–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

It’s July, teen unemployment has risen to 24 percent, and you—or your teenage children—still don’t have a summer job. This is a peculiarly American problem.

In Nepal, according to Hudson Institute research assistant and Nepalese citizen Astha Strestha, “teens just hang around all summer and spend their parents’ money.”

In France, summer vacations are shorter, only 6 weeks, and teens try to stay with relatives outside the city.

In America, summer vacation lasts the better part of three months, and teens work either to earn spending money, contribute to college tuition payments, or simply because they think that they should have a job.

These days summer jobs are less plentiful due to the economy and to increases in the minimum wage.

It’s easier to be employable at a wage of $5.15, the 2006 minimum, than to find someone to hire you at $7.25, the new federal minimum effective on July 24. But just because no one has hired you, it doesn’t mean that you can’t earn money. You can start your own business. If it grows, you can employ friends and siblings, and perhaps keep it going for the rest of the year.

Computer assistance. You may not know it, but you have a comparative advantage in computers. This can be used by helping older adults, who grew up when computers were larger than cars and programming meant putting a pile of cards in a machine. You could help people set up email or social networking accounts, figure out their iPods, build a Web site, organize digital photos on a computer, or construct spreadsheets for bills and expenses.

Tutoring. You may not get straight As in school, but you probably know more about a subject than kids two or three years younger than you. And some of them might want to review material from last year, or get a head start on their classes for next year. Even more likely, parents might think their kids need help. Your slogan can be “Give Your Kids the Best—the Power of Summer Tutoring.”

Bicycle Repair. It’s remarkable how people throw out bicycles that–with a little cleaning, grease and tube repair—can be almost as good as new. Some people have old bikes in their basements that they would like collected, and some cities are even willing to have discarded bicycles removed from their dump. With the help of a bike repair manual you can mend them and sell them on Craigslist.

Yard Service and Car Maintenance. What people value most is their time, and some don’t want to spend their time mowing their lawn, weeding, or washing their cars. In suburbia there are endless opportunities which can carry over into the school year with leaf clearing and snow shoveling.

Summer Camp. One step up from babysitting is setting up informal week-long summer camps for small groups of neighborhood children. The themes could be sports, arts and crafts, reading and writing—wherever your skills may lie. In order to start a business, you need enthusiasm for a publicity drive through word of mouth; flyers through neighbors’ doors; notices with tear-off telephone numbers at grocery stores, houses of worship, community centers, and libraries; or internet sites, such as your Facebook page and Craigslist.

The object is to let everyone know that you’re available. Since businesses generally spread through word of mouth, you could ask the first few clients to act as references, perhaps even giving them a discount to do so. Valuable references and good will are some of the best assets your young company can have. That means always being courteous and cleanly-dressed.

Pricing can be a challenge. Until you find the right price, you might want to ask your clients to pick the price—“pay me whatever you like to mow this lawn”—so that people don’t think that you’re out to exploit them. In some cases, your clients might pay you more than you would have dared to charge on your own.

Just as large businesses collect information about potential customers, you want to keep a good database of your clients by recording names, addresses, telephone numbers, and email addresses.

Then, if business is a little slow, or if you go on vacation and return to town, you can call your clients and politely ask if they need your services. The advantages of starting your own business are numerous. You work for yourself, not a boss. You set your own hours. You don’t have to put up with cranky co-workers. If you’re not interacting with your clients, you can dress as you choose: no one cares if you build a website in your pajamas.

On the other hand, entrepreneurship is unpredictable and has its ups and downs. You might need several tries to get clients. One teen I know intended to spend his summer tutoring full-time and fixing bicycles on the side, yet ended up fixing bicycles full-time and tutoring on the side, since he had more bike customers than students.

Teens, there’s a job out there for you. You just have to go out and make it.

–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

Next Thursday, just in time for the July 4 holiday weekend, America’s unemployment rate is forecast to rise from 9.4 percent to 9.6 percent, well above rates in other industrialized countries.

Yet today the House of Representatives is rushing to pass the American Clean Energy and Security Act of 2009, even though the bill was incomplete yesterday and congressmen have not yet had the opportunity to analyze it. The bill would send America’s unemployment rate even higher.

The 1,200-page bill, cosponsored by Henry Waxman, Chairman of the House Energy and Commerce Committee, and Edward Markey, Chairman of the House Energy and Environment Subcommittee, would increase the price of energy by setting allowances for greenhouse gas emissions and mandating new standards for energy production and use.  The bill would raise $846.6 billion over 10 years while adding $821.2 billion to federal spending.

