Tidbits Quotations
To Accompany the December 21, 2012 edition of Tidbits
Bob Jensen at Trinity University

My Free Speech Political Quotations and Commentaries Directory and Log ---

"Top 10 Myths About Mass Shootings," by James Alan Fox, Chronicle of Higher Education, December 18, 2012 ---

Even before the death toll in last Friday’s school massacre in Newtown, Conn., was determined, politicians, pundits, and professors of varied disciplines were all over the news, pushing their proposals for change. Some talked about the role of guns, others about mental-health services, and still more about the need for better security in schools and other public places. Whatever their agenda and the passion behind it, those advocates made certain explicit or implied assumptions about patterns in mass murder and the profile of the assailants. Unfortunately, those assumptions do not always align with the facts.

Myth: Mass shootings are on the rise.
Reality: Over the past three decades, there has been an average of 20 mass shootings a year in the United States, each with at least four victims killed by gunfire. Occasionally, and mostly by sheer coincidence, several episodes have been clustered closely in time. Over all, however, there has not been an upward trajectory. To the contrary, the real growth has been in the style and pervasiveness of news-media coverage, thanks in large part to technological advances in reporting.

Myth: Mass murderers snap and kill indiscriminately.
Reality: Mass murderers typically plan their assaults for days, weeks, or months. They are deliberate in preparing their missions and determined to follow through, no matter what impediments are placed in their path.

Myth: Enhanced background checks will keep dangerous weapons out of the hands of these madmen.
Reality: Most mass murderers do not have criminal records or a history of psychiatric hospitalization. They would not be disqualified from purchasing their weapons legally. Certainly, people cannot be denied their Second Amendment rights just because they look strange or act in an odd manner. Besides, mass killers could always find an alternative way of securing the needed weaponry, even if they had to steal from family members or friends.

Myth: Restoring the federal ban on assault weapons will prevent these horrible crimes.
Reality: The overwhelming majority of mass murderers use firearms that would not be restricted by an assault-weapons ban. In fact, semiautomatic handguns are far more prevalent in mass shootings. Of course, limiting the size of ammunition clips would at least force a gunman to pause to reload or switch weapons.

Myth: Greater attention and response to the telltale warning signs will allow us to identify would-be mass killers before they act.
Reality: While there are some common features in the profile of a mass murderer (depression, resentment, social isolation, tendency to blame others for their misfortunes, fascination with violence, and interest in weaponry), those characteristics are all fairly prevalent in the general population. Any attempt to predict would produce many false positives. Actually, the telltale warning signs come into clear focus only after the deadly deed.

Myth: Widening the availability of mental-health services and reducing the stigma associated with mental illness will allow unstable individuals to get the treatment they need.
Reality: With their tendency to externalize blame and see themselves as victims of mistreatment, mass murderers perceive the problem to be in others, not themselves. They would generally resist attempts to encourage them to seek help. And, besides, our constant references to mass murderers as “wackos” or “sickos” don’t do much to destigmatize the mentally ill.

Myth: Increasing security in schools and other places will deter mass murder.
Reality: Most security measures will serve only as a minor inconvenience for those who are dead set on mass murder. If anything, excessive security and a fortress-like environment serve as a constant reminder of danger and vulnerability.

Myth: Students need to be prepared for the worst by participating in lockdown drills.
Reality: Lockdown drills can be very traumatizing, especially for young children. Also, it is questionable whether they would recall those lessons amid the hysteria associated with an actual shooting. The faculty and staff need to be adequately trained, and the kids just advised to listen to instructions. Schools should take the same low-key approach to the unlikely event of a shooting as the airlines do to the unlikely event of a crash. Passengers aren’t drilled in evacuation procedures but can assume the crew is sufficiently trained.

Myth: Expanding “right to carry” provisions will deter mass killers or at least stop them in their tracks and reduce the body counts.
Reality: Mass killers are often described by surviving witnesses as being relaxed and calm during their rampages, owing to their level of planning. In contrast, the rest of us are taken by surprise and respond frantically. A sudden and wild shootout involving the assailant and citizens armed with concealed weapons would potentially catch countless innocent victims in the crossfire.

Myth: We just need to enforce existing gun laws as well as increase the threat of the death penalty.
Reality: Mass killers typically expect to die, usually by their own hand or else by first responders. Nothing in the way of prosecution or punishment would divert them from their missions. They are ready to leave their miserable existence, but want some payback first.

Continued in article

Jensen Comment
As I walked my treadmill this morning I watched a friend of the Lanza family surmise that Adam snapped when he learned that his mother was leaning toward having him committed to a psychiatric hospital.

"Mother may have wanted Adam Lanza committed," by Teresa Priolo, myfoxny, December 19, 2012 ---

As the days drag on details are emerging about the life Adam Lanza led prior to his murderous spree at Sandy Hook Elementary School in Newtown, Conn. While some may say "forget Adam, these details can't bring his 27 victims back," but maybe they will help all of us understand how to prevent something this horrific from happening again.

What made Lanza unhinge and mercilessly slaughter 20 innocent children and six adults? The answer may lie in his past, in the relationship he had with his mother.

FoxNews.com reports exclusively that Adam knew that his mother, Nancy Lanza, was planning to have him committed to a psychiatric facility.

Adam, reportedly diagnosed with Asperger's syndrome and suffering from mental health issues, lived with his single mother, who was his primary caregiver.

A neighbor described as a family friend told Fox that Adam knew Nancy was feeling overwhelmed and feared she could no longer care for him so she began the process of petitioning the court for conservatorship. Previous reports have suggested Nancy considered moving with her son to Washington State so that he could attend a special school that could address his issues.

She had the sole right to make these decisions as part of her divorce agreement with Peter Lanza.

They both were only required to consult each other on decisions related to Adam's care, but Nancy had final say.

Divorce paperwork suggests the Lanzas were required to complete a parenting education class, which the decree shows she did.

Continued in article

Jensen Comment
I have a loaded pistol and shotgun in the house that have never been fired. I don't like guns and would vote for banning sales of assault rifles and high capacity shell magazines. I do support the right to carry, because I think this strikes fear in many would-be rapists, muggers, robbers, kidnappers, car jackers, and terrorists. It won't, however, be me doing the carrying.

