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Thursday, December 5, 2019 2:55 PM

How’s business? “Wonderful,” is the answer you’ll probably get from those who only know the stock market continues to rise. 

How is business in Indiana or in your sector of the economy? That answer is often hard to find. 

  • MUNCIE – Whenever I explain why Indiana needs more kids to attend college, I get some version of the comment, “a young person doesn’t need college to do well; we need more people in the trades.” While it is true for a few talented individuals, that is not true for a city or state. Economists call this the ‘fallacy of composition,’ which I can explain with a few facts. In a typical year, more than 85,000 Hoosiers turn 18 years old. Of these, fewer than 75,000 finish high school, and of these fewer than 42,000 head to college. Ultimately, about 60% of those will complete their degree. That means the state’s pipeline of college-educated workers is today about 27,000 per year. However, the net loss from brain drain is about 10% and growing. That means Indiana can expect only about 25,000 college graduates per year to finish college and live in Indiana. This is an economic development disaster. To see how this hobbles Indiana, we should consider how national labor markets value education. Nationwide, about eight in 10 of all net new jobs go to four-year college graduates. The remaining two in 10 jobs go to those who hold either an associate degree or have been to some college. This means that if Indiana were growing like the national economy, all the new job growth would go to those who’d been to college. 
  • SOUTH BEND – If an 80-1 longshot can win the Kentucky Derby, can Democrat Tom McDermott win the U.S Senate race in Indiana? Upsets do happen, in politics as well as in sports. But chances of McDermott defeating Republican Sen. Todd Young this fall in Indiana, where no Democrat has won a statewide race in a decade, appear worse than those faced by the Derby winner. Rich Strike at least began the race from the same starting line. McDermott starts from way back, in name recognition, funding and organization. And he’s running on an unfavorable bright red track in a red state carried twice in landslides by Donald Trump. Still, McDermott could be a winner in losing, just as an underdog sports team wins respect and encourages its fans about the future by competing impressively even though a championship is out of reach. That’s the realistic hope of Hoosier Democrats. Also, of course, you never say never, no matter the odds.
  • BLOOMINGTON – Recently, a couple of reporters at The New York Times published an intriguing story about conversations between House Republican leader Kevin McCarthy and other members of his leadership team. It was shortly after the events of Jan. 6 at the Capitol, and they were talking about what to do about then-President Trump.  His conduct, McCarthy said, had been “atrocious and totally wrong.” Moreover, wrote Alexander Burns and Jonathan Martin in their article, McCarthy “faulted the president for ‘inciting people’ to attack the Capitol, saying that Mr. Trump’s remarks at a rally on the National Mall that day were ‘not right by any shape or any form.’” He added, “I’ve had it with this guy.” Burns and Martin have since published a series of articles on the subject, including McCarthy’s fears that some of his more extreme colleagues could themselves incite more violence. Not surprisingly, there have been plenty of denials, but the two reporters have countered with one key point: They have the audio recordings.
  • INDIANAPOLIS – We are deluged with “news” that the American labor market is a shambles. Business owners say, “We can’t get people to work, even with higher wages and improved benefit packages.” Well maybe, just maybe, workers have had it with low wages and inadequate respect, and the worm has turned. Maybe, COVID didn’t make people lust for the days of old when workers were commodities instead of individuals. Or, perhaps, the whole labor shortage is that mountain made from a convenient mole hill. “People today just aren’t willing to work!” Strange, but the size of the national labor force (those employed or seeking employment) was down in 2021 by just 1.4% from its pre-COVID 2019 peak. Of course, it’s more impressive if we say the labor force is down by 2.3 million persons and then fail to mention the base we’re talking about is in excess of 163 million persons.