The bill requires that greenhouse gas emissions in 2012 do not exceed 97 percent of 2005 emissions, declining to 17 percent of 2005 emissions by 2050.  Meeting these standards now is technologically impossible without radically reducing our standards of living, but Congress is hoping that technology will magically appear as needed.

The mechanism for this is a “cap-and-trade” program under which allowances to emit greenhouse gases would be issued by the Environmental Protection Agency at a steadily declining rate through 2050.  When emissions exceed a firm’s allowance, or cap, it would have to purchase allowances from the government or other firms, a tax under another name, driving up costs that would be passed on to consumers.

Electric utilities have been given free allowances to encourage them to support the bill.  Oil and gas would be particularly hard hit, because they are responsible for 35 percent of emissions yet are allocated only three percent of the free allowances.

Just as the increases in oil prices in the 1970s brought about an increase in unemployment, the energy provisions in the Waxman-Markey bill could usher in years, perhaps decades, of lower economic growth and higher unemployment than would be the case otherwise.

The effects of the oil price increases between 1972 and 1988 have been extensively analyzed by economists Steven Davis of the University of Chicago and John Haltiwanger of the University of Maryland.  Although their research deals with the effects of oil price increases, it is also applicable to increases in the price of energy, which would be the effect of Waxman-Markey.

Davis and Haltiwanger find that oil price increases resulted in more jobs lost than jobs gained in almost every industry sector of the economy.  The largest oil shock, in 1973, caused an estimated eight percent decline in manufacturing employment over the following two years.

Oil price increases have larger effects on economic activity than oil price declines, Davis and Haltiwanger calculate, a finding shared by other economic studies.  In other words, when energy prices increase firms lay off workers, but when prices decline the workers are not hired back as fast.

Davis and Haltiwanger also find that higher energy prices are more likely to suppress employment than monetary shocks. Many politicians fret over the harmful effects of recent American monetary policy, but overlook the even greater danger to employment from the Waxman-Markey bill.

Supporters of the bill claim that the new regulations will create jobs, because people will have to be employed to produce the new technology.  But the funds for the new expenditures have to come from somewhere, and money spent on new products is money that cannot be spent on other activities, such buying clothes or food, or anything else that Americans would otherwise buy.  This would drive down employment in those industries.

In fact, not only does the bill penalize American firms through higher costs, it gives firms a financial incentive to move abroad through “offsets,” activities that supposedly lower carbon emissions elsewhere.  Since Congress knows that firms cannot meet the standards in the bill, legislators are allowing firms to meet 30 percent of their 2012 greenhouse gas reduction obligations, increasing to 60 percent by 2050, by buying offsets. Half of these offsets can take place abroad.

The offset provisions allow firms to shift economic activity abroad to countries with laxer emissions standards, further damaging U.S. job creation. A plant’s emissions might exceed its U.S. allowances, yet its technology might produce lower emissions than the norm in a developing country, allowing the relocation to count as an offset.

The American unemployment rate now exceeds those in France (8.9 percent) and Germany (7.7 percent). With unemployment climbing even without the Waxman-Markey bill, the question for Congress is the following:  how high do you want the rate to go?

–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

When Congress inserted “Buy America” protectionist provisions that required some goods (such as steel, cement, and textiles) financed by the stimulus bill to be made in America, our government invited a trade war with important economic partners.  Now China and Canada are imposing their own protectionist regulations, potentially destroying well-paid American jobs in the export sector.  Other countries may follow suit.

This week China reported that the government now requires stimulus projects to use domestic suppliers when possible, even though in February it promised to treat foreign companies equally.  The Chinese $585 billion stimulus package has resulted in a World Bank growth forecast of 7.2% for China this year, far above other industrialized countries.

And on June 6 the delegates at the Federation of Canadian Municipalities passed a resolution calling on “local infrastructure projects, including environmental projects such as water and wastewater treatment projects, [to] procure goods and materials required for the projects only from companies whose countries of origin do not impose trade restrictions against goods and materials manufactured in Canada.”

The tragic losers of “Buy America” are free trade agreements and potential job growth in the American economy. Seductively, “Buy America” promises workers they can have it all — cheap goods from China, oil from Canada, as well as protection from global competition. But real life just doesn’t work that way.  In reality, “Buy America” is shorthand for fewer jobs as other countries retaliate.