In the wake of this tragedy, the new ploy by potentially violent young people being medicated and treated as mental health outpatients might be threatening terrorism if care givers don't give them exactly what they want in terms of video games, sex, porn, and spending money. Could we possibly incarcerate them even though only one in a million will actually carry out acts of terrorism on innocent children? What do you do when neither Theory X nor Theory Y is working on a troubled kid?

When it comes to allocating scarce resources, I think priority should be given to very common crimes (e.g., child abuse, spousal abuse, sexual assault) relative to very rare crimes except when those rare crimes might kill thousands in a single incident.

"22 Stats That Prove That There Is Something Seriously Wrong With Young Men In America," by Michael, The Economic Collapse Blog, December 17th, 2012 ---

 . . .

So why is all of this happening?

Well, there are a whole host of reasons. But certainly parents and our education system have to bear much of the blame. In the old days, young men were taught what it means to "be a man", and morality was taught to young men both by their parents and in the schools. But today, most young men have very little understanding of what "manhood" is, and our society has taught them that morality doesn't really matter. Instead, television and movies constantly portray young men as sex-obsessed slackers that just want to party all the time, so that is what many of our young men have become.

How much better off would our society be if we had trained this generation of young men to love, honor, protect and take care of others?

How much better off would our society be if we had nurtured the manhood of our young men instead of teaching them to be ashamed of it?

How much better off would our society be if we had disciplined our young men and taught them morality when they were getting off track instead of just letting them do whatever they wanted?

The following are 22 stats that prove that there is something seriously wrong with young men in America today...

#1 Males account for approximately 70 percent of all Ds and Fs in U.S. public schools.

#2 About two-thirds of all students in "special education programs" are boys.

#3 The average American girl spends 5 hours a week playing video games.  The average American boy spends 13 hours a week playing video games.

#4 The average young American will spend 10,000 hours playing video games before the age of 21.

#5 One study discovered that 88 percent of all Americans between the ages of 8 and 18 play video games, and that video game addiction is approximately four times as common among boys as it is among girls.

#6 At this point, 15-year-olds that attend U.S. public schools do not even rank in the top half of all industrialized nations when it comes to math or science literacy.

#7 In 2011, SAT scores for young men were the worst that they had been in 40 years.

#8 According to a survey conducted by the National Geographic Society, only 37 percent of all Americans between the ages of 18 and 24 can find the nation of Iraq on a map.

#9 According to the New York Times, approximately 57 percent of all young people enrolled at U.S. colleges are women.

#10 It is being projected that women will earn 60 percent of all Bachelor's degrees from U.S. universities by the year 2016.

#11 Even if they do graduate from college, most of our young men still can't find a decent job.  An astounding 53 percent of all Americans with a bachelor's degree under the age of 25 were either unemployed or underemployed during 2011.

#12 Pornography addiction is a major problem among our young men.  An astounding 30 percent of all Internet traffic now goes to pornography websites, and one survey found that 25 percent of all employees that have Internet access in the United States even visit sex websites while they are at work.

#13 In the United States today, 47 percent of all high school students have had sex.

#14 The United States has the highest teen pregnancy rate on the entire planet.  If our young men behaved differently this would not be happening.

#15 In the United States today, one out of every four teen girls has at least one sexually transmitted disease.  If our young men were not sex-obsessed idiots running around constantly looking to "score" these diseases would not be spreading like this.

#16 Right now, approximately 53 percent of all Americans in the 18 to 24 year old age bracket are living at home with their parents.

#17 According to one survey, 29 percent of all Americans in the 25 to 34 year old age bracket are still living with their parents.

#18 Young men are nearly twice as likely to live with their parents as young women the same age are.

#19 Overall, approximately 25 million American adults are living with their parents in the United States right now according to Time Magazine.

#20 Today, an all-time low 44.2% of Americans between the ages of 25 and 34 are married.

#21 Back in 1950, 78 percent of all households in the United States contained a married couple.  Today, that number has declined to 48 percent.

#22 Young men are about four times more likely to commit suicide as young women are.

Jensen Comment
I did not verify these statistics.

One of the things that bothers me is the proportion of D and F grades going to males in public schools since grade inflation is so severe that almost nobody gets a D or F grade in a public school --- those low grades are reserved mostly for students who did not try in the least to pass.

"Dumbest Generation Getting Dumber," by Walter E. Williams, Townhall, June 3, 2009 --- http://townhall.com/columnists/WalterEWilliams/2009/06/03/dumbest_generation_getting_dumber 

The Program for International Student Assessment (PISA) is an international comparison of 15-year-olds conducted by The Organisation for Economic Co-operation and Development (OECD) that measures applied learning and problem-solving ability. In 2006, U.S. students ranked 25th of 30 advanced nations in math and 24th in science. McKinsey & Company, in releasing its report "The Economic Impact of the Achievement Gap in America's Schools" (April 2009) said, "Several other facts paint a worrisome picture.

First, the longer American children are in school, the worse they perform compared to their international peers. In recent cross-country comparisons of fourth grade reading, math, and science, US students scored in the top quarter or top half of advanced nations. By age 15 these rankings drop to the bottom half. In other words, American students are farthest behind just as they are about to enter higher education or the workforce." That's a sobering thought. The longer kids are in school and the more money we spend on them, the further behind they get.

While the academic performance of white students is grossly inferior, that of black and Latino students is a national disgrace. The McKinsey report says, "On average, black and Latino students are roughly two to three years of learning behind white students of the same age. This racial gap exists regardless of how it is measured, including both achievement (e.g., test score) and attainment (e.g., graduation rate) measures. Taking the average National Assessment of Educational Progress (NAEP) scores for math and reading across the fourth and eighth grades, for example, 48 percent of blacks and 43 percent of Latinos are 'below basic,' while only 17 percent of whites are, and this gap exists in every state. A more pronounced racial achievement gap exists in most large urban school districts." Below basic is the category the NAEP uses for students unable to display even partial mastery of knowledge and skills fundamental for proficient work at their grade level.

The teaching establishment and politicians have hoodwinked taxpayers into believing that more money is needed to improve education. The Washington, D.C., school budget is about the nation's costliest, spending about $15,000 per pupil. Its student/teacher ratio, at 15.2 to 1, is lower than the nation's average. Yet student achievement is just about the lowest in the nation. What's so callous about the Washington situation is about 1,700 children in kindergarten through 12th grade receive the $7,500 annual scholarships in order to escape rotten D.C. public schools, and four times as many apply for the scholarships, yet Congress, beholden to the education establishment, will end funding the school voucher program.

