Wal-Mart is the new General Motors for the Middle Class

Posted by PITHOCRATES - February 22nd, 2014

Week in Review

The left hates Wal-Mart.  Because they are nonunion.  And their low prices make it difficult for small mom & pop shops to stay in business charging their customers higher prices.  But being nonunion lets them hire more people.  And their low prices allow people to buy more with their paychecks.  Good things.  Yet the left hates Wal-Mart.  Because they would rather have union jobs even if it means fewer jobs.  And higher prices.  Despite Wal-Mart being the best thing for the middle class since General Motors (see Walmart and the middle class, sinking together by Rick Newman posted 2/21/2014 on Yahoo! Finance).

It was once General Motors (GM) whose fortunes reflected those of the middle-class Americans who bought its products. Now, that bellwether Goliath is Walmart (WMT)…

A chronically weak job market is pinching lower-income consumers — some of whom can’t even afford to shop at Walmart anymore.

The digital revolution has left Walmart at a disadvantage against etailers such as Amazon (AMZN), which has 7 times’ Walmart’s online revenue, and a much smaller physical footprint to manage.

With Walmart tied so closely to the fortunes lower-middle-class Americans, it’s no exaggeration to say that, as goes Walmart, so goes America. And vice versa…

A century ago, Henry Ford famously doubled the pay of his workers — to $5 per day — to reduce turnover and make his production lines more efficient. That move had the added benefit of raising living standards for Ford workers and helping establish the modern middle class.

Even though Walmart is the nation’s largest employer — with 1.3 million U.S. workers — it seems highly unlikely it could achieve anything similar to what Henry Ford did. Global competition gives retailers little room to raise costs without giving away pricing advantages. And fading demand for lesser-skilled workers lacking a college degree leaves few companies with a real incentive to raise wages, aside from earning a bit of public goodwill. Before Henry Ford doubled wages, his workers often left for other blue-collar jobs in a booming industrial economy. Most Walmart workers lack such options.

Amazon is nonunion, too.  But Amazon founder, Jeff Bezos, donated $2.5 million to support gay marriage in Washington State.  Donates primarily to Democrat candidates.  And supports an Internet sales tax (see What Are Jeff Bezos’s Political Leanings, and How Might They Shape the Washington Post? by David A. Graham, The Atlantic, posted 8/5/2013 on the National Journal).  So there are things the left likes about Amazon.  But they only have about 100,000 employees to Wal-Mart’s 2.2 million.  Which is why the left has an all out assault on Wal-Mart.  Because they want to unionize those 2.2 million.  For 2.2 million people would provide a lot of union dues.

Unionization or a higher minimum wage does not build a strong middle class.  A strong economy does.  That’s what helped Henry Ford raise his wages.  To keep his best workers from quitting so they could take higher paying jobs elsewhere.  Which is how people earn more money.  When an economy is so robust that there are more jobs than people to fill them.  Requiring employers to pay more to attract workers.  Not by forcing employers to pay more.  Especially during a weak economy.  When a business’ margins couldn’t be thinner.  Leaving them unable to raise wages without cutting workers.  Which the left will be glad to see.  Lost jobs.  As long as those remaining are union jobs.



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Flying is Quicker and more Cost Efficient than Passenger Rail

Posted by PITHOCRATES - February 8th, 2014

Week in Review

Politicians everywhere want to build high-speed rail.  Why?  Because there are maybe only 2 high-speed rail lines in the world that operate at a profit.  All other passenger rail requires government subsidies.  Because the massive capital and operating costs for passenger rail are so great they cannot recover them via ticket prices.  And high-speed rail is the costliest of all.

So passenger rail requires new taxation to support it.  And politicians like new taxes.  Also, building passenger rail requires an enormous infrastructure.  Built and maintained by lots of people.  Union people.  Something else politicians love.  Rewarding their union friends with lots of new union jobs.  Which is why politicians love high-speed rail.  They get a lot ‘thank you’ votes for all that government spending.  No matter how costly or inefficient passenger rail is as a means of transportation.  As we can see here (see I Spent 28 Hours on a Bus. I Loved It. by Eric Holthaus posted 2/4/2014 on Slate).

traveling by plane car train bus R1

The infrastructure between point A and point B for cars and buses is already there.  Paid for with fuel taxes.  Planes need no infrastructure between point A and point B.  But trains do.  A very costly infrastructure.

Trains carry more people than buses.  But not as many as planes.  Which means the far greater cost of passenger rail is divided by fewer ticket purchasers.  Whereas the less costly flying is divided by more ticket purchasers.

Planes can fly around 500 mph.  Passenger rail can travel up to 100 mph on some sections of track.  While high-speed rail travels at speeds of just under 200 mph on dedicated (and very expensive) track.

You add these points together and it’s little wonder that traveling by train costs about 20% more than flying.  While taking 5.8 times as long.  Or a little less for high-speed rail. Making the plane the undisputed champion of long-distance travel.  And it works without massive government subsidies.  Which is the best kind of travel there is.  The kind where the people traveling pay for their travels.  And not everyone else.  As is the case with passenger rail.