Many markets no longer have national boundaries but global reaches. America sits at the center of global markets for technology, equipment manufacturing, finance, banking, fashion, and advertising — to name but a few. When international markets expand, America grows. When barriers are erected to trade, jobs — and also wages —shrink.

Trade creates jobs not just through investments of foreign companies at home, but also by increasing employment at exporting firms. This effect, though less obvious, is far more significant. That’s why “Buy America” hurts employment.

Andrew Bernard, a professor at Dartmouth College, together with economists Bradford Jensen and Peter Schott, find that firms that trade goods employ over 40% of the American workforce. They conclude that approximately 57 million American workers are employed by firms that engage in international trade.

They analyze American imports and exports using customs documents that accompany shipments of goods crossing the border, along with reports of firms’ employment. The resulting information provides the most precise picture available of the employment effects of American trade.

Back in February, Caterpiller spokesman Jim Dugan declared, “Our position is that, while ‘Buy American’ may sound good, in fact we’re very concerned that if this stimulus legislation contains the ‘Buy American’ provision, other nations and regions of the world would follow our lead and pass similar provisions.”  He was right.

Trade also benefits millions of families who cut their shopping bills by buying low-cost imports. To take just one example, the amount that Americans spend on clothing has declined by 21% in real terms over the past 20 years, yet our closets are fuller than ever.

The benefits of free trade, such as increased employment, higher economic growth, and lower prices, are often taken for granted. But the disadvantages of free trade — such as the occasional instances of shuttered plants and lost jobs where American firms are not as efficient as international competitors — are all too visible.

Trillions of international dollars pass through America each year not because we are isolated, but because we are the hub of the world. Terrorists twice attacked the World Trade Center because the building symbolized international trade. They destroyed a building and murdered thousands of innocent Americans, but they failed to vanquish world trade. Sadly, politicians who erect barriers to trade are hostile not only to trade but to our country and to our jobs.

–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

Just as motorists began the summer driving season, U.S. Department of Transportation Secretary Ray LaHood told Congress that the Highway Trust Fund will run out of money by August.   Rising gasoline prices and the recession mean less driving, and less driving means lower revenues from gasoline taxes for the Highway Trust Fund.

At the same time, President Obama wants to spend $13 billion as a downpayment on high-speed rail, an expensive form of transportation that will reach only small segments of the country and that will not substitute for highways.  The money would be better spent on developing a more stable  source of revenue for highways, based on miles driven rather than gasoline used, that would help to reduce traffic congestion and greenhouse gas emissions.

When the Highway Trust Fund ran out of money in 2008, Congress transferred $8 billion to the fund from general revenues as a repayment from 1998, when the fund was in surplus, and $8 billion was moved into general spending.  This year, if Congress transfers money, it would be a direct expenditure, with no fig leaf. Without a transfer, work on many projects would stop or slow down.

The federal government financed the interstate highway system by means of a fuel tax because that was the best method available. Legislation passed in 1956 provided that, on completion, the federal tax would be repealed and funding restored to the states. The highway system is now complete, so there is no rationale for continuing federal involvement in financing state roads.

The $13 billion allocated for high-speed rail would be better spent to encourage the states to adopt a new way of charging for road use.  Driving is the primary method of transportation for Americans. They own about 235 million registered passenger cars, vans, pickup trucks and sport utility vehicles, and drive over 2.5 trillion miles a year.

Mechanisms for improving road finance were addressed earlier this year in a pathbreaking bipartisan report by the National Surface Transportation Infrastructure Financing Commission entitled Paying Our Way: A New Framework for Transportation Finance.

The Commission concluded that America should move away from gasoline taxes as a way to fund roads.  With more efficient cars, motorists will be able to travel further using less gasoline while still imposing wear-and-tear on roads. Hence, maintenance and repair should be funded through direct user charges that are based on miles traveled on all streets and roads, rather than on gasoline purchased.

House Committee on Transportation and Infrastructure Chairman Jim Oberstar regards a vehicle mileage charge as one of a number of options under consideration as a complement or alternative to a gasoline tax, but he is not committed to any course of action, according to the committee communications director Jim Berard.

Ideally, a vehicle mileage charge would require a tamper-proof device that would track not only miles and time of day driven but also the route selected.  This would allow states and local governments to vary the charges based on route taken and time of day driven.  Motorists who travel on congested roads at peak times of day could be charged more, encouraging them to shift their travel away from rush hour.