Any long-term solution to our education problems requires the decentralization that can come from competition. Centralization has been massive. In 1930, there were 119,000 school districts across the U.S; today, there are less than 15,000. Control has moved from local communities to the school district, to the state, and to the federal government. Public education has become a highly centralized government-backed monopoly and we shouldn't be surprised by the results. It's a no-brainer that the areas of our lives with the greatest innovation, tailoring of services to individual wants and falling prices are the areas where there is ruthless competition such as computers, food, telephone and clothing industries, and delivery companies such as UPS, Federal Express and electronic bill payments that have begun to undermine the postal monopoly in first-class mail.

At a Washington press conference launching the McKinsey report, Al Sharpton called school reform the civil rights challenge of our time. He said that the enemy of opportunity for blacks in the U.S. was once Jim Crow; today, in a slap at the educational establishment, he said it was "Professor James Crow." Sharpton is only partly correct. School reform is not solely a racial issue; it's a vital issue for the entire nation.

William F. Buckley, Jr. --- http://en.wikipedia.org/wiki/William_F._Buckley,_Jr.

William A. Rusher --- http://en.wikipedia.org/wiki/William_Rusher

Bill Buckley, a great and entertaining debater, for decades was the leading spokesman of contemporary conservatism as founder and editor of The New Republic.
William Rusher was “the other Bill.” But in many ways it’s Rusher, not Buckley, who shaped contemporary conservatism.

"The Syndicate," by Geoffrey Kabaservice, The New Republic, August 27, 2012 ---

If Not Us, Who? William Rusher, National Review, and the Conservative Movement
by David B. Frisk
ISI Books, 517 pp., $34.95

ON APRIL 15, 1974, A DEBATE failed to take place at Yale University, even though the speakers were present and the auditorium was full. William Shockley, the Nobel laureate physicist turned eugenicist crank, faced William A. Rusher, the publisher of the leading conservative magazine, National Review. Shockley came to argue that, since black people were intellectually deficient for genetic reasons, the government should support their sterilization. Rusher did not have a problem with Shockley’s racism: “I have no objection to Shockley’s premise,” he wrote. He intended to criticize Shockley only for his misplaced (“liberal”) faith in government’s ability to cure the problem of racial IQ inferiority.

Predictably, the students in the audience shouted down both speakers. The university was overwhelmed by negative publicity, and criticized for blocking free speech. The media made much of the students’ rudeness toward Rusher—didn’t they realize that he was there to oppose the racist viewpoint? (The media reaction was evidence of the success of Rusher’s effort—and the laziness of the press.) The whole episode, in short, was a work of conservative-movement performance art that bore Rusher’s characteristic hallmarks: it was media-savvy, cynical, manipulative, embarrassing to the establishment, possessed of a nasty racial edge, and too clever by half.

The Shockley brouhaha isn’t mentioned in David B. Frisk’s new biography of Rusher. Like most books about the movement that are blurbed, reviewed, published, and read almost exclusively by conservatives, the biography is generally uncritical of its subject and skirts episodes that might discredit the cause. The book is instead concerned with presenting an engaging portrait of the man who spent most of his life known as “the other Bill,” overshadowed by National Review’s flamboyant editor-in-chief, William F. Buckley, Jr. It also makes the case that Rusher strengthened the conservative movement by providing political intelligence and perspective that Buckley lacked. Yet Frisk’s unwillingness to grapple with the grittier details of Rusher’s career curiously undervalues his subject, for in many ways it was Rusher, not Buckley, who was the founding father of the conservative movement as it currently exists. We have Rusher, not Buckley, to thank for the populist, operationally sophisticated, and occasionally extremist elements that characterize the contemporary movement.

Rusher was born in Chicago in 1923, and although he grew up in the New York City area he remained skeptical of the East Coast and its liberal ways for all of his life. Rusher’s parents argued viciously before they divorced, perhaps ruining him for marriage, while also—according to Frisk—teaching him how to win debates by taking advantage of opponents’ weak spots. Rusher mastered his debating skills as an undergraduate at Princeton in the early 1940s, where he acquired another lifelong trait: his resentment of the establishment. Aristocratic swells at pre-war Princeton deemed him an un-clubbable middle-class striver (“black shoe,” in the terminology of the day), instilling a lifelong hatred of liberal elites.

Rusher’s introduction to practical politics began in the early 1950s, not long after his graduation from Harvard Law School, when his involvement in the national Young Republican (YR) federation connected him with the strategic genius F. Clifton White. Rusher and White went on to create a political machine that held the YRs in thrall for decades to come. The Syndicate, as the White-Rusher nation-wide network of low-level Republican operatives became known, allowed the two men to extend their influence beyond the YRs to the broader Republican Party—imitating the structure of New York governor Thomas Dewey’s tightly run national Republican network, which helped to deliver the 1952 and 1956 presidential elections to Dewey’s favored candidate, Dwight D. Eisenhower.

As Rusher’s anti-Communist feelings intensified and he became increasingly aligned with National Review (which he joined as publisher in 1957), the Syndicate began to siphon off power from the Dewey organization and to turn the party away from Dewey-Eisenhower moderation. White and Rusher masterminded the delegate-hunting operation that led to Barry Goldwater’s seizure of the GOP presidential nomination in 1964, and Syndicate alumni went on to high positions in Republican administrations. Many are still active in party politics today.

Scholars, including Frisk, have yet to analyze the Syndicate adequately, mostly because its activities were necessarily sub rosa and directed against moderates inside the GOP rather than Democrats. (Conservatives, by and large, do not write about the movement as impartial scholars, and the internal developments of the Republican Party were out of academic vogue until quite recently.) But the Syndicate provided much of the conservative movement’s ideological content and personnel, as well as its tactics and tone. Many of those tactics were borrowed directly from the Communist Party: manipulation of elections, the creation of front groups, intimidation, slander, agit-prop techniques, and an ends-justify-the-means approach. Rusher was rather proud of his mastery of what he called “the black art of winning conventions” and other political contests, but the darker side of the Syndicate’s influence is still felt today: it provided a template for a movement that knows very much about how to incite resentments and oppose establishments, but very little about how to govern.

