A review of this year’s statewide spending reports shows just how expensive power can be — and who benefits

First in a two-part series

By JEREMY ALFORD

If you don’t think political spending in Louisiana is an economic driver, you’re not paying close enough attention. Year-to-date spending by statewide candidates alone has already surpassed the economic impact of the state’s citrus industry, the amount of taxpayer money used to subsidize the NBA Hornets this year and the annual payroll of Halliburton’s new Lafayette facility.

From Jan. 1, 2011, to this past Saturday, Oct. 15, candidates for governor, lieutenant governor, secretary of state, agriculture commissioner and insurance commissioner have collectively spent more than $8.9 million, according to campaign reports filed with the state Ethics Administration.

The day of decision dawns Saturday morning and candidates will be spending even more cash this week to claim their titles. A few of them will even be using their own dough, a recent trend in Louisiana politics. In fact, of the $8.9 million spent so far, about $2.3 million comes from the pockets of just five candidates.

That means 25 percent of all expenditures from statewide campaigns year-to-date were bankrolled by just a few select people. Plaquemines Parish President Billy Nungesser, a Republican gunning for lieutenant governor, leads the pack with $1.2 million of his own cash invested.

Gov. Bobby Jindal (R)

State Sen. Norby Chabert, a Democrat-turned-Republican from Houma who cut his teeth running campaigns, says this year’s abundance of private cash is due to several factors.

For starters, he says it’s just plain easier for incumbent Insurance Commission Jim Donelon, a Republican, to raise cash, as opposed to those in positions like secretary of state or lieutenant governor. The insurance gig has a built-in constituency of givers, like insurance agents and companies; most of the others positions don’t.

Plus, all of the Republican-on-Republican match-ups this fall are keeping a lot of folks on the sidelines. “And don’t forget about the local and national economy,” Chabert says. “That 25 percent can usually be supplanted by your smaller $500 donors, but they’re not giving.”

While personal cash can certainly give a candidate more independence than one connected to unions or power brokers, the trend also lends itself to exclusivity — you can’t run if you can’t pay. Whether or not the model gets busted by a change in these factors is a question that will have to wait for another day.

Deep pockets aside, you’d still be hard-pressed not to find a Louisiana booster or cheerleader on the ballot. Few if any would profess preference for New York or Virginia or Florida. Regardless, many statewide candidates still look outside of the state when spending their campaign donations.

Of the $8.9 million spent thus far, only $5.4 million went to Louisiana vendors and businesses. That’s a whopping 40 percent going somewhere else.

Secretary of State Tom Schedler (R)

Incumbent Secretary of State Tom Schedler, a Republican, has the highest percentage of in-state spending, or roughly 99 percent. Donelon has the lowest in-state spending, about 11 percent, based on the zip codes and descriptions included in his campaign finance reports.

John Sutherlin, director of the Social Science Research Lab at the University of Louisiana at Monroe, says it’s an easy option for campaigns to choose the cheapest option, which often takes them outside of the state. “It might cost you a little more, but I always advise campaigns to spend as much as they can in Louisiana. Quite frankly, there are no services or products that can’t be found in Louisiana,” Sutherlin says. “You might have to work a little harder and spend more to get them, though.”

As of this past Saturday, statewide campaigns are responsible for 4,908 separate financial transactions. Of that amount, Gov. Bobby Jindal, a Republican, is responsible for 3,673 transactions, or basically 74.8 percent of all purchases year-to-date.

FOR A BREAKDOWN OF MONEY SPENT YEAR-TO-DATE BY STATEWIDE CANDIDATES, INCLUDING IN-STATE SPENDING AND LOANS, CLICK HERE

For the purposes of this story, all 4,908 individual expenditures were reviewed and divided into 18 general categories ranging from signs, postage and payroll to consultants, polling and advertising.

The top category of spending by statewide candidates was overwhelmingly media, advertising and related productions, which comes to $4.4 million, or roughly 49 percent of all money spent so far. The other highest-ranking categories, in order, were:

— Consultants and staff: $1.3 million, or 15 percent

— Fundraising: $769,833, or 8 percent

— Polling and focus groups: $508,624, or 5 percent

— Mail: $431,788, or 4 percent

Pat Bergeron, a Baton Rouge-based conservative internet consultant who operates Category 5 Communications, says the amount of money being dedicated to media functions is lower than he has seen in previous election cycles.