  • INDIANAPOLIS – When the Indiana General Assembly reconvenes on Tuesday for "Technical Corrections Day" it will almost certainly override Gov. Eric Holcomb's veto of HEA1041, the transgender sports bill. But the subplot will be the looming U.S. Supreme Court decision of the Dobbs case, which is expected to repeal Roe v. Wade. The U.S. Supreme Court voted 7-2 in the 1973 Roe v. Wade case that legalized abortion, Republican Lt. Gov. Robert Orr had been a contributor to Planned Parenthood. When a young Republican named Mike Pence first ran for Congress in 1988, the abortion issue wasn’t a campaign hallmark. As the nation grappled with the fallout of Roe, it was Northeastern Catholics who mounted the initial vanguard against legalized abortion. After the 1994 Republican Revolution, the pro-life bulwark shifted to the South and Midwest, helping to create the red center of the nation, while the coasts (along with Illinois and Colorado) became blue. In the 1990s in the Indiana General Assembly, Republican House Speaker Paul Mannweiler and Senate President Pro Tem Robert Garton were pro-choice, while Democrat House Speaker John Gregg was pro-life. How far will super majority Republicans go? Will they ditch the carve outs that would allow abortion in the case of rape, incest or the endangerment of the life of the mother? Here’s a clue: In an op-ed published in the Richmond Palladium-Item, State Sen. Jeff Raatz said he will support "any" bill that restricts abortion. 

  • CARMEL – There once was a time when the thought of thousands of Russian tanks and light armored vehicles pouring through the Fulda Gap into Germany sent shivers down the spines of NATO military planners. Before the United States could airlift or send a sufficient quantity of M1A1 Abrams tanks to meet the attacking Russians, ole Marshall Boris Bettenoff could be found sipping Chablis in a café on the Champs Elysees.  This was a potent and existential threat to western Europe and NATO, not to mention the thousands of American boys we keep in Germany to serve as a rapid response force. What we have learned since the Russkies invaded Ukraine in late February is that a fresh-faced, newly trained volunteer holding a shoulder-fired Javelin anti-tank weapon can easily take out the toughest of the Russian tanks. With the massive increase in Javelins it is now “bye bye Boris!” I must assume that American defense contractors Raytheon and Lockheed Martin had a good inkling that they had a home run with the Javelin, but you just never know until you test them out on the bad guys. The United States, its NATO allies, Russia, China and their allies and inquisitive minds in Iran and North Korea have all learned a great deal in the past few months by watching the day-to-day events in the proxy war between Ukraine and Russia.  In fact, Ukraine may be the largest military test tube in history.
  • INDIANAPOLIS - This "trend" bubbled up in the homestretch leading into the May 3 Indiana primary in several media quarters: A slate of "Liberty Defense" candidates was poised to pull the Republican House and Senate super majorities even further to the right. Liberty Defense, based in Bluffton, was formed to confront Gov. Eric Holcomb's pandemic mandates and to preserve "your freedoms and traditional family values. Our firm conservative stance is held tight to a no-compromise view on the issues of the sanctity of life, the 2nd Amendment, and religious freedom." But there was no anti-incumbency trend in the May 3 primary. Five General Assembly incumbents lost, but three (State Reps. Curt Nisly, Jeff Ellington and State Sen. Kevin Boehnlein) fell victim to other incumbent legislators after they were drawn into the same districts with the new. With the defeat of Reps. John Jacob and Nisly, who were championed by Liberty Defense, two major headaches of Speaker Todd Huston are now gone. As for the challenges by the Liberty Defense organization in 25 House races, only four on its list won and three of them – State Rep. Bruce Borders, State Sen. Gary Byrne and Wabash County Councilman Lorissa Sweet – had already won multiple elections. Of these 21 Liberty Defense races where endorsed candidates lost, none were close to matching Howey Politics Indiana’s 7% threshold that would suggest a potential breakthrough in the 2024 cycle.