Frisk averts his gaze from the Syndicate’s unsavory activities and focuses on more pleasant and often quite fascinating matters, such as Rusher’s relations with Buckley, his debates with other National Review colleagues, his extensive travels to anti-Communist bastions, and his connoisseurship in food and wine. Frisk describes Rusher’s generous mentorship of generations of right-wing activists and his indefatigable correspondence with movement participants. Though Rusher achieved some public prominence through his nationally syndicated column “The Conservative Advocate” (published from 1973 to 2009), his speeches, and his appearances on the PBS television show The Advocates during the ’70s, Frisk’s account suggests that his more significant role may have been as a movement nexus and motivator, a sort of Allard Lowenstein of the right.

In fact, Rusher was something of a sage, outlining the conservative future in 1963 in his essay “Crossroads for the GOP,” which called for the joining of white Southern populists with traditional-minded economic conservatives—a prophetic glimpse of the Southern Strategy that began under Richard Nixon and has continued to the present day. But he had little confidence in his vision. He was quite skeptical that the Republican Party could ever be converted, and devoted much of his energies to a quixotic quest for a conservative third party. As late as 1979, he called the Republican Party “that putrefying corpse,” and asked a friend, “Do you see the slightest evidence that the GOP is really going anywhere?” Ironically, it is Rusher’s polarizing caricature of an America divided into “producers” and “non-producers” that has lived on in the Tea Partiers today.

But Frisk makes a strong case that Rusher was not a mere populist propagandist. Though he was passionately opposed to abortion, for example, he warned pro-lifers that American democracy “requires constant compromise among people who differ passionately.” Still, Rusher was, as he put it (paraphrasing Napoleon), “not very fond of women or games. ... 100 percent a political animal.” Partisan politics colored his whole life, and he apparently had only a single Democratic friend. And he was, ultimately, a hard-shelled conservative warrior.

Continued in article

Jensen Comment
Sadly conservatism is mostly a topic of history as the Academy surrounds itself with a liberal choir these days. Rusher may be one of the reasons vocal conservatives re despised on campus. Sadly when a scholar wears the Scarlet C around his/her neck that scholar is deemed to accept even the most objectionable extremes of conservatism. Similarly, when a radical liberal wears a Scarlet L around his/her neck that scholar is deemed to accept even the most objectionable extremes of conservatism. Scholars that think for themselves should be afforded more respect.

Sadly on college campuses the liberals built politically correct walls to shut out debate that is not politically correct. The days of civil debate on some topics are over..

96% of the faculty and staff at Ivy League colleges that contributed to the 2012 presidential race donated to President Obama's campaign, reveals a Campus Reform investigation compiled using numbers released by the Federal Election Commission (FEC). From the eight elite schools, $1,211,267 was contributed to the Obama campaign, compared to the $114,166 given to Romney. The highest percentage of Obama donors came from Brown University and Princeton, with 99 percent of donations from faculty and staff going towards his campaign.
Oliver Darcey, November 24, 2012 --- http://www.campusreform.org/blog/?ID=4511

"Moving Further to the Left," by Scott Jaschik, Inside Higher Ed, October 24, 2012 ---

"The Academic Mob Rules Instead of encouraging wide discussion, the Chronicle of Higher Education fires a blogger," by Naomi Schaefer Riley, The Wall Street Journal, May 8, 2012 ---

"A Different Ann Coulter Debate," by Scott Jaschik, Inside Higher Ed, November 12, 2012 ---

The Nobel Prize for Political Literature:  Tolstoy and Twain never won, but many obscure writers have. Criteria other than high art seem to be involved," by Joseph Epstein, The Wall Street Journal, October 14, 2012 ---

"The Liberal Skew in Higher Education," by Richard Posner, The Becker-Posner Blog, December 30, 2007 --- http://www.becker-posner-blog.com/

"The Difference Between Political Journalists and B-School Profs," by Justin Fox, Harvard Business Review Blog, March 9, 2010 ---

"New View of Faculty Liberalism:  Why are professors liberal?" by Scott Jaschik, Inside Higher Ed, January 18, 2010 ---

Bob Jensen's threads about the liberal bias of the media and the Academy are at ---

"Can the Estate Tax Solve the Fiscal Cliff?" by Christopher Matthews, Time Magazine, December 11, 2012 ---

Jensen Comment
I've been a long-time advocated of greatly increased estate taxation. But I also see problems if the threshold is set too high to protect family farms. Family farm estates, along with many other estates like farm estates, have frequent problems with liquidity. Estate taxes will exacerbate that problem to a point where the assets of the estate (e.g., the farm land and equipment) must be auctioned off to pay increased estate taxes. The end result will be ever-increasing loss of family farms to big agribusiness conglomerates. Maybe this is inevitable even without increasing estate taxes, but I would hope that along with increases in estate taxation some innovative solutions are found to allow farms to be passed on to family heirs rather than forcing these farms to be victims of ever-increasing ownership of the land by giant and faceless multinational corporations.


A rare voice for conservatism in our liberal Academy
Luigi Zingales at the University of Chicago --- http://en.wikipedia.org/wiki/Luigi_Zingales

Video on A Captitalism for the People (ISBN-13: 9780465029471 ) for the ," by Luigi Zingales ---

InfoGraphic on How the Tax Burden Has Changed ---

Case Studies in Gaming the Income Tax Laws ---

You can't simply save money chasing wages (overseas) anymore.
Charles Fishman (see article forwarded by Bob Overn)

My reply to my distant cousin Bob Overn is an article by Paul Krugman about robots.

"Rise of the Robots," by Paul Krugman, The New York Times, December 8, 2012 ---

Catherine Rampell and Nick Wingfield write about the growing evidence for “reshoring” of manufacturing to the United States. They cite several reasons: rising wages in Asia; lower energy costs here; higher transportation costs. In a followup piece, however, Rampell cites another factor: robots.

The most valuable part of each computer, a motherboard loaded with microprocessors and memory, is already largely made with robots, according to my colleague Quentin Hardy. People do things like fitting in batteries and snapping on screens.

As more robots are built, largely by other robots, “assembly can be done here as well as anywhere else,” said Rob Enderle, an analyst based in San Jose, Calif., who has been following the computer electronics industry for a quarter-century. “That will replace most of the workers, though you will need a few people to manage the robots.”

Robots mean that labor costs don’t matter much, so you might as well locate in advanced countries with large markets and good infrastructure (which may soon not include us, but that’s another issue). On the other hand, it’s not good news for workers!

This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.

Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.