But he was even more surprised that Web- and computer-related spending has only reached about $129,000. “It’s still an emerging industry here and I think it’s an area where we’re going to see growth in coming years,” says Bergeron. “This coming presidential election will prove once and for all that you can’t do politics in Louisiana without the Web.”

FOR A LOOK AT THE SPENDING OF STATEWIDE CANDIDATES BY CATEGORY, CLICK HERE

As for who’s winning the media wars, Cox Communications has received nearly $493,000 from statewide campaigns this year. While company officials are well known for making political donations, Cox is always developing new relationships in government as a public access provider.

To be certain, election spending has become an important source of revenue for media outfits all around the state. Here are the other big earners YTD:

— WAFB-TV in Baton Rouge: $297,100

— WWL-TV in New Orleans: $202,000

— SuddenLink Louisiana: $191,000

— KSLA-TV in Shreveport: $171,400

One of the more surprising findings from this year’s expenditures involves the absolute nosedive in newspaper advertising. Just consider the state’s two biggest dailies: The Advocate has earned about $7,800 from statewide candidates, according to financial reports, while The Times Picayune has chalked up about $5,000.

Moon Griffon

To put that into perspective, syndicated talk show host Moon Griffon appears to have earned more though advertising on his show YTD — about $9,700 — than the dailies did individually. Want another comparison? Advertising expenditures by statewide candidates inside movie theaters — yes, the buttered popcorn variety — have so far outpaced the earnings of both dailies combined, or roughly $18,400.

There’s certainly more money related to the local races for newspapers and the situation could get better during the comings days. Additionally, there may be some expenditures that haven’t been properly reported. Nonetheless, this trend is difficult to interpret as anything else but dismal for the black-and-whites.

During a recent teleconference on media trends, Kate Kaye, senior editor of ClickZ News and author of “Campaign 08: A Turning Point for Digital Media,” commented that the watershed moment is happening now. She says most campaigns tend to spend upwards to 5 percent of their advertising budgets online, whereas print used to be the standard many moons ago. “Going forward, we can expect more dollars to flow toward digital media in 2012 and see the share of the budget increase,” Kaye says.

She likewise sees the upcoming presidential election as a litmus test of sorts. “Google was a huge recipient of online ad dollars in 2008,” Kaye says. “We know that about 45 percent of (President Barack) Obama’s online ad budget went to Google alone. That was around $7.5 million dollars,” she says.

Political currents, however, are pushing candidates away from Google and closer toward social networking sites, Kaye adds. Locally, that can clearly be seen on several campaign finance reports. Schedler, for instance, has so far invested $10,000 in Facebook ads and another $2,000 into YouTube tools.

TO SEE HOW MUCH MONEY STATEWIDE CANDIDATES HAVE GIVEN TO MEDIA OUTLETS IN YOUR AREA, CLICK HERE

Relatively speaking, compliance appears to be an affordable proposition for modern Louisiana campaigns. The statewide candidates have spent more than $78,000 so far this year on accounting and legal services; campaign finance preparations; and ethics and transaction fees. That’s roughly $8,600 per statewide campaign on average, at least among those spending money; it pales in comparison to other expenses, like food and beverages, which has topped $41,000 as of this past weekend.

Billy Nungesser (R) - Plaquemines Parish President

That said, the two highest paid in-state firms serving the statewide campaigns are dedicated solely to fundraising services.

At the top of the list is the Nungesser Group, which is operated by three women from the Baton Rouge area. They have cleared nearly $200,000 in commissions working for Schedler and incumbent Lt. Gov. Jay Dardenne, a Republican. In an interesting twist, the firm is actually owned by consultant Sally Nungesser, whose cousin happens to be Billy Nungesser.

Then there’s the The Bautsch Group, another woman-owned business in Baton Rouge. The company is raising money just for the Jindal campaign and has earned commissions in excess of $100,000 so far this year.

A common thread that runs through both of these businesses is personnel with government experience. It’s another example of how intimate knowledge of government operations and bureaucratic mazes can be turned into profitable private businesses.

FOR A LIST OF THE TOP-EARNING LOUISIANA FIRMS THIS ELECTION CYCLE SO FAR, CLICK HERE

Check back with The Pelican Post soon for Part Two of our investigative feature.

THE COST OF ELECTIONS: A closer look at how the laws governing campaign expenditures may be failing us.

Jeremy Alford is a freelance journalist based in Baton Rouge. You can reach him through his Web site at www.jeremyalford.com.