  • SOUTH BEND – Most of us think cannibalism is in bad taste. So, it’s the perfect issue for culture wars. In Florida, Gov. Ron DeSantis stoked culture wars and boosted his Republican presidential nomination prospects with a law to crack down on teaching sexual orientation in kindergarten through grade 3. No more kindergarten teachers grooming kids with sexual orientation topics. No more first graders being taught the LGBTQs instead of the ABCs. One little problem: There were no reported cases of kindergarten or early-grade teachers doing such things. Nor was anyone advocating that the little kids be indoctrinated with sexual topics. So what? That’s not the point. The strategy in culture wars is to create an issue, even if no problem exists. You sucker opponents into expressing outrage over your tactics, creating an impression that they actually support the supposed evil. Then you stand defiantly in their way, a patriot worthy of hefty campaign contributions.
  • INDIANAPOLIS – Want to sign up to be an inflation fighter? Don’t think it’s just something for the Fed, Congress, and Big Business to do? It’s like being a forest fire fighter. Inflation is a blaze that’s hard to contain once it gets going. It can be started by careless people on the ground as well as by strikes of lightning from above. Our current inflation is a result of two efforts by the Fed, the Administration, and the Congress (including both parties) to avoid economic disasters in 2008 and 2020. In 2008, Wall Street imploded, and the entire credit system of the U.S. was endangered. The credit system enables us to buy a car, a house, and our daily groceries with our credit/debit cards. It enables the car dealer to have a selection of cars on the lot and the grocer to have a variety of goods on the shelves.
  • ANDERSON - Late last year, Amelia Thomson-DeVeaux wrote an article for the website FiveThirtyEight titled “What Americans really think about abortion.” The answer, she discovered, is not much. “Given the longstanding, intractable division on abortion, one might think that Americans hold murky views because they’re actively, even painfully, wrestling with the matter,” she wrote. “But that’s not what I found when I dug into the issue. The truth is that many Americans just don’t like talking or thinking about abortion.” That might soon change. The U.S. Supreme Court seems poised to overturn a 49-year-old precedent in Roe vs. Wade, and at least some voters are mad about it. Listening to the noise, you might get the idea that America is split down the middle. The reality is significantly more complicated. The folks who care deeply about this issue make up less than half of the U.S. population.
  • INDIANAPOLIS - On Monday, Politico broke the story of a leaked SCOTUS draft opinion that had by a 5-4 margin the termination of Roe v. Wade which has legalized abortion over the past 49 years. “We hold that Roe and Casey must be overruled," wrote Justice Samuel Alito. "It is time to heed the Constitution and return the issue of abortion to the people’s elected representatives. Roe was egregiously wrong from the start. Its reasoning was exceptionally weak, and the decision has had damaging consequences. And far from bringing about a national settlement of the abortion issue, Roe and Casey have enflamed debate and deepened division.” When the Dobbs case out of Mississippi is announced in late June or early July, Gov. Eric Holcomb will almost certainly call a special session of the General Assembly and Indiana is expected become one of 26 states to outright ban abortions. This will likely preclude the traditional carve outs that had allowed abortion in the case of rape, incest or the life of the mother is in peril. The outright outlawing of all abortion will bring more children into our state. I was curious about how the children already with us are doing, so I read the 2022 Kids Count Data Book published by the Indiana Youth Institute. Indiana is home to the 14th largest population of children nationally, with more than 1.57 million children younger than 18 residing, including 51% who were males and 49% females. According to the Indiana Department of Health, the number of abortions in Indiana grew by 119, or 1.6%, to 7,756 during 2020. That increased number remained below the some 8,000 performed in 2018, Indiana’s highest number since 2014.

  • MUNCIE – David Ricks, CEO of Lilly, recently told members of the Indiana Economic Club that state policymakers need to address poor educational attainment and high health care costs. These topics will sound familiar to faithful readers of this column, but it is refreshing to hear these points made so publicly by a business leader. In a future column I’ll detail comprehensive policy options for reducing health care costs. As difficult as it will be to remedy this important issue, it is easy compared to our educational challenges. To fix our low levels of educational attainment, Indiana must better educate a higher share of its young adults and make more communities into places they’d like to live. This may sound easy, but any progress here requires that almost everyone set aside some long-held, mistaken opinions. The two most misunderstood issues are about what ails education and how taxes factor in to the location decisions of people and businesses. Indiana’s comprehensive school reforms are not the problem. In fact, the success of broad school choice masked other problems. The evidence from several high-quality studies makes clear that school choice mostly benefitted students in local public schools. 