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The Fed’s Quantitative Easing keeps the Big Three Building Cars

Posted by PITHOCRATES - December 29th, 2013

Week in Review

Governments love it when people buy houses and cars.  Because building houses and cars generates a lot of economic activity.  So much economic activity that central banks will flood their economies with money to keep interest rates artificially low.  To encourage people to go into great debt and buy these things.  Even if they don’t want them.  Especially if they don’t want them.  Because if you add in people buying things who don’t want them with the people who do that’s a lot of economic activity.  Which is why central banks keep interest rates artificially low.  To get people to buy things even when they don’t want them.  But do because those low interest rates are just too good to pass up.

Automotive jobs are union jobs.  At least with the Big Three.  Which is another reason why the Federal Reserve (America’s central bank) keeps interest rates artificially low.  To save union jobs.  Because they support Democrats.  And the Democrats take care of them.  By enacting legislation that favors union-built cars.  Placing tariffs and quotas on imports.  And doing whatever they can to encourage the Fed to keep interest rates artificially low.  So the Big Three keep building cars with union labor.  Even if they’re not selling the cars they build (see Spending on new cars may break record in December by Joseph Szczesny posted 12/25/2013 on CNBC).

Total vehicle sales are expected to be up at least 4 percent year over year, with the industry anticipating all-time record consumer spending on new vehicles, according to a forecast.

While new car sales started the month slowly, they are expected to finish strong, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive. That would be a welcome development for industry planners concerned about a recent bulge in dealer inventories, which has led several manufacturers to trim production…

Vehicle production in North America through November is up 5 percent from the same time frame last year, with nearly 700,000 additional units. Even as inventory has increased, production volume remained strong last month, at 1.4 million units—a 4 percent increase from November 2012.

But there are some concerns that the industry may be turning up production faster than the market can handle. General Motors, Ford Motor and Chrysler continued to build inventories last month, and their combined supply climbed from 87 days at the beginning of November to 93 days by the end…

Some of the buildup can be traced to dealers’ ordering pickup trucks and utility vehicles before the planned shutdowns for model changes at GM and Ford. But those two makers also have decided to take more downtime at some of their plants this month in an effort to reduce excess stock.

Automotive news is often contradictory.  Sales are up they tell us.  Even when inventories are growing.  A sign that sales are not growing.  Because when people buy more cars than they build inventories fall.  But when people buy fewer cars than they build inventories rise.  So when inventories are rising typically that means sales are falling.  So this isn’t a sign of a booming economy.  But one that is likely to slip into recession.  Especially when the Fed finally begins their tapering of their bond buying (i.e., quantitative easing).  The thing that is keeping interest rates artificially low.  And once they do those inventories will really bulge.  As they do during the onset of a recession.



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To avoid Detroit’s Fate Chicago looks at Revenue Generation from Speed Cameras

Posted by PITHOCRATES - August 11th, 2013

Week in Review

The City of Detroit bankruptcy shows how the massive costs of a city’s public sector are strangling these cities.  Promises of generous pensions for a long retirement and free health insurance up until you die are just promises these cities can’t pay for.  So some (like Detroit) raised their tax rates so high that people left the city in droves.  Further reducing the tax base.  While other cities turn to other revenue generating schemes (see Speeders were plentiful in camera test run by David Kidwell and Bill Ruthhart posted 8/12/2013 on the Chicago Tribune).

As Mayor Rahm Emanuel rolls out his long-delayed speed camera plan, new numbers his office released suggest that drivers who speed in Chicago could rack up way more in fines than a cash-starved City Hall initially projected.

The mayor had hoped to bring in $30 million this year. But results from a monthlong test of the automated camera system indicate the city could reap well into the hundreds of millions of dollars in the program’s first year.

City transportation officials argue that estimate is overblown, but the test period statistics the mayor’s office released Friday reinvigorated critics who argue that the program is more of a cash grab than the child safety measure Emanuel sold it as…

City transportation officials put estimated first-year revenues at $40 million to $60 million, arguing that several factors will cut down on the number of tickets actually issued.

For starters, they argue that it’s incorrect to estimate revenues based on the test program. They suggest the money will never reach into the hundreds of millions of dollars because of a number of factors. The most important: the fast learning curve of Chicago drivers…

Ald. Leslie Hairston, 5th, who voted against the speed camera program, said the number of speeders captured on the test cameras supports her insistence that the main motivation is to generate more city revenue.

“I guess this is just going to be a city for wealthy people, that’s where we’re headed,” she said…

The speed camera rollout was scheduled for closer to the start of the year, but it was delayed after City Hall came under scrutiny following Tribune reports of an alleged bribery scandal involving its 10-year-old red light camera program.

Making the streets safer for children is a noble goal.  But like their red light camera program it’s all about the Benjamins.  The money.  And they love cameras because they can rake in the money without having to put more costly public sector workers (i.e., cops) onto the streets.  That is, they’re outsourcing these costly union jobs to machines.  To minimize their labor costs.  Just like corporations try to minimize their labor costs.  Because union workers are very, very expensive.