Former Bush Administration officials keen on the idea of giving taxpayers access

NEW ORLEANS, La. – Despite losing out in a narrow committee vote, Rep. Tony Ligi’s (R-Metaire) push for transparency in collective bargaining has generated national interest. With public attention now attuned to the power of public employee unions to lobby for higher taxpayer funded benefits, Ligi anticipates he will reintroduce the Public Employee Bargaining Transparency Act (HR 204) next year.

His legislation would mandate the placement of collective bargaining sessions between state public employers and labor unions under the open meetings law. Any document created or presented during the sessions would be available to the public and the details attached to the collective bargaining agreements posted on the Internet.

The House and Government Affairs Committee voted 8-7 to “involuntarily defer” (terminate)  the legislation earlier this month. Ligi lost two of his own Republicans, Reps. George Cromer of Slidell and Jane Smith of Bossier City, who joined with Democrats to vote for the motion from Rep. Richard Gallot (D-Ruston) to kill the bill.

“With a full committee I would have the votes,” Ligi said.  “That’s just the ebb and flow of the legislative schedule, we couldn’t keep everyone together. But I fully expect this to be back in full force next year. The public certainly has right to see what’s happening in these negotiations.”

Former Bush Administration officials who worked under Labor Secretary Elaine Chao expect to see other state’s pick up on Ligi’s transparency bill. Patrick Pizzella, a former assistant secretary of labor who served from 2001-2009, said in an interview that he sees a growing understanding throughout the country that taxpayers do not have a seat at the table in the negotiations between unions and government officials.

“This is really a taxpayer protection act,” he observed. “The government entity in on the negotiations may actually be represented by people who just got elected with contributions from unions on the other side of the bargaining table. That’s why I think this transparency act is something you will start to see in other states. Taxpayers need a seat at the bargaining table and this is the only way to make sure they do.”

Beginning in 2009, more union members worked for the government than for the private sector (51.8 percent), a trend that continued through 2010, according to the U.S Department of Labor’s Bureau of Labor Statistics. This shift has occurred in tandem with an overall drop in union membership that affects mostly the private sector. After losing over 600,000 members last year, organized labor now accounts for just 11.9 percent of all employees.

The demonstrations in Wisconsin, New Jersey and Ohio aimed against reduced benefit packages for union members relate back to this fundamental shift in the complexion of organized labor, said Vincent Vernuccio, a labor policy counsel with the Competitive Enterprise Institute (CEI), who also served  in the Bush Administration Labor Department.

“Sunshine is the best antiseptic,” he said. “Opening collective bargaining agreement negotiations to public scrutiny will prevent the type of back door deals that give government unions lavish unsustainable benefits at the expense of taxpayers.  Legislation to bring open meeting laws to contract negations is needed to ensure taxpayer money is protected and citizen concerns are fairly represented.”

As the Common Sense Institute of New Jersey, a State Policy Network affiliate, recently reported, Gov. Chris Christie recently secured a major over public employee unions, especially the New Jersey Education Association (NJEA), which resisted his reforms. The changes include increased employee contributions to health care and retirement plans.

“It’s shocking for some citizens to know that in some cases public employees were not making any contributions for their benefits,” Pizzella said. “That’s why Gov. Christie had success in New Jersey and that’s why the issue is not going away. Rep. Ligi has seized on a very good idea.”

But the Louisiana Federation of Teachers was strongly opposed to the legislation. Meladie Munch, president of the Jefferson Federation of Teachers, has argued that Ligi’s bill would actually harm the negotiation process. Participating parties would not be able to speak in an open and unrestrained manner, Munch has said.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and follow him on Twitter.

Amendment that opens negotiations to taxpayer scrutiny set for Senate debate

After its brush with death, Rep. Tony Ligi’s (R-Metaire) legislative push for transparency in collective bargaining is back to life in the form of an amendment to HB 559, which is scheduled for a vote on the Senate floor today.

The initial Public Employee Bargaining Transparency Act (HR 204) would have placed collective bargaining sessions between state public employers and labor unions under the open meetings law. Any document created or presented during the sessions would be available to the public and the details attached to the collective bargaining agreements posted on the Internet.

However, the House and Government Affairs Committee voted 8-7 to “involuntarily defer” (terminate)  the legislation earlier this month. Ligi lost two of his own Republicans, Reps. George Cromer of Slidell and Jane Smith of Bossier City, who joined with Democrats to vote in favor of a motion from Rep. Richard Gallot (D-Ruston) to kill the bill.