  • LOGANSPORT – One of the great contributions of the 20th Century in Indiana came from Col. Eli Lilly. His legacy company generated capital to fund community foundations in all 92 Indiana counties. That on top of countless grants from the Lilly Endowment that represent perhaps the greatest legacy of any industrialist who ever came from Indiana. Fast forward to last month when David Ricks, chairman and CEO of Eli Lilly, said at an Indianapolis luncheon that Indiana is behind the curve of other states. Bluntly put, he said Indiana falls short in educational skills, the affordability of health care, robust green-energy policies, workforce development, and inclusion of minorities and immigrants. Like it or not, and I’m sure many in high places in our state attached profanity to Ricks’ name when reports of his remarks aired, he spoke the truth. While our state leaders like to boast about economic development, the truth is we have fewer employees in Indiana now than before the pandemic. Like it or not, our college attainment rates lag in a state that has some of the best colleges and universities in the world. 
  • SOUTH BEND – Mike Pence keeps looking better. “I’m not getting in the car,” Pence said defiantly as the Capitol riot raged. Those words now are focused on by the committee investigating the effort to overturn the presidential election. That statement of determination to stay and complete certification of election results is described by Rep. Jamie Raskin, D-Md., a committee member, as “six of the most chilling words in American history.” As the committee zeros in on what happened and what was at stake, Raskin finds it clear that Pence, in staying and insisting on completing certification on the night of that Jan. 6 insurrection, halted the chilling prospect of a coup aimed at preventing peaceful transfer of power under the Constitution. That quote from Pence, who feared being whisked away on orders from Donald Trump’s Secret Service supervisors if he got in the vice presidential limo, appeared in “I Alone Can Fix It,” a book written by two Washington Post reporters.
  • BLOOMINGTON – Having just watched a Supreme Court nominee supported by a comfortable majority of Americans draw just three Republican votes in the Senate, you could be forgiven for thinking bipartisanship in Congress is a thing of the past. And in the case of Supreme Court nominees, you’d be right: The last time a nominee got over half the votes of the opposition party was in 2005, and you have to go back nearly three decades—to Ruth Bader Ginsburg in 1993—to find one who drew votes from almost all senators. But if you look carefully, there are plenty of signs that bipartisanship is still possible in Washington. President Biden recently signed into law a bill reforming the Postal Service, which drew strong support from both parties in Congress. The same happened with a measure that keeps companies and universities from shielding themselves against lawsuits for sexual harassment. And both houses have passed a package aimed at boosting American competitiveness, again with support in both parties. There are other examples, as well, but you’ll notice something about them: They’re not focused on hot-button issues like voting rights or gun control or immigration. This is in no small part because in the Senate, a measure effectively needs 60 votes to pass—which means neither party can get bills approved without members of the other party.
  • INDIANAPOLIS – We continue to hear it whispered where once it was shouted, “Manufacturing isn’t dead yet, but it is certainly dying.” If growing is a signal of dying, then there is no hope for anything. From 2009 to 2019, the best years available for comparisons given the COVID crisis, the U.S. economy, as measured by Gross Domestic Product (GDP) grew by 51% and manufacturing by 39%. Those are current dollar figures, not adjusted for inflation, but inflation was not a significant factor in those years. For Indiana, those growth figures were 46% for the state’s economy and 44% for manufacturing. In both years, manufacturing accounted for 29% of Indiana’s economy, a percentage no other state exceeded. Nationally, in those 10 years, manufacturing added one million jobs and 100,000 of those were in the Hoosier state. Only Michigan added more manufacturing jobs (168,000) than did Indiana. Together, these two neighbors accounted for one-quarter of the entire increase in American manufacturing jobs.