But the college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:.

Insert Graph

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society”, or whatever it is the likes of Paul Ryan etc. are selling this week, won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents. And so on.

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.

But I think we’d better start paying attention to those implications.

Also see http://roboticsonline.wordpress.com/2011/07/18/educating-congress-about-robots-in-manufacturing/


---------- Forwarded message ----------
From: overnboblo <overnboblo@comcast.net>
Date: Tue, Dec 11, 2012 at 6:17 PM
Subject: The Insourcing Boom
To: Bob & Ericka Jensen <rjensen@trinity.edu>


"The Insourcing Boom," by Charles Fishman, Atlantic Magazine, December 2012 ---

After years of offshore production, General Electric is moving much of its far-flung appliance-manufacturing operations back home. It is not alone. An exploration of the startling, sustainable, just-getting-started return of industry to the United States.
By Charles Fishman
For much of the past decade, General Electric’s storied Appliance Park, in Louisville, Kentucky, appeared less like a monument to American manufacturing prowess than a memorial to it.

The very scale of the place seemed to underscore its irrelevance. Six factory buildings, each one the size of a large suburban shopping mall, line up neatly in a row. The parking lot in front of them measures a mile long and has its own traffic lights, built to control the chaos that once accompanied shift change. But in 2011, Appliance Park employed not even a tenth of the people it did in its heyday. The vast majority of the lot’s spaces were empty; the traffic lights looked forlorn.


In 1951, when General Electric designed the industrial park, the company’s ambition was as big as the place itself; GE didn’t build an appliance factory so much as an appliance city. Five of the six factory buildings were part of the original plan, and early on Appliance Park had a dedicated power plant, its own fire department, and the first computer ever used in a factory. The facility was so large that it got its own ZIP code (40225). It was the headquarters for GE’s appliance division, as well as the place where just about all of the appliances were made.


By 1955, Appliance Park employed 16,000 workers. By the 1960s, the sixth building had been built, the union workforce was turning out 60,000 appliances a week, and the complex was powering the explosion of the U.S. consumer economy.


The arc that followed is familiar. Employment kept rising through the ’60s, but it peaked at 23,000 in 1973, 20 years after the facility first opened. By 1984, Appliance Park had fewer employees than it did in 1955. In the midst of labor battles in the early ’90s, GE’s iconic CEO, Jack Welch, suggested that it would be shuttered by 2003. GE’s current CEO, Jeffrey Immelt, tried to sell the entire appliance business, including Appliance Park, in 2008, but as the economy nosed over, no one would take it. In 2011, the number of time-card employees—the people who make the appliances—bottomed out at 1,863. By then, Appliance Park had been in decline for twice as long as it had been rising.


Yet this year, something curious and hopeful has begun to happen, something that cannot be explained merely by the ebbing of the Great Recession, and with it the cyclical return of recently laid-off workers. On February 10, Appliance Park opened an all-new assembly line in Building 2—largely dormant for 14 years—to make cutting-edge, low-energy water heaters. It was the first new assembly line at Appliance Park in 55 years—and the water heaters it began making had previously been made for GE in a Chinese contract factory.


On March 20, just 39 days later, Appliance Park opened a second new assembly line, this one in Building 5, to make new high-tech French-door refrigerators. The top-end model can sense the size of the container you place beneath its purified-water spigot, and shuts the spigot off automatically when the container is full. These refrigerators are the latest versions of a style that for years has been made in Mexico.


Another assembly line is under construction in Building 3, to make a new stainless-steel dishwasher starting in early 2013. Building 1 is getting an assembly line to make the trendy front-loading washers and matching dryers Americans are enamored of; GE has never before made those in the United States. And Appliance Park already has new plastics-manufacturing facilities to make parts for these appliances, including simple items like the plastic-coated wire racks that go in the dishwashers.


In the midst of this revival, Immelt made a startling assertion. Writing in Harvard Business Review in March, he declared that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.” Just four years after he tried to sell Appliance Park, believing it to be a relic of an era GE had transcended, he’s spending some $800 million to bring the place back to life. “I don’t do that because I run a charity,” he said at a public event in September. “I do that because I think we can do it here and make more money.”


Immelt hasn’t just changed course; he’s pirouetted.


What has happened? Just five years ago, not to mention 10 or 20 years ago, the unchallenged logic of the global economy was that you couldn’t manufacture much besides a fast-food hamburger in the United States. Now the CEO of America’s leading industrial manufacturing company says it’s not Appliance Park that’s obsolete—it’s offshoring that is.


Why does it suddenly make irresistible business sense to build not just dishwashers in Appliance Park, but dishwasher racks as well?
In the 1960s, as the consumer-product world we now live in was booming, the Harvard economist Raymond Vernon laid out his theory of the life cycle of these products, a theory that predicted with remarkable foresight the global production of goods 20 years later. The U.S. would have an advantage making new, high-value products, Vernon wrote, because of its wealth and technological prowess; it made sense, at first, for engineers, assembly workers, and marketers to work in close proximity—to each other and to consumers—the better to get quick feedback, and to tweak product design and manufacture appropriately. As the market grew, and the product became standardized, production would spread to other rich nations, and competitors would arise. And then, eventually, as the product fully matured, its manufacture would shift from rich countries to low-wage countries. Amidst intensifying competition, cost would become the predominant concern, and because the making and marketing of the product were well understood, there would be little reason to produce it in the U.S. anymore.


Vernon’s theory has been borne out again and again over the years. Amana, for instance, introduced the first countertop microwave—the Radarange, made in Amana, Iowa—in 1967, priced at $495. Today you can buy a microwave at Walmart for $49 (the equivalent of a $7 price tag on a 1967 microwave)—and almost all the ones you’ll see there, a variety of brands and models, will have been shipped in from someplace where hourly wages have historically been measured in cents rather than dollars.


Outsourcing, says Jeffrey Immelt, is quickly becoming “outdated as a business model for GE Appliances.”
But beginning in the late 1990s, something happened that seemed to short-circuit that cycle. Low-wage Chinese workers had by then flooded the global marketplace. (Even as recently as 2000, a typical Chinese factory worker made 52 cents an hour. You could hire 20 or 30 workers overseas for what one cost in Appliance Park.) And advances in communications and information technology, along with continuing trade liberalization, convinced many companies that they could skip to the last part of Vernon’s cycle immediately: globalized production, it appeared, had become “seamless.” There was no reason design and marketing could not take place in one country while production, from the start, happened half a world away.
You can see this shift in America’s jobs data. Manufacturing jobs peaked in 1979 at 19.6 million. They drifted down slowly for the next 20 years—over that span, the impact of offshoring and the steady adoption of labor-saving technologies was nearly offset by rising demand and the continual introduction of new goods made in America. But since 2000, these jobs have fallen precipitously. The country lost factory jobs seven times faster between 2000 and 2010 than it did between 1980 and 2000.