The Louisiana Federation of Teachers was strongly opposed to the legislation. Meladie Munch, president of the Jefferson Federation of Teachers, has argued that Ligi’s bill would actually harm the negotiation process. Participating parties would not be able to speak in an open and unrestrained manner, Munch has said.

But a change in policy is needed to help safeguard taxpayers who are often locked out of the process, Ligi countered.

“Right now the public has no say in these negotiations and what they will end up costing all of us a lot of money,” he observed. “This often happens without the public even having seen the documents or having any input. That’s not the way we should operate. Public employee contracts involve a lot of money and we need transparency.”

The pending amendment, which is applicable only to school boards, makes for a less expansive version of HB 204.

“If the amendment remains and the bill passes, it would provide taxpayers with the opportunity to review collective bargaining agreements with public employee labor unions and employment contracts with the superintendant of schools before a school board can approve the contract.

“Taxpayers have a vested interest in these contracts so it is appropriate that they be open for public scrutiny prior to being ratified,” Ligi added.

Renee Baker, the Louisiana director of the National Federation of Independent Business (NFIB), concurred.

“I can’t imagine too many small businesses I represent wouldn’t be interested in the contracts between unions and public employers,” she said. “They [union officials] always talk about how they are taxpayers when this comes up, which they are, but we are also taxpayers and we don’t get the benefit they do.”

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org. Follow him on Twitter

Unelected hospital board stuck in lawsuit, failing to make progress on new facility

Since Hurricane Katrina struck in 2005, New Orleans East has been without an operating hospital. Two successive mayors have failed to replace the old Methodist Hospital building.

A report by the Times-Picayune this week provides ample explanation for this inertia. As usual, the responsibility for providing New Orleans with a necessary service has fallen to another unelected, mayoral-appointee board. The New Orleans Hospital District A Board came out of 2006 state legislation to “preside over redeveloping the shuttered Methodist Hospital into a community hospital,” to which it has not come close.

After Mayor Landrieu took office, he quickly dismissed Mayor Nagin’s appointees to this board, backed by a law which essentially left the composition of the board up to the Mayor’s discretion. In response, the Nagin-era board members filed a suit challenging the legality of Landrieu’s actions. The board must now focus on a time and money-consuming lawsuit.

Now, HB 353, authored by Rep. Jeff Arnold (D-Algiers) and backed by Landrieu, seeks to “retool” the appointing process. According to Arnold, his bill would give the public more say over the composition of the board.

The bill, however, misses the point. It would merely reinforce the flawed notion that unelected bureaucrats are qualified to have critical influence over the city’s hospitals and that more boards and commissions are a prerequisite to progress.

The city currently has planned a public-private partnership with the Franciscan Missionaries of Our Lady Health System to operate the proposed hospital. However, Hospital Board agreed to this partnership behind closed doors and gave the public no say in the matter. Moreover, the closed-door selection in lieu of an open bidding process meant that the city did not necessarily choose the most fiscally prudent course of action for a hospital which taxpayers will certainly subsidize.

The most practical and responsible way towards achieving a new hospital in the East is taking the reins from the hands of bureaucrats and putting private contractors in the driver’s seat. A competitive, transparent bidding process for a new hospital does not require the oversight of an entirely new board.

The East’s hospital charade is testament to the ineptitude and destructiveness of government interference.  Government, as a business model, is habitually a failure, and something as indispensable as a hospital should be left to health care professionals, not unelected boards.

“Loser pays” legislation forces plaintiffs to pay defendant’s legal fees if suit deemed groundless

Texas is rapidly becoming a beacon for sensible government planning and practices. One such area is its reasonable legal climate, as the National Review has documented.

The Texas Senate, in a unanimous vote, passed tort-reform to make a plaintiff pay the winning party’s legal fees if their suit is deemed without merit. This “loser-pays” legislation was quickly approved by the house and signed into law by Gov. Rick Perry.

“Loser pays” laws will severely hamper the will of parties to engage in baseless, cash-grabbing lawsuits. Such suits take a significant toll on companies and small businesses, as well as municipal governments, which often choose settlements rather than engage in a costly trial, no matter how unjustified the lawsuit is.

The article notes that Texas’ legal climate, heralded even by the New York Times, until fairly recently was an “ambulance-chaser’s paradise.” However, by beating back the demands of the lobbyists and the Texas Trial Lawyers Association, Texas has demonstrated once more why many industries have begun to view it as the best business climate in the nation.