  • CARMEL –  Wha, wha, wha! The sounds from Millennials are deafening. The chants of baristas with philosophy degrees and anthropologists with whatever those degrees are called can be heard across this great land, “Pay off my student loans, wha, wha, wha!” Your cries have been heard by our Comforter-in-Chief, President Joe Biden and his merry band of “let’s give away cash” socialists in the United States Congress.  President Biden and Congressional leadership would love to find some legal way to cancel the student loan debt of nearly 45 million Americans. With a prospective ugly election fate at the mid-term elections staring them in the face, what better way for Democrats to get many in their base who are disenchanted with $5 a gallon gasoline and 9.5% inflation back on board the Biden choo choo? Two years ago in this publication, I warned about the exploding student debt problem and the many challenges that it presents. I identified runaway college tuitions with no market controls, easy money loan access to students who either shouldn’t be borrowing money to pursue a five-year college major in navel lint picking and the protection against bankruptcy afforded to student loan lending organizations by the generosity and opportunism of Congress as the major causes of the problem.
  • SOUTH BEND – In a recent Washington Post analysis of the top 10 prospects for the 2024 Democratic presidential nomination, former South Bend Mayor Pete Buttigieg is ranked second. Of special interest in the evaluations written by Post political reporter Aaron Blake is Buttigieg moving up from a prior analysis to be listed ahead of Vice President Kamala Harris, now No. 3. No. 1 of course is President Joe Biden. The incumbent president almost certainly wouldn’t be turned away by his own party if he seeks reelection. Why was Harris dropped down a slot, with Buttigieg moving ahead of her? Because “it’s not at all clear” that Harris is using the vice presidency effectively as a launchpad and “she’s done little to change the perceptions that harmed her 2020 (presidential) campaign,” including messaging problems. Because Buttigieg, who ran so impressively in ’20 with a background as South Bend mayor, would in ’24 have “more heft” as a Cabinet member, secretary of transportation.
  • MUNCIE – For most of my adult life, I’ve described myself as a free market economist. But, I should explain just what that means, and how it influences what I research and write about. The best way to start this essay is to observe that nearly all economic research examines the points at which markets fail. It is rare to find a technical economic paper that reports markets working especially well. In the past 25 years, across several hundred studies, I think I’ve concluded markets are working well in no more than one or two papers. This is largely how the rest of scientific publishing works. There would be no need for virologists if there were no viruses that made people unwell. But, most of the time we are not unwell due to viruses, and very few papers in virology focus on well people. Markets are much the same. Most of the time, in most places, markets work well. They allocate goods or services to those who value them most and they push factors of production, such as talent or equipment, to the places they’ll be most productive. Without any conscience design, markets tell us when there is too little or too much of a commodity in a certain place. This causes humans to ‘truck and barter’ from places of plenty to places of scarcity.
  • INDIANAPOLIS – The March Consumer Price Index (CPI) convinced many an economic cosmic cataclysm is about to occur. Yes, an 8.5% increase over the same period last year is startling. That’s why inflation led off the evening news and dominated newspaper headlines. Yet, when the U.S. Bureau of Labor Statistics (BLS) announced its March CPI figure, it also reported the March 2022 CPI figure exceeded the February 2022 number by 1.3%. This 1.3%, this short-term number, was the one often headlined in the past. If prices sustained that monthly growth rate, they would be 16.8% higher by the end of 12 months. Clearly, a 16.8% prospective inflation rate is scarier than an 8.5 retrospective rate. Both rates are technically correct, but many CPI components are highly variable, and the purpose of the Index is to tell us where we have been, not to forecast the future.
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  • NRA donations to Sens. Braun and Young
    "Horrified by the senseless murder of 14 children and a teacher in Texas. My heart is with the parents and the community bearing this unimaginable anguish. We have to keep guns out of the hands of criminals and the mentally ill, which is why I support Indiana’s red flag law, which works well when it is utilized." U.S. Sen. Mike Braun, tweeting after 19 students and two teachers were murdered in their Uvalde, Tex., school on Tuesday. According to Brady United, Braun has received $1.249 million from the NRA, while U.S. Sen. Todd Young has received $2.89 million from the NRA.
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