Until very recently, this trend looked inexorable—and the significance of the much-vaunted increase in manufacturing jobs since the depths of the recession seemed easy to dismiss. Only 500,000 factory jobs were created between their low, in January 2010, and September 2012—a tiny fraction of the almost 6 million that were lost in the aughts. And much of that increase, at first blush, might appear to be nothing more than the natural (but ultimately limited) return of some of the jobs lost in the recession itself.


Yet what’s happening at GE, and elsewhere in American manufacturing, tells a different and more optimistic story—one that suggests the curvature of Vernon’s product cycle may be changing once again, this time in a way that might benefit U.S. industry, and the U.S. economy, quite substantially in the years to come.


The GeoSpring water heater—the one that just came home to Louisville from China—looks a little like R2‑D2, the Star Wars robot, although taller and slimmer. It has a long gray body, and a short top section—the brains—in gray or bright red, with a touch-pad control panel.


The magic is in that head: GE has put a small heat pump up there, and the GeoSpring pulls ambient heat from the air to help heat water. As a result, the GeoSpring uses some 60 percent less electricity than a typical water heater. (You can also control it using your iPhone.)


The GeoSpring is the kind of product we’ve come to expect will arrive on a boat from China—not much more than a curve of rolled steel, some pipes and heating elements, a circuit board, a coat of paint, and a cardboard box. And for the first two and a half years that GE sold the GeoSpring, that’s exactly where it came from.


At Appliance Park, this model of production—designed at home, produced abroad—had been standard for years. For the GeoSpring, it seemed both a victory and a vulnerability. The GeoSpring is an innovative product in a mature category—and offshore production, from the start, appeared to provide substantial cost savings. But making it in China also meant risking that it might be knocked off. And so in 2009, even as they were rolling it out, the folks at Appliance Park were doing the math on bringing it home.


Even then, changes in the global economy were coming into focus that made this more than just an exercise—changes that have continued to this day.
  • Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.
  • The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home. (Natural gas now costs four times as much in Asia as it does in the U.S.)
  • In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18 percent a year.
  • American unions are changing their priorities. Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.
  • U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.
So much has changed that GE executives came to believe the GeoSpring could be made profitably at Appliance Park without increasing the price of the water heater. “First we said, ‘Let’s just bring it back here and build the exact same thing,’ ” says Kevin Nolan, the vice president of technology for GE Appliances.


But a problem soon became apparent. GE hadn’t made a water heater in the United States in decades. In all the recent years the company had been tucking water heaters into American garages and basements, it had lost track of how to actually make them.


The GeoSpring in particular, Nolan says, has “a lot of copper tubing in the top.” Assembly-line workers “have to route the tubes, and they have to braze them—weld them—to seal the joints. How that tubing is designed really affects how hard or easy it is to solder the joints. And how hard or easy it is to do the soldering affects the quality, of course. And the quality of those welds is literally the quality of the hot-water heater.” Although the GeoSpring had been conceived, designed, marketed, and managed from Louisville, it was made in China, and, Nolan says, “We really had zero communications into the assembly line there.”


To get ready to make the GeoSpring at Appliance Park, in January 2010 GE set up a space on the factory floor of Building 2 to design the new assembly line. No products had been manufactured in Building 2 since 1998. An old GE range assembly line still stood there; after a feud with union workers, that line had been shut down so abruptly that the GeoSpring team found finished oven doors still hanging from conveyors 30 feet overhead. The GeoSpring project had a more collegial tone. The “big room” had design engineers assigned to it, but also manufacturing engineers, line workers, staff from marketing and sales—no management-labor friction, just a group of people with different perspectives, tackling a crucial problem.


“We got the water heater into the room, and the first thing [the group] said to us was ‘This is just a mess,’ ” Nolan recalls. Not the product, but the design. “In terms of manufacturability, it was terrible.”
The GeoSpring suffered from an advanced-technology version of “IKEA Syndrome.” It was so hard to assemble that no one in the big room wanted to make it. Instead they redesigned it. The team eliminated 1 out of every 5 parts. It cut the cost of the materials by 25 percent. It eliminated the tangle of tubing that couldn’t be easily welded. By considering the workers who would have to put the water heater together—in fact, by having those workers right at the table, looking at the design as it was drawn—the team cut the work hours necessary to assemble the water heater from 10 hours in China to two hours in Louisville.


In the end, says Nolan, not one part was the same.


So a funny thing happened to the GeoSpring on the way from the cheap Chinese factory to the expensive Kentucky factory: The material cost went down. The labor required to make it went down. The quality went up. Even the energy efficiency went up.


GE wasn’t just able to hold the retail sticker to the “China price.” It beat that price by nearly 20 percent. The China-made GeoSpring retailed for $1,599. The Louisville-made GeoSpring retails for $1,299.


Time-to-market has also improved, greatly. It used to take five weeks to get the GeoSpring water heaters from the factory to U.S. retailers—four weeks on the boat from China and one week dockside to clear customs. Today, the water heaters—and the dishwashers and refrigerators—move straight from the manufacturing buildings to Appliance Park’s warehouse out back, from which they can be delivered to Lowe’s and Home Depot. Total time from factory to warehouse: 30 minutes.


For years, too many American companies have treated the actual manufacturing of their products as incidental—a generic, interchangeable, relatively low-value part of their business. If you spec’d the item closely enough—if you created a good design, and your drawings had precision; if you hired a cheap factory and inspected for quality—who cared what language the factory workers spoke?