Louisiana can observe Texas’ successes and implement reforms of its own. The group Louisiana Lawsuit Abuse Watch, in an extensive study, determined that from 2006-09, $52 million was spent on lawsuits against local governments in eight municipalities alone. Furthermore, a national survey of companies and attorneys found Louisiana to have the second worst legal climate in the entire nation.

Fortuitously, Louisiana appears to be taking cues from its neighborhood. As Robert Ross of the Pelican Institute reports, a bill currently in the state Senate would mirror medical malpractice reform in Texas which has helped make the Lone Star State so popular with the medical industry.

It goes without saying that a favorable climate for businesses is good for the state’s economy, and in a state which is struggling mightily to create a balanced budget, our elected officials should take every possible precaution to create such a climate. Emulating the triumphs of Texas is an obvious start, and correcting our legal culture through legislation such as “loser pays” laws should be a logical step.

State-mandated transparency requirements set for all public school governing authorities

BATON ROUGE, La. – Pending website transparency requirements may soon place boards that govern public schools under greater scrutiny. The School Authority Transparency Act, HB 559, awaits floor debate and final vote tomorrow in the Louisiana House of Representatives, with Rep. Rosalind Jones (D – Monroe) as prime sponsor.

HB 559 would mandate publication of a wide variety of information, including school disciplinary procedures, detailed event calendars, and all board policies and procedures. It even goes so far as to include school dress codes, grade change processes, and strategies for bullying prevention.

A school governing authority in theory carries out the wishes of the citizens of that jurisdiction. However, Rep. Jones says constituents have brought their difficulties to her attention – that nominally public information has been difficult to obtain, even requiring legal counsel.

“So I thought to provide some sunshine, some transparency to school board policy and procedure… If the school boards have a website, they should be able to publish all their policies and procedures on the website, along with other pertinent information for parents.”

However, opponents contend that this law places greater top-down burdens on the public school system. Leslie Jacobs, a New Orleans-based education reform advocate and founder of Educate Now!, believes websites can provide valuable information for parents and community, but she cautions legislators that they “not continue to build layers of compliance that take financial and human resources away from the classroom.”

The new law’s requirements also apply to charter schools, which were initiated to be more independent – “overwhelmingly publicly funded, predominantly privately run,” as superintendent of the Recovery School District, Paul Vallas, has described. The proposed law, however, does not distinguish between charter schools and conventional public schools, except that it requires an additional list of charter schools.

“With respect to charter schools,” says Jacobs. “HB 559 is particularly burdensome… Charter schools do not have a central office, nor do they have the staff to constantly update their websites. This requirement will be costly.”

Andrew J. Coulson of the Cato Institute has observed that the “pattern in publicly funded education, both domestically and internationally, has always been one of increasing regulation over time… That same pattern is playing out in the charter school sector.”

Rep. Jones says she has observed little push-back to HB 559, including the governor’s office, suggesting she is confident of its passage.

Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy and editor of The Pelican Post. He can be contacted at fhodgson@pelicaninstitute.org, and one can follow him on twitter.
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Matthew Cole contributed to this article as research assistant with the Pelican Institute for Public Policy. He studies economics at Loyola University in New Orleans.

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Pelican site reveals salary irregularities, particularly in police and wildlife and fisheries departments

NEW ORLEANS, La. – News outlet WDSU.com has utilized LouisianaSunshine.org, a project of the Pelican Institute for Public Policy, to show startlingly high overtime rates among government employees. In some cases, these employees are earning more in overtime than they do from their base salaries.

Watch the five minute video here.

The WDSU I-Team, led by Travers Mackel, noted the Crescent City Connection police department as a chief culprit for excessive overtime payments. Highway foreman Joseph Leblanc, for example, received $66,000 in overtime, while his base salary was $55,000.

“It absolutely raises red flags,” said Kevin Kane, president of the Pelican Institute. Although he cautioned that we need to know more about the circumstances of each individual case.

The Crescent City Connection insight follows a recent Pelican Post commentary which noted this police department already has other fiscal embarrassments on its hands, and its funding may soon dry up.

In addition to 190,000 salary records, LouisianaSunshine.org has a complete database of state-level contracts and vendor payments.