Since the change in road financing cannot be made immediately, the Commission recommends setting up a user-charge system that would work in conjunction with the Highway Trust Fund until 2020, at which point the new system would be in place to take over.

Full transition to this new revenue system would require research, the purchase of technology, and pilot projects, all of which would be a better use of stimulus funds than high-speed rail. With prices of transponders and global positioning systems falling, sophisticated and efficient road pricing systems are now possible. GPS devices could be given to drivers who choose to participate, and drivers could pay as easily as they now pay for cell phones or E-ZPass tolls.

To make road user charges more politically palatable, participating motorists could be exempt from registration fees, but would pay road charges instead, charges that could vary by type of road used and time of day.  Technologies exist to ensure that detailed information on trips is not sent out to motorists so that privacy is preserved.

The vanishing Highway Trust Fund is a wake-up call to use new technology to make our roads flow better.

–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

Health reform season kicked off this week with a meeting between President Obama and 24 Senate Democrats at the White House in preparation for congressional hearings and debate on health care in the weeks ahead.

Obama declared: “So we can’t afford to put this off, and the dedicated public servants who are gathered here today understand that and they are ready to get going, and this window between now and the August recess I think is going to be the make-or-break period. ”

At issue is how best to use the $250 billion plus pot of money that could result from taxing the value of employer-provided health insurance. Currently, health insurance provided by the employer to workers is free of income tax. When Senator McCain suggested eliminating tax-free employer-provided health insurance and replacing it with an individual tax credit to be used for health insurance purchases from any company, Obama accused him of raising taxes.

Now, according to Senate Finance Committee Chairman Max Baucus, one of the attendees at the White House meeting, President Obama is open to ending the tax break—without substituting an alternative individual tax credit—in order to finance health care reform. Removal of the tax exclusion would break Obama’s campaign promise not to raise taxes on Americans making less than $250,000 per year.

The tax benefit for employer-provided health insurance has prevented the development of a private health insurance market and tied Americans to their jobs for fear of losing coverage. No one complains that losing a job will mean termination of auto or home insurance, because these policies are purchased independently of employment and numerous companies compete to offer the best deals.

The additional $250 billion a year—as estimated by the nonpartisan Congressional Budget Office—could be a substantial downpayment to the $634 billion that President Obama’s budget sets aside for health care reform.

Democrats want the federal government to use the $250 billion for a national plan to insure the 47 million uninsured. In contrast, Republicans want to use the funds to give each family a refundable tax credit, worth about $2,300 for individuals and about $5,700 for families, with an extra $5,000 for poor families, to purchase health insurance and to expand tax-free health savings accounts.

Coincidentally—or perhaps not—Democrats and Republicans are both proposing to set up “exchanges” as the path to better health care. But there are major differences between the two proposals.

A new Council of Economic Advisers report entitled The Economic Case for Health Reform (view pdf) proposes the creation of an “insurance exchange” to improve the operation of markets for health insurance. This national exchange would coordinate health plan participation; negotiate premiums with employers; disseminate information about different plans; and facilitate enrollment.

During the campaign, President Obama proposed using the insurance exchange in combination with a new public plan. Those Americans who wanted to sign up to the new plan could do so, and private insurance plans would be regulated by the new insurance exchange.

State-based health care exchanges are a crucial feature of the leading Republican health care proposal, “The Patients’ Choice Act of 2009,” (view pdf) proposed by Wisconsin Congressman Paul Ryan and Oklahoma Republican Senator Tom Coburn, a physician who goes home and delivers babies on Mondays. This state exchange would be used as a portal where Americans could take their tax credits and choose private insurance. All insurance plans that are licensed in the state could participate in the state exchange, and premiums would be set by the different companies.

Under Dr. Coburn’s plan, health insurance plans could include high deductible plans combined with health savings accounts, or more traditional managed care or fee for service plans. Those with chronic illnesses, such as hemophilia or diabetes, would be placed in special plans.

Politicians from both parties are open to ending the tax-favored status of employer-provided insurance and putting in place some type of exchange. The question in the months ahead is whether to use the funds for another government health plan and further federal government regulation, or for an individual tax credit encouraging increased consumer choice of plans.