This sounded good in theory. In practice, it was like writing a cookbook without ever cooking.
Lou Lenzi now heads design for all GE appliances, with a team of 25. But for years he worked for Thomson Consumer Electronics, which made small appliances—TVs, DVD players, telephones—with the GE logo on them. Thomson was an outsource shop. It designed stuff, then hired factories to make much of that stuff. Price was what mattered.
“What we had wrong was the idea that anybody can screw together a dishwasher,” says Lenzi. “We thought, ‘We’ll do the engineering, we’ll do the marketing, and the manufacturing becomes a black box.’ But there is an inherent understanding that moves out when you move the manufacturing out. And you never get it back.”
It happens slowly. When you first send the toaster or the water heater to an overseas factory, you know how it’s made. You were just making it—yesterday, last month, last quarter. But as products change, as technologies evolve, as years pass, as you change factories to chase lower labor costs, the gap between the people imagining the products and the people making them becomes as wide as the Pacific.


What is only now dawning on the smart American companies, says Lenzi, is that when you outsource the making of the products, “your whole business goes with the outsourcing.” Which raises a troubling but also thrilling prospect: the offshoring rush of the past decade or more—one of the signature economic events of our times—may have been a mistake.


Business practices are prone to fads, and in hindsight, the rush to offshore production 10 or 15 years ago looks a little extreme. The distance across the Pacific Ocean was as wide then as it is now, and the speed of cargo ships was just as slow. A lot of the very good reasons for bringing factories back to the U.S. today were potent arguments against offshoring in the first place.


It was important to innovate, and to protect innovations, 10 or 15 years ago. It was important to have designers, engineers, and assembly-line workers talk to each other then, too. That companies spent the past two decades ignoring those things just shows the power of price, even for people who should be able to take a broader view.


“There was a herd mentality to the offshoring. And there was some bullshit.” Many of the biggest costs were hidden.


Harry Moser, an MIT-trained engineer, spent decades running a business that made machine tools. After retiring, he started an organization called the Reshoring Initiative in 2010, to help companies assess where to make their products. “The way we see it,” says Moser, “about 60 percent of the companies that offshored manufacturing didn’t really do the math. They looked only at the labor rate—they didn’t look at the hidden costs.” Moser believes that about a quarter of what’s made outside the U.S. could be more profitably made at home


“There was a herd mentality to the offshoring,” says John Shook, a manufacturing expert and the CEO of the Lean Enterprise Institute, in Cambridge, Massachusetts. “And there was some bullshit. But it was also the inability to see the total costs—the engineers in the U.S. and factory managers in China who can’t talk to each other; the management hours and money flying to Asia to find out why the quality they wanted wasn’t being delivered. The cost of all that is huge.”


But many of those hidden costs come later. In the first blush of cheap manufacturing, it’s easy to overlook the slow loss of your own skills, the gradual homogenization of your products, the corrosion of quality and decline of innovation. And it’s easy to assume that globally distributed production will hum along more smoothly than it often does in practice: however strong the planning, some of those shipping containers will be opened to reveal damaged or substandard goods, and some of them won’t have the number or variety of goods a company needs at that very moment. “All you need is to have to hire one or two 747s a couple times to get product here in a hurry,” says Shook, “and you lose those savings.”


Thomas Mayor, a senior adviser with Booz & Company who specializes in manufacturing strategy, says that in industry after industry, he is seeing the same kind of reassessment GE has made. When asked about the value of the original rush offshore, Mayor laughs.
“Twelve years ago, I saw a lot of boards of directors and senior executives saying, ‘Three years from now, I’m going to be sourcing $4 billion in product from China. Go figure out how to make it happen.’ ” Part of the rationale, from the start, was merely to gain a foothold in the Chinese market. And for many companies, that made sense, at least to some extent. “But if you press them on their savings by sourcing from China for North America, I get stories like ‘Oh, I asked about that six months ago. I had five finance guys working on it, and they couldn’t come up with any savings.’ At the end of the day, they say, ‘If we were doing this for the U.S. market, we should never have gone to China in the first place.’ ”


GE is not alone in moving the manufacture of many of its products back to the U.S. The transformation under way at Appliance Park is mirrored in dozens of other places, with Whirlpool bringing mixer-making back from China to Ohio, Otis bringing elevator production back from Mexico to South Carolina, even Wham-O bringing Frisbee-molding back from China to California. The Boston Company published a paper in May on ways for investors to capitalize on the U.S. factory revival. ISI Group, an investment-research company, put out a 98‑page report in August, piling up reasons for the return of a strong U.S. industrial sector. Nancy Lazar, who co-authored the ISI Group report, says, “This is the beginning of a manufacturing renaissance. I’ve been saying this since 2009. Even the industrial companies told me I was crazy. Why are they telling me I’m crazy? Because they’ve spent the last 15 or 20 years putting the plants outside the U.S. That’s over.”


The recalibration of costs in recent years is one reason, and the competitive benefit of keeping production stateside is another. But the logic of onshoring today goes even further—and is driven, in part, by the newfound impatience of the product cycle itself.


Just a few years ago, the design of a new range or refrigerator was assumed to last seven years. Now, says Lou Lenzi, GE’s managers figure no model will be good for more than two or three years. This phenomenon is not limited to GE. The feverish cycle of innovation and new products beloved in the electronics world has infected all kinds of consumer categories. Products that once seemed mature—from stoves to greeting cards—are being reinvigorated with cheap computing technology. And the product life cycle is speeding up—many goods get outflanked by “smarter” versions every couple of years, or faster.


Factories take a while to settle into a new product, a new design. They face a learning curve. But models that have a run of only a couple years become outdated just as the assembly line starts to hum. That, too, makes using faraway factories challenging, even if they are cheap.


It is not, in fact, your mother’s refrigerator anymore. The highest-end French-door fridge being made at Appliance Park retails for $3,099. Its auto-fill water spigot is unique, and it is lit inside by 10 recessed LED bulbs that use almost no energy, create almost no heat, and never burn out.
The addition of high-tech components to everyday items makes production more complicated, and that means U.S. production is more attractive, not just because manufacturers now have more proprietary technology to protect, but because American workers are more skilled, on average, than their Chinese counterparts. And the short leap from one product generation to the next makes the alchemy among engineers, marketers, and factory workers all the more important.


One key difference between the U.S. economy today and that of 15 or 20 years ago is the labor environment—not just wages in factories, but the degree of flexibility displayed by unions and workers. Many observers would say these changes reflect a loss of power and leverage by workers, and they would be right. But management, more keenly aware of offshoring’s perils, is also trying to create a different (and better) factory environment. Hourly employees increasingly participate in workplace decision making in ways that are more like what you find in white-collar technology companies.
In late 2008, Dirk Bowman and Rich Calvaruso, both manufacturing managers at Appliance Park, were looking to shake up the place, desperate to keep it relevant. Bowman oversees all manufacturing at Appliance Park. He started there 29 years ago, fresh out of college, as the second-shift foreman on the dishwasher line. Calvaruso has worked for years in manufacturing at GE, and now helps other people at Appliance Park invent and then reinvent their work on the assembly lines.