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Diverse groups support “evidence-based” corrections practices for Louisiana

BATON ROUGE, La. – Louisiana’s stand as the nation’s leader for incarceration is the target of five new bills from the state’s Sentencing Commission.

Joe Lopinto (R-Metairie), sponsor of three of the bills, says the state has an enormous prison population of low-risk, non-violent offenders. One in 55 Louisianians is behind bars, and he believes the annual cost of $665 million is extreme.

“It’s easy to say ‘lock them up, and throw away the key’ when someone else is paying for it. But we’ve got to ask ourselves whether it’s worth the expense.”

Lopinto believes archaic rules contribute to Louisiana’s high incarceration rate; hence the need for reform. For example, he describes current requirements on parole eligibility as unnecessarily onerous, with only a small fraction of prisoners up for parole each year.

These bills (HBs 106, 414, 415, 416, and SB 202) would allow the Public Safety Department to apply swift punishment for parole and probation violations; establish training requirements for parole board members; shorten the time criteria for parole eligibility of non-violent offenders; initiate a centralized database of offenders on home incarceration; and streamline the calculations which allow for early release on account of good behavior.

Of the five bills (explained further here), two have passed through committee, one is with the Criminal Justice Committee, and two await assignment. HB 106, sponsored by Helena Moreno (D-New Orleans), is set for debate on Thursday, May 19.

While the Commission’s final report is not due until early 2012, the preliminary recommendations and subsequent legislation are the product of a broad review, involving numerous stakeholders. For example, the Pew Center on the States and the Vera Institute of Justice – national, nonpartisan policy institutes – have collaborated on the project.

Bobby Constantino of Vera says their role is to assist the Louisiana Sentencing Commission by providing explanations of and data relating to “evidence-based” reform practices from other states. The Pew Center’s website says its role is to identify “innovative approaches” and advocate for “pragmatic solutions.”

Along with the Office of the Governor, numerous and varied organizations have given official support to at least three pieces of Sentencing Commission legislation. They include the Louisiana Sheriffs Association, the First United Methodist Church of Baton Rouge, the Louisiana District Attorneys Association, and the Pelican Institute for Public Policy.

Any attempt to reduce sentence lengths may draw resistance from proponents of strict enforcement. However, this legislation follows the national Right on Crime campaign, which seeks to bring “tough on crime” conservatives on board with prison reform. Its rapid success at generating high profile supporters, even while aligning with organizations such as the American Civil Liberties Union, suggests a widespread willingness to acknowledge America’s disproportionate prison population.

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Two separate measures of U.S. employment tell different stories

Last week, the Bureau of Labor Statistics stated that unemployment had fallen to 8.8 percent, with 34 states claiming a decrease in their unemployment rates. Yet the employment-to-population ratio is now lower than it was when the recession officially ended, and the share of employed Americans also fell to 45.4 percent, the lowest level since 1983. Here in Louisiana, only 41.6 percent of working age individuals are employed, excluding military personnel and the self-employed.

Edward Leamer, professor of economics at University of California at Los Angeles, claims that the employment-to-population ratio is a better measure of the job market. Unlike the unemployment rate, changes in labor participation do not affect the statistic.

“It’s people getting so discouraged that they’re dropping out,” said Leamer. He says about half of the decrease in the unemployment rate during the last four months was caused by Americans who gave up looking for work and left the labor force, also known as “discouraged workers”.

Robert Higgs, Senior Fellow at the Independent Institute, states that measuring unemployment is “fraught with many difficulties,” specifically, “the extent to which someone is actually, actively ‘seeking employment.’”

Alan Krueger, former Treasury official and Princeton economics professor, studied the effects of long-term unemployment at Stockholm University. His study concluded that the longer people are without a job, the less time they spend looking for employment.

According to the Bureau of Labor Statistics, since 2009 the number of people who have been out of work for more than six months has increased by 40 percent.

Various theories have been proposed for persistent dysfunction within the labor market, despite pronouncements of recovery.

Leamer claims that we are experiencing technological unemployment – rapidly changing labor needs in the presence of transitioning technology. Kruger, on the other hand, believes the fault lies with the U.S. education system, for not providing pupils with employable skills.

A working paper by Michael Spence and Sandile Hlatshwayo of New York University revealed that most of the growth in employment between 1990 and 2008 was in the nontradeable sector of the economy. That means commodities not subject to international competition, with government and health care jobs accounting for 40 percent of growth.