–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –

Good news for Americans with large families or who need to transport substantial amounts of gear: President Obama’s new vehicle emissions standards are not as tough as they seem. But this is bad news for environmentalists, who want to lower the use of gasoline.

When Obama, using authority granted to the president in the 2007 Energy Act, announced earlier this month that automakers will be required to achieve a higher fleet average, 35 miles a gallon, by 2016—four years earlier than Congress had mandated—Americans might have been forgiven for thinking that in 2016 the window stickers on the new cars would reflect this new standard.

Not so.  Window stickers describe only the calculated gasoline efficiency of the model they are pasted on.  Moreover, even if miles per gallon (MPG) were averaged for all models, the result would fall below the new standards Obama announced for 2016.

What he promulgated was a higher “fleet average” for each automaker as calculated by the Department of Transportation, using a kind of vehicular treadmill to test cars’ fuel efficiency.

But MPG for each model is calculated by the Environmental Protection Agency, using a different method that purports to take account of how cars are driven.  Model for model, EPA’s MPG is lower than that of the corporate fleet average calculated by the Transportation Department.

The CAFE standards declared by Obama—for cars, minivans, and light trucks—are scheduled to rise to an average of 35 MPG in 2016 from levels of 27 MPG now for cars and 22 MPG for light trucks.

A 35 MPG CAFE standard corresponds roughly to a 26 MPG EPA standard, according to the automotive information Web site Edmunds.com, a 40 percent increase from present levels. Edmunds.com reports that this is met already by 29 car models and 36 truck models.  Half these trucks and one third of the cars are made by domestic automakers.

In other words, there was less to Obama’s announcement than met the eye—or made the headlines.

If he had aimed at a 35 MPG EPA standard, so that the window stickers of the new cars would show averages of 35 MPG, automakers would have had to increase fuel efficiency by 70 percent. Doing that would lead to even higher prices than will result from the costs imposed by achieving the MPG goals that the president declared.

“The CAFE tests performed now for the Transportation Department are the same as the ones performed under the initial CAFE standards introduced in the 1975 Energy Policy Act,” said Environmental Defense Fund senior fellow John DeCicco in a phone conversation this week.   “Congress has not changed these tests since they were put into place in 1978.”

These scientific tests require special fuel and place the vehicle tested on a dynamometer, a machine designed to measure fuel intake in a repeatable pattern that is not the same as ordinary driving. Plainly, this yields better “mileage” than would driving over the road.

Whatever the “real” MPG of new cars, this approach to raising efficiency has substantial disadvantages compared to a higher gasoline tax.  Last summer, when the price of gasoline climbed above $4 a gallon, Americans cut back on their driving—with no extra CAFE standards. Dealers faced waiting lists for more efficient hybrid models, such as the Toyota Prius.

Raising emissions standards is a complex issue, requiring negotiations between different government departments and nuanced methods of measurement. And automotive fuel efficiency has been rising without stricter CAFE standards, even as engine power increases, because as older cars are replaced with newer ones, fuel efficiency improves.  If Obama wants Americans to use less fuel, a gas tax would be simpler and more effective than higher emissions standards.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

President Obama is in favor of moving towards “energy independence,” but his new 2010 Budget specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry. In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.

Surely a president who desires energy independence would leave oil companies alone so that America could develop greater domestic reserves.  But this is not the case.

The ostensible rationale for the tax increases is that the current tax system “distorts markets by encouraging more investment in the oil and gas industry than would occur under a neutral system. To the extent expensing encourages overproduction of oil and gas, it is detrimental to long-term energy security…” This wording, with reference to credits, lower tax rates, special treatment, and accelerated depreciation, is repeated eight times in the Treasury Department’s Green Book, a description of proposed spending and revenue changes in the budget.

President Obama believes that subsidies for renewable energy are acceptable, even though renewable energy is only responsible for 4 percent of America’s supply.  He does not consider expenditures of $60 billion on “clean energy investments” to be distortions.  But oil, which accounts for almost 40 percent of America’s energy usage, is a different matter, apparently deserving of higher taxes to limit overproduction. With fuel prices close to $5 a gallon last summer, we could have used a little overproduction.

If America is to reduce use of imported fuels, it needs to raise domestic production to increase long-term energy security. Every additional barrel of oil produced in America is one barrel fewer that needs to be imported.  The oil and gas industry already employs more than 1.5 million workers, and has the potential to employ many more.