But like every government revenue policy they’ve overstated the expected revenue from these cameras.  Just like a higher cigarette tax rate reduces cigarette tax revenue.  Taxes, and these revenue cameras, change human behavior.  Actually achieving the stated purpose for them (better health if people don’t smoke and safer streets if speeders are punished).  Which means though they have a burst of revenue in the beginning it will eventually taper away.  Requiring a new revenue generating scheme.  And then another one to replace that one.  And so on.  On and on.  Forever and forever.  Instead of doing the simpler thing.  And the thing that would work best.  Forever and forever.  Just stop spending so much.

If the public sector union enjoyed pensions and health care benefits like they do in the private sector there would be no Detroits going bankrupt.  Because there would be no generational theft.  These workers would provide their own pensions—401(k)s—and pay a much larger portion of their health care expense.  And they would work into their Sixties (or more) like the rest of America.  Instead of retiring in their 40s or 50s.  To enjoy a retirement that in some cases lasts longer than their working career.  This would solve the budget problems of the big cities.  Instead of passing it on to future taxpayers who were not included in those generous contract negotiations that they find themselves stuck paying for.



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Washington D.C. and Detroit say ‘No’ to Wal-Mart because they don’t need Jobs or Shelves full of Low-Priced Goods

Posted by PITHOCRATES - July 20th, 2013

Week in Review

The Democrats hate Wal-Mart.  As do unions.  Because Wal-Mart stores do not have union labor.  Unions hate that.  And because Democrats and unions are joined at the hip, Democrats hate what unions hate.  Which is why you won’t find Wal-Mart stores in big Democrat cities.  Because the Democrats do everything they can to keep them out.  Even writing laws specifically targeting Wal-Mart (see Trouble in store: Why Walmart has failed to woo Washington by Rupert Cornwell posted 7/21/2013 on The Independent).

Walmart has been wooing [Washington D.C.] for years, and in 2010 announced plans to open four stores there, a number subsequently raised to six. Everything was going swimmingly, with work already started on three of the sites, until earlier this month, when the council passed its Large Retailer Accountability Act, otherwise known as “Get Walmart”.

Under it, non-unionised stores with a commercial space of 75,000ft or more – ie Walmart – will henceforth have to pay employees at least $12.50 (£8.20) an hour, compared with the city’s existing minimum wage of $8.25, and the national one of just $7.25 an hour. The company retorted by threatening to scrap three of the planned stores at once, and perhaps abandon the three where construction has begun too, causing the loss of up to 1,800 new jobs…

The case for Walmart is strong – that its stores provide working-class Americans (and many wealthier ones too) with good service and a broad selection of goods “at the lowest prices possible”, to use the words of old Sam Walton, who opened his first store in Rogers, Arkansas, in 1962. And it provides jobs: 1.4 million of them in the US alone…

Nor is Washington DC alone in feeling that way. Five of the country’s other largest cities – San Francisco, Detroit, Seattle, Boston and, above all, New York – have also said no. “As long as Walmart’s behaviour remains the same, they’re not welcome in New York City,” says Christine Quinn, the New York City council speaker who may well be the next mayor. “New York isn’t changing. Walmart has to change.”

Not by coincidence all those cities, like DC, are Democratic strongholds where unions are strong. They are liberal, socially “progressive” and, by definition, urban, while Walmart’s genes are southern, conservative and suburban.

Detroit said ‘no’ to Wal-Mart?  The city that just filed the largest municipal bankruptcy in history said they don’t need jobs or low prices on food, clothing, pharmacy and household goods?  If you’re looking for the answer to why Detroit is in the mess it is in this is your answer.  The Democrat stronghold in Detroit got so anti-business that it chased all the jobs out of the city.  Once the jobs left the people soon followed.  First the whites.  Accelerating their ‘white-flight’ following the Detroit riots.  While the blacks held on.  But after 20 years (1974 – 1994) of Coleman A. Young they gave up, too.  For they don’t come further left than Coleman A. Young.  And when you’re that far left you’re no friend to business.  So businesses stay away.  As do their jobs.

The black middle class followed the whites out of Detroit.  In pursuit of greener pastures.  And jobs.  Leaving Detroit with half the population it once had.  Impoverished.  And more anti-business than ever.  Which is why they said ‘no’ to Wal-Mart.  Because Wal-Mart isn’t union.  And the two largest employers in the city, the City of Detroit and the Detroit Public Schools, are union strongholds.  So they protected their high pay and benefit packages.  By keeping nonunion jobs out of the city.  While thinking nothing of the unemployed masses in the city.  Helping to keep the unemployment rate in Detroit well above the national average.  While the unemployed masses would have loved to see up to six new Wal-Mart stores (or more) opening in the city.  The 1,800 new jobs (or more) that would have came with them.  And shelves full of food, clothing, pharmacy and household goods at low prices that their Wal-Mart paycheck could easily afford.  But no.  Wal-Mart is not union.  So the people of Detroit have to stay unemployed.  And impoverished.



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