Civitas Review

More Research on Unemployment Insurance's Impact on Employment


Last week my article on unemployment benefits was published in the N&O. The main premise was simple and noncontroversial: when you pay people not to work, the result will be more people not working. But apparently pointing out an obvious truth ruffles some feathers, judging from the several angry letters to the editor the article generated – with one such letter calling this self-evident bit of common sense "a stretch."

For additional reading on the subject (as if glaringly obvious common sense is not enough to persuade them) for these deniers, they can review some recent academic findings that confirm what should be obvious to any rationally thinking person: more generous and longer extended unemployment benefits translates into higher unemployment.

  • This 2012 paper by the Philadelphia Federal Reserve Bank, that finds: "The extensions of UI benefits are found to have contributed to an increase in the unemployment rate of 1.4 percentage points, which is 29 percent of the observed increase in the unemployment rate (4.8 percentage points);" and "the December 2010 extension has moderately slowed down the recovery of the unemployment rate, keeping the rate 0.6 percentage point higher during 2011."
  • Or this 2013 National Bureau of Economic Research paper that states: "Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility."
  • And this 2011 article by the Chicago Federal Reserve Bank that concludes: "the extension of unemployment insurance benefits during the recent economic downturn can account for somewhere in the neighborhood of 1 percentage point of the increase in the unemployment rate, with a preferred estimate of 0.8 percentage points."
  • This research by Econ Journal Watch that suggests: "The UI benefit extensions that have occurred between the summer of 2008 and the end of 2010 are estimated to have had a cumulative effect of raising the unemployment rate by .77 to 1.54 percentage points."
  • And then there is this article written by former Obama economic advisor Larry Summers, in which he declares: "The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a “reservation wage”—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer."

A picture IS worth a thousand words


Sarah Arnett at the Mercatus Center has put together a number of interesting  maps ranking the fiscal condition of the 50 states by various indices such as cash solvency, budget solvency, long-run solvency and service-level solvency.   She also has a map that combines her four indices to provide an overall long-term ranking of states by fiscal condition. Access it here.

I hope Sarah doesn't mind if I add some other interesting information, care of our friends at State Vote

Top Ten Ranked States by Fiscal Solvency

  • Legislative Control – 8 – Republican; 1 Split; 1 N/A (Nebraska Unicameral)
  • Governor's Party – 9 Republicans; 1 Democrat
  • State Control: 7 – Republicans;  2 – Split ; 1 N/A (Nebraska Unicameral)

Bottom Ten Ranked States by Fiscal Solvency

  • Legislative Control – 8 Democrats; 1 – Republican,  1 – Split
  • Governor's Party –   8 Democrats ;  2- Republicans
  • State Control -  7 Democrats ; 1 – Republican; 2 – Split

Detect a pattern?…   Just thought you might be interested.

Remember the Race-Baiting City Councilman? There's More to the Story!


A previous Civitas blog post reported that Rocky Mount City Councilman and Witness Wednesday arrestee Andre Knight made comments which could easily be interpreted as calling a community leader a racist.  This happened when that community leader was presenting a petition for the City of Rocky Mount to have a public hearing on whether or not the city should build a proposed Event Center downtown. Wait a minute there is more to the story.

In the meeting, which took place Jan. 13, there was a proposal put forth to approve $67,430 to include a study that would be run by Visions Inc.  Senator Angela Bryant (D- Nash) runs this organization, and Rocky Mount City Councilman Lamont Wiggins  is on the board. The Rocky Mount Telegram reported that “(t)he intent of the plan was to assist the city in recognizing the importance of a diverse workforce reflective of the community as much as possible allowing the city to better understand and respond to citizens,” said Assistant City Manager Ann Wall in a memorandum to City Manager Charles Penny. “The intent of the plan was also to establish a workplace which values employees and encourages their development.” The study was approved that night, since September of 2012 the City of Rocky Mount will have spent $413,220 just on studies  for the City and for building of the proposed $43.6 million Event Center.  Citizens in the community are beginning to become upset that the city is spending the taxpayers’ money not only to help a local Senator and City Councilman but to also build an Event Center that is of questionable value.

Another thing to look at about the Visions study that was approved was the fact that it passed the City Council with a voice vote.  Some said “Aye”, no one said “No”, and no one recused themselves.  If LaMont Wiggins is on the board for Visions Inc. wouldn’t it be a conflict of interest for him to vote on the approval of the study?

Rob Coffman — Baby or Bath Water?


Any day now, the Director of the State Board of Elections (SBOE) will make the decision to either terminate Forsyth County Elections Director Rob Coffman' employment or give him a reprieve. The county board of elections submitted a petition, signed by the majority, to the SBOE on December 11 to remove the Director; Coffman entered his response on Dec. 30.

According to NCGS 163-35 (b), the SBOE Director has 20 days to make her decision, but the State Board could decide to defer the decision and then they would be the ones to make the final determination. If that were to happen, the county director would be given the opportunity to be heard and present witnesses.

Coffman has had his defenders, namely the community organizing group CHANGE. The group started a petition in support of Coffman when the termination petition was submitted to the SBOE and has five signatures – so far. CHANGE is an affiliate of Industrial Areas Foundation, a national community organizing network founded by the noted radical organizer Saul Alinsky. Also supporting Coffman is the Forsyth Democratic Party. The chair of the party wrote a letter in his defense. And then there's the Winston-Salem Journal's editorial page editor, John Railey, who acknowledged his friendship with Coffman in an editorial. Railey's article focused mostly on Coffman's "irreverent Northern sense of humor" and gave the example of Coffman introducing one of his employees, a black woman, as a "crack ho" to a stranger.

Railey wrote: "I don’t believe Coffman meant the term maliciously, as hard as that might be to explain. But I joke around with him pretty much. I haven’t heard him use a term as bad as 'crack ho,' but the Michigan native does have a certain irreverent Northern sense of humor, pushed to the extreme at times, that doesn’t always fly well here."

While Railey would have us believe that the problem is with Coffman's "sense of humor," the petition for Coffman's removal does not focus entirely on his racist comments directed at employees and others. It looks at how he administers elections and runs the county's elections office. It covers Coffman's mishandling of election results and subsequent recounts in this year's Tobaccoville town council race. The petition also points to how Coffman's disregard for policy, procedure and the law allowed voter registration cards to be held at the Winston-Salem State University post office for more than four years.

Rob Coffman is not a new director; his problems are not rookie mistakes or simple oversights. They appear to be purposeful disregard for policy and procedure and contempt for authority. Mr. Railey says the board shouldn't throw the baby out with the bath water, I wager that many people think that Rob Coffman is the bath water.

Changes Coming to State Pension Fund Oversight?


Per the N&O:

State Treasurer Janet Cowell announced Thursday the creation of an independent, bipartisan commission to review the state’s governance structure for investment management.

The commission, which is expected to makes its recommendations to Cowell and the General Assembly by April 30, will look the state’s current sole investment trustee structure and whether it should be replaced with an investment advisory committee model.

North Carolina is currently one of just four states with a sole fiduciary – the state treasurer – who makes all investment decisions in consultation with staff.

I've written before on the political pitfalls that are invited when one person wields so  much decision-making power over such a large pot of money.

Of course, the best state pension reform option would be to transition from the current defined-benefit structure in which taxpayers are on the hook for rapidly growing unfunded liabilities, to a 401(k) style defined-contribution plan in which the workers own and control their own retirement funds. This would effectively take the politics - and all the potential corruption that comes with it - out of the pension system.