Estimates of American oil and natural gas reserves keep growing, potentially generating more job opportunities.  In 2007, 200 trillion cubic feet of natural gas, equivalent to 33 billion barrels of oil, or about 18 years of U.S. oil production, were found in the Haynesville Shale, a rock formation in northern Louisiana. Discoveries have also been made in Texas, Arkansas, and Pennsylvania. New optimism about U.S. gas reserves and production capacity has been pushing natural gas prices down.  Since the fuel is there, why propose new taxes to discourage production?

President Obama’s new tax proposals, rather than leading towards energy independence, would drive oil and gas production abroad.  New taxes would place American producers at a disadvantage in the global market, punishing domestic American oil and gas companies and benefiting countries with large reserves such as Venezuela, Saudi Arabia, Iran and Russia.  Does President Obama really want these countries, all under fire for their neglect of basic human rights, to get richer at our expense?

Moving towards energy independence is under attack from another quarter—extreme environmentalists. After Tuesday’s failure of California ballot initiatives to cut spending, Californians might take seriously Governor Arnold Schwarzenegger proposal to allow additional offshore drilling from Platform Irene, off the coast of Santa Barbara, which would raise $1.8 billion. But drilling on the Outer Continental Shelf remains unpopular. It’s telling that residents find it preferable to release 40,000 prisoners from jail or fire thousands of teachers—rather than drill offshore, which could bring in a steady stream of revenue to the state capital of Sacramento.

Until the United States has the technology to operate its 250 million motor vehicles without gasoline and natural gas, we need more domestic exploration, not less.  At some point, maybe later this year, maybe in 2010, our economy is going to shift to post-recession recovery, and oil and gas consumption are going to rise.  We don’t want a repeat of $5 gasoline and sky-high home heating bills.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

As President Obama considers whether to fulfill his campaign promise to raise the minimum wage from $7.25 to $9.50 per hour by 2011, there’s no better illustration of the consequences of well-intentioned policy-making than recent events in American Samoa, a United States territory in the South Pacific that falls within the purview of Congress.

Chicken of the Sea, the tuna company, announced this month that it will close its canning plant in American Samoa in September. The culprit is 2007 legislation in Washington that gradually increased the islands’ minimum wage until it reaches $7.25 an hour in July 2009, almost double the 2007 levels.

In 2007, the hourly minimum wage in American Samoa for fish canning and processing was $3.76 and the minimum wage for government employees was $3.41. Shipping had the highest minimum wage, at $4.59. Garment manufacturers got the lowest, at $3.18 an hour. A $7.25 wage is a substantial increase for most residents.

Chicken of the Sea will lay off 2,041 employees—12 percent of total employment, almost half of all cannery workers. And the 2,700 workers at StarKist, the other American Samoa tuna canning company and Chicken of the Sea’s rival, are probably concerned that their jobs are the next to go.

American Samoa’s loss is Georgia’s gain. Chicken of the Sea will move to Lyons, Georgia, (2007 population 4,480) employing 200 people in a new $20 million plant on a more capital-intensive production line.

In January 2007 the legislation originally did not include American Samoa, perhaps because Del Monte, at the time the parent company of StarKist, was headquartered in Speaker Nancy Pelosi’s district.

Until then, the Labor Department had set wage rates in American Samoa every two years, following an extensive study on economic conditions on the island. But before final passage, Congress included American Samoa.

Back in 2007 American Samoa Governor Togiola Tulafono worried that increasing the minimum wage “would kill the economy” and Congressional Samoan Delegate Eni F.H. Faleomavaega forecast that it would devastate the local tuna industry.

They knew that industries would go elsewhere if they have to pay $7.25 an hour.

They were right. American Samoa will lose not only the 2,041 jobs at the Chicken of the Sea canning plant, but also secondary jobs from the ripple effect of loss of income—stores and eateries that cater to cannery workers, shops that mend fishing nets, shipyards, and buses that transport workers.

In a telephone conversation this week, Representative Vaito’a Hans A. Langkilde of the Ma’oputasi District #10, representing the villages of Leloaloa, Satala and Atu’u, described the prospective devastation of the community. His district is home to both StarKist and Chicken of the Sea.

Mr. Lankilde told me, “Over the past 50 years the industry provided massive job opportunities for unskilled labor. The 2007 law that increased the minimum wage was the beginning of the end for the tuna industry and the cause of massive job losses for our already fragile economy. The only way to resolve the trend towards total economic disaster is for Congress at its soonest opportunity to reverse its position.”

