

The winners, of course, are the upper income households. About 29% of adults live in the bottom tier today, a bit more than the 25% in 1971. The ranks of the upper income group grew substantially, however, from 14% of the total then to 21% today. Read more »

$15 Minimum Wage is Uncharted Territory

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerFightfor15I recently participated in a discussion of Governor Cuomo’s proposed $15 minimum wage on WXXI public radio’s Connections with Evan Dawson. A listener contacted the host, referred to the recently-passed increase for fast food workers, and said, “Hey, I’m a skilled machinist earning $18/hour. Why should someone at McDonalds earn nearly the same?” That’s an interesting question—it points out that the $15 minimum wage could have far more impact than we might think at first blush. First I’ll summarize what research tells us about the obvious and short run impacts, then tentatively explore the broader implications raised by this comment.

On the left, we’re led to believe that a minimum wage rise will significantly improve the well-being of the poor and that employment could actually increase as a consequence. The right declares that jobs for the most disadvantaged would disappear and that the increase might trigger a recession.

An across-the-board minimum wage increase to $15 an hour is very different from the incremental increase we’re experiencing right now in New York. The minimum wage statewide rose to $8.75 at the end of last year and is scheduled to increase to $9 on Dec. 31. The federal minimum wage remains at $7.25. Read more »

State Ed Test Opt-outs: What’s the impact on policy?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner Choose to RefuseDissatisfaction with the NYS Education Department’s testing regime led many parents to allow their children to “opt-out” of state exams last spring. And now state leaders are engaged in a tactical withdrawal. With State Education Commissioner John King off to Washington—replaced by former Florida educator Mary Ellen Elia—Governor Cuomo is placing the blame for the botched Common Core rollout on State Ed’s doorstep and is calling for a reboot in time for his State of the State in January. Board of Regents Chair Meryl Tisch indicates her openness to changing the state’s teacher assessment system, the Annual Professional Performance Review (APPR).

EliaElia has been touring the state on a charm offensive. While noting that the tests are not optional under state law, she recently announced that next year’s math test would have fewer multiple choice questions and the English language arts (ELA) test would include fewer reading passages. Read more »

Confessions of a Free Market Economist

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner I’ve a weakness for dystopian literature (think Cormac McCarthy’s The Road). The premise of these books is a disaster thThe Roadat fundamentally alters the trajectory of the planet. The apocalypse is typically human-caused, some act that taps into our collective guilt about environmental degradation, warlust or technological hubris.

An economist’s dystopia is portrayed in Kurt Vonnegut’s Player Piano. Instead of a despoiled planet or some biological or digital monster, Vonnegut’s first novel portrays a society nearly bereft of work. Set at a thinly disguised General Electric (where Vonnegut once worked), World War III prompts an acceleration in automation, allowing the U.S. to win the war. A decade later, automation has become near total. The only people needed are the very best engineers, who spend their days seeking new efficiencies, displacing yet more human involvement. They’ve been freed from work—utopia, right? Read more »

Faith v. Reason: The Pitfalls of Ideology

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner A friend characterized many policy debates as disputes between “faith and reason.” The political season—particularly the primaries—involves repeated “professions of faith.” Candidates appear before the high priests of their sect and are judged on purity and zeal.

Unfortunately, uncritical faith leads to irrational policy. Consider Republicans’ faith in tax cuts. The lesson of the 1964 income tax cut—a Kennedy initiative, I remind you—was that high taxes can discourage industry and that cutting tax rates can paradoxically yield more tax revenue as the economy expands. When Ronald Reagan followed Kennedy’s lead, the tax rate on the highest earners was nearly 70% and almost surely discouraged enterprise. Cutting taxes was a reasoned response. Now an article of faith in republicanism, raising taxes has become a sinful act that invokes moral sanction. Even closing some of the loopholes that riddle the tax code can be deemed “raising taxes.” Reason responds that taxation is necessary and must be balanced—reductio ad absurdum surely applies: Reducing taxes to zero would be absurd and would lead to a very different society than what we now enjoy. Read more »

A new commissioner takes the helm at NYS Education Department

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner Mary Ellen EliaNewly appointed NYS Education Commissioner MaryEllen Elia will require the wisdom of Solomon, the patience of Job, the confidence of Donald Trump and the guile of Machiavelli to succeed in her new job. The divisions both between and within stakeholder groups have never been deeper.

First, she has to figure out who she’s working for. Is there a more complicated reporting relationship in state government? The Commissioner of Education is hired by the NYS Board of Regents. Which is appointed by the NYS Legislature. Not the NYS Senate or the NYS Assembly, but the entire legislature sitting in joint session. As there are 150 Members of the Assembly but only 63 Senators, the Assembly really makes the decision. Since 2009, the Chancellor (the person who leads the 17-member Board of Regents) has been Merryl Tisch, ally of the formerly-all-powerful Sheldon Silver. After Silver lost his post, the Assembly has shown more independence, replacing two regents who were supportive of Tisch and her endorsement of the Common Core and strong teacher accountability. If you have to report to a committee of 17, you’d better hope that the committee is either unified or strongly led, conditions that appear to be waning. Read more »