Robert Ross is a researcher and social media strategist with the Pelican Institute for Public Policy. He can be contacted at rross@pelicaninstitute.org, and you can follow him on twitter.

Exclusive interview: Americans for Fair Taxation district director for Louisiana

The Fair Tax proposal has received more research attention, $22 million worth, than any United States federal tax reform. Short of outright elimination of the federal income tax, it also appears to be the most likely candidate for repeal and replacement.

To explain the mechanics of the Fair Tax, a streamlined national retail sales tax, Laura O’Halloran, pictured below, spoke with The Pelican Post. (Click above to listen or here to download – 47 minutes.)

The key hook for Fair Tax proponents is that its implementation would coincide with the elimination of all federal income taxes and associated loopholes: individual, corporate, Social Security, Medicare, death, gift, and capital gains. Since states would collect revenue via retailers, it would also coincide with the elimination of the IRS, its April 15 stresses, and feared individual tax audits.

Although revenue neutral, O’Halloran believes this consolidation into one tax would bring greater transparency, lower compliance costs, and incentivize investment. For these reasons, she notes, the National Small Business Association has endorsed the plan.

“Right now we have taxation without comprehension,” O’Halloran says, as she alludes to more than 70,000 pages of IRS tax code, which the Fair Tax would replace with 133 pages.

Arthur Laffer, formerly an economic advisor to Ronald Reagan, estimates that compliance costs 30 cents for every dollar of income tax paid. That comes to almost half a trillion dollars annually of wasted resources.

Passage of the Fair Tax at the federal level (H.R.25 and S.13) would also include repeal of the U.S. Constitution’s 16th Amendment, assuming ratification by 38 states within seven years. The intent of this measure is to prevent the existence of both a national sales tax and an income tax at the same time. If the states do not ratify the repeal, the Fair Tax would automatically end and all previous taxes would return.

The anticipated rate for the national sales tax is 23 percent on all new items, although there is some dispute over this level. A monthly prebate would also counter this marginal rate, as presented in the diagram (and explained in further detail below). O’Halloran is quick to assert that U.S. consumers already pay 22 percent in embedded taxes carried over to the consumer; this plan would merely make the burden more overt.

2011 Effective Fair Tax Rate

The final rate would tend to be higher than 23 percent, though, since states would likely combine this with their own sales tax. Many Canadian provinces already have a Harmonized Sales Tax, and at least eight states, including Louisiana, have legislation pending to that effect.

State Rep. Walker Hines (R – New Orleans) has announced he will introduce the Louisiana Fair Tax Act (H.B.239), which he describes as “simpler, fairer, and more transparent,” to replace the state’s personal and corporate income taxes. This plan would also eliminate hundreds of pages of tax exemptions, deductions, and credits, most of which he believes are antiquated and have an annual cost of approximately $4 billion.

Hines acknowledges, however, a low probability of passage this year.

Sales taxes draw on consumption and not investment, so wealthier people pay more but generally less as a proportion of their income. For this reason, prominent Fair Tax proponents, including Mike Huckabee, former governor of Arkansas, support a prebate component.

The current federal proposals do include a monthly payment for each household, a prebate, in return for the sales taxes they would pay up to the poverty level. In other words, the sales taxes on spending up to the poverty level – $22,350 for a family of four – would be neutralized.

2011 Fair Tax Prebate Schedule

The advocacy group, Americans for Fair Taxation, dates back to 1995, and Rep. John Linder (R – Ga.) first introduced it at the federal level in 1999. In the intervening years registered supporters have grown to 1.2 million, but the proposal has also received scrutiny and harsh criticisms – and that includes from people who agree that the prevailing system is overly complex and intrusive.

Bruce Bartlett, former director of the congressional Joint Economic Committee, has described its prebate as a new national welfare program and dismissed it as having zero chance of enactment. Others have estimated the needed rate as much higher than 23 percent and dispute the value judgement that fair implies ever heavier marginal rates on high earners.

Laurence Kotlikoff, an economics professor at Boston University, is a leading advocate and has responded directly to Bartlett. He asserts, without reform, grave fiscal danger for the United States and, along with 80 economic professionals, signed a letter in 2006 in support of the Fair Tax initiative.

For those interested in the debate, O’Halloran recommends these three books:

The FairTax Book; FairTax: The Truth; and, published most recently, The FairTax Solution.

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Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy and editor of The Pelican Post. He can be contacted at fhodgson@pelicaninstitute.org, and one can follow him on twitter.
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