With the recent laying of fiber-optic cable linking American Samoa to the United States, Samoans could get jobs in call centers. Yet the higher minimum wage could discourage firms.

Raising the minimum wage to $9.50 an hour would drive even more jobs away from American Samoa. In the United States it would have the effect of shifting jobs from low-skill to high-skill workers, raising unemployment among those who are least equipped to handle it.

Rather than having to accept direction from a government thousands of miles away where they have no voting representation, residents of American Samoa should be given the power to decide on their own minimum wage. Congress should leave further minimum wage increases to individual states to choose as they see fit, because wage levels and the cost of living vary substantially between states such as Mississippi and New York.

The closure of the Chicken of the Sea cannery in American Samoa shows us that higher minimum wages cause low-skill workers to lose jobs. What’s true for American Samoa holds equally true for the United States.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

Jack Kemp, who died on May 2 at the age of 73, lived the American dream as the football star who was elected to the House of Representatives. He had the vision to translate his intellectual ideas into the practical tax cuts, housing vouchers, and enterprise zones that sparked not only the Reagan revolution in America but also similar economic revolutions in many countries around the globe.

Jack Kemp spent his life as a champion of the little guy, the forgotten man, the person left behind in a world too busy to care. It is easy to look to other way and ignore the cries of the weak and the helpless. Jack Kemp could have done that. But Jack Kemp always stopped to listen. And when he listened, he stood up for the downtrodden.

His economic plan for America had a consistent theme: help the little guy. For Kemp, that meant letting him prosper and getting the government off of his back. That would work in America, and that would work around the world. Kemp spent much of his career trying to get oppressive governments off the backs of the forgotten.

Take the Soviet Union, for example. Today, almost 20 years after its demise, we can see from hindsight that the system was doomed. Yet in the early 1970s it was not obvious.

In 1974, four years after Kemp was first elected to Congress, he was a co-sponsor of the Jackson-Vanik amendment that called for eliminating trade negotiations and all scientific, educational, and cultural exchange missions with the Soviet Union until the country restored freedom. The Soviet Union was crushing dissent at home and sending refuseniks to die in gulags. Jack Kemp heard and stood up for the forgotten Russians. The Jackson-Vanik amendment was passed and signed by President Gerald Ford in 1975.

Jack Kemp kept his eye on the Soviet Empire and the people it crushed. In 1978, he introduced a resolution urging the U.S. Olympic Committee to hold the 1980 Summer Olympic Games outside the Soviet Union. The next year, it was a resolution urging the Soviet government to “end the oppression of Jews in the Union of Soviet Socialist Republics.” It would have been easy to look the other way. Jack Kemp didn’t.

In 1985, he introduced a resolution that supported President Reagan’s decision to discuss Soviet human rights violations against the people of Afghanistan with Soviet leader Mikhail Gorbachev and called on him to reiterate the U.S. desire to achieve a negotiated political settlement agreeable to all parties in Afghanistan. This included withdrawal of foreign troops, restoration of an independent and sovereign Afghanistan, and the safe return of Afghan refugees. Most Americans could not find Afghanistan on a map. Jack Kemp knew it was filled with people crushed by the Soviet Union and forgotten by the world.

Kemp also fought for a free people in Poland. In 1984, he sponsored a bill that “authorizes the use of a specified amount of Economic Support Fund money for agricultural activities in Poland which are managed by the Polish Catholic Church or other nongovernmental organizations”. In 1987, he introduced a joint resolution that specifically provided aid to the Polish independent trade union organization Solidarity. It would have been easy to ignore the people of Poland but Jack Kemp didn’t.

Kemp did not forget the people of Hong Kong facing more than a billion people in the People’s Republic of China. That country wanted to take over Hong Kong without regard to the wishes of its people. Jack Kemp introduced a resolution supporting the self-determination of the people of Hong Kong, saying that without the agreement of its citizens, new government will not be imposed. Unfortunately the principle of self-determination was pushed aside and China moved its forces into Hong Kong. Now the only people of Hong Kong who live free are the ones who were able to escape.

After America left Vietnam, most American politicians wanted to forget about the Vietnamese. Not Jack Kemp. In 1979, he attempted to help Vietnamese who wanted to come to the United States. Kemp introduced a concurrent resolution to help refugees and to establish a consular office in Vietnam for those wishing to emigrate.

In countries from Angola to Nicaragua to Israel, on every continent, Jack Kemp fought for the forgotten man and against oppressive governments. He could have looked the other way. He could have appeased the totalitarians. He could have ignored the cries of the weak. Not Jack Kemp.

Jack Kemp’s life provides valuable lessons for the leaders of today. Stand up for principle, even though the probability of success might initially appear small. Just as the Soviet Union fell and democracy spread across the globe, we have the power to defeat dictators who are funding terrorism and want to bring the West to its knees.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.  The views expressed are her own. —

In his first one hundred days, President Obama has shown himself to be one of the most radical U.S. presidents in history.  He is harming America’s defenses by publishing memos on interrogation of detainees and threatening to prosecute lawyers who drafted supportive memos.  He shakes hands with America’s enemies, such as Venezuelan leader Hugo Chavez, and sends mixed signals to its friends, such as Colombia’s President Uribe.

And, in the name of combating a recession, he is destroying the fundamental institutions of America’s free-market economy.

Not only would President Obama’s proposed programs move government spending to levels, in relation to the economy, unseen since the end of World War II, but his administration is increasingly involved in the minutiae of a new, unwise, industrial policy, such as how much firms can pay workers, and which banks are allowed to repay government loans, and which industries and companies deserve a government rescue package.

Under Obama’s proposed budget, the nonpartisan Congressional Budget Office projects the government deficit to hit $1.2 trillion in 2019, or six percent of GDP, after “bottoming out”—if it does—at  $658 billion in 2012, a level more than 40 percent above the highest deficit under the presidency of George W. Bush. By 2019, government spending would take up nearly a quarter of GDP, far higher than at the peak of Iraq war spending and the highest, excepting 2009 and 2010, since 1946.

Much has been written about President Obama’s plans for multi-year, growing expenditures on energy and health care. He has proposed to invest billions of dollars in wind, solar power, and other renewables, which now produce about 3 percent of U.S. energy, yet he neglects nuclear power, which produces 20 percent.  He has suggested a substantial cap-and-trade energy tax, which would raise more than a trillion dollars over time, according to some estimates. And he wants a down payment of $634 billion for a universal health care plan whose details he has not yet confided to the public.

In addition, Obama is pushing for other programs which are both costly and naive.  One of his priorities is high-speed passenger rail service, which was given a downpayment of $8 billion in economic stimulus funds and possibly $5 billion more in the budget.  This proposal is, to put it charitably, poorly-designed. Real high-speed rail, with trains that travel 150 miles an hour and faster, can be found in Europe and Japan, but they have not stemmed the increasing use of road transportation.  And these trains need their own, specially engineered rights-of-way, which would cost much more than $13 billion.

Some of Obama’s economic proposals appear to be aimed at placating labor unions, an important element in his political base, rather than encouraging economic recovery.  In March, even before the swine flu scare, he signed legislation ending a program, opposed by the Teamsters union, allowing a small number of Mexican trucks to enter into the United States.  Mexico is retaliating by imposing tariffs on almost 100 agricultural products, including wheat, beans, beef and rice, hurting American exporters.

In another concession to unions, the president has let the U.S. Labor Department end some disclosure requirements for union finances, originally put in place so that union members can learn how their dues are being spent.

Although Obama lauds transparency, the Labor Department has announced that it would not enforce the filing of the form that requires union officials to report conflicts of interest, such as whether they had personal relationships with firms doing union business.  In addition, unions will no longer be required to disclose supplemental information about officers’ pensions and compensation.

Even as unions are allowed to reveal less about their finances, financial institutions that have taken government funds, some reluctantly and under Treasury Department duress, are subject to an unprecedented level of scrutiny as to their compensation of senior executives.  Goldman Sachs, Morgan Stanley, and J.P. Morgan are being discouraged from repaying their Troubled Assets Relief Program funds, even though pay caps are interfering with retention of talented staff.  A government pressuring banks to do something not required by law is engaged in extra-legal behavior.

The government’s treatment of executive compensation bonuses, standard in many industries, has also been capricious. Some executives working in banks that received TARP funds were paid their bonuses without complaints from Washington.  Others, notably those working at AIG, were demonized both by the press and government.

For those who favor nationalization of the economy, or at least of big business, Obama’s first 100 days have been a roaring success.  Others, however, pray that the economy can survive not only the recession but also the president’s prescriptions.