“The dishwasher line was extremely long,” Bowman says. “It went from the back of the factory to the front, and back again. It was very loud. It was very expensive—each operator was surrounded by parts, a lot of inventory. It was a command-and-control operation.” It was the kind of operation Chinese companies could readily out-compete, and the kind U.S. factory managers were happy to outsource.
Both Bowman and Calvaruso knew something about “lean” manufacturing techniques—the style of factory management invented by Toyota whereby everyone has a say in critiquing and improving the way work gets done, with a focus on eliminating waste. Lean management is not a new concept, but outside of car making, it hasn’t caught on widely in the United States. It requires an open, collegial, and relentlessly self-critical mind-set among workers and bosses alike—a mind-set that is hard to create and sustain.


In the simplest terms, an assembly line is a way of putting parts together to make a product; lean production is a way of putting the assembly line itself together so the work is as easy and efficient as possible.


“We thought, ‘We gotta try something new,’ ” says Bowman. “ ‘We have to be competitive.’ ” Calvaruso put together a group that included hourly employees and told it to completely reimagine dishwasher assembly. The group was given this crucial guarantee: regardless of the efficiencies it created, “no one will lose their job because of lean.”
So the dishwasher team remade its own assembly line. It eliminated 35 percent of the labor.
What happened to the workers who were no longer needed for dishwasher assembly? Bowman and Calvaruso created another team and asked them to pick a dishwasher part they thought Appliance Park should, once again, be making itself. The team picked the top panel of the door—appliance people call it the “dishwasher escutcheon.” It’s the part you grab to open and close the dishwasher, where all the controls and buttons are. If you use a dishwasher, you touch the escutcheon.


“The escutcheon is a high-interface part with the consumer,” says Bowman. “We wanted to control the quality. We can deliver it more easily right here. And we actually thought we could do it cheaper.” And now they do


That’s how the outsourcing cycle starts to turn. Once you begin making the product itself, you get the itch to make the parts, too.


The dishwasher’s initial assembly-line redesign was a primitive version of lean. The full-blown, sophisticated version has spread across Appliance Park, into the work of the engineers, the designers, the salespeople, the bosses. Another team took a design for a new dishwasher into a room and pulled it apart. As originally designed, the door had four visible screws. The marketing people on the team wanted the door to have no visible screws—they wanted it iPhone-sleek. The operators loved that idea—four screws is a lot of assembly-line work. The engineers and designers came up with a design that holds the door together with one hidden screw and a rod.


“It’s easier to assemble,” says Calvaruso. “It’s cheaper. And the fit, feel, and finish are better.”


If the people who design dishwashers sit at their desks in one building, and the people who sell them to retailers and consumers sit at their desks in another building, and the people who make the dishwashers are in a different country and speak a different language—you never realize that the four screws should disappear, let alone come up with a way they can. The story of the four disappearing screws on that dishwasher door is why Jeffrey Immelt has the confidence to spend $800 million to bring Appliance Park back to life.


At the public event in September, Immelt captured the lessons of the new Appliance Park. “I think the era of inexpensive labor is basically over,” he said. “People that are out there just chasing what they view as today’s low-cost labor—that’s yesterday’s playbook.”


GE is rediscovering that how you run the factory is a technology in and of itself. Your factory is really a laboratory—and the R&D that can happen there, if you pay attention, is worth a lot more to the bottom line than the cost savings of cheap labor in someone else’s factory.


Outsourcing and the disappearance of U.S. factory jobs were the result of what often seemed like irresistible market forces—but they were also the result of individual decisions, factory by factory, spreadsheet by spreadsheet, company by company


Appliance Park will end this year with 3,600 hourly employees—1,700 more than last year, an increase of more than 90 percent. The facility hasn’t had this many assembly-line workers in a decade. GE has also hired 500 new designers and engineers since 2009, to support the new manufacturing.
GE’s appliance unit does $5 billion in business—and today, 55 percent of that revenue comes from products made in the United States. By the end of 2014, GE expects 75 percent of the appliance business’s revenue to come from American-made products like dishwashers, water heaters, and refrigerators, and the company expects that its sales numbers will be larger, as the housing market revives.


What’s happening in factories across the U.S. is not simply a reversal of decades of outsourcing. If there was once a rush to push factories of nearly every kind offshore, their return is more careful; many things are never coming back. Levi Strauss used to have more than 60 domestic blue-jeans plants; today it contracts out work to 16 and owns none, and it’s hard to imagine mass-market clothing factories ever coming back in significant numbers—the work is too basic.


Appliance Park once used its thousands of workers to make almost every part of every appliance; today, every component GE decides to make in Louisville returns home only after a careful calculation that balances quality, cost, skills, and speed. Appliance Park wants to make its own dishwasher racks, because it can, and because the rack is an important part of the dishwasher experience for customers. But Appliance Park will likely never again make its own compressors or motors, nor is it going to build a microchip-etching facility.


And of course, manufacturing employment will never again be as central to the U.S. economy as it was in the 1960s and ’70s—improvements in worker productivity alone ensure that. Back in the ’60s, Appliance Park was turning out 250,000 appliances a month. The assembly lines there today are turning out almost as many—with at most one-third of the workers.


All that said, big factories have a way of creating larger economies around them—they have a “multiplier effect,” in economic parlance. Revere Plastics Systems, one of GE’s suppliers, has opened a new factory just 20 minutes north of Appliance Park, across the Ohio River in Indiana, and has 195 people there working in three shifts around the clock. The manufacturing renaissance now under way won’t solve the jobs crisis by itself, but it could broaden the economy, and help reclaim opportunities—and skills—that have been lost across the past decade or more.


It’s possible that five years from now, everything will have unraveled—that the return of factory jobs will have been a temporary blip, that Appliance Park will be closed. (Business practices, after all, are prone to fads.)


But that doesn’t seem likely. Bringing jobs back to Appliance Park solves a problem. It is sparking a wave of fresh innovation in GE’s appliances—every major appliance line has been redesigned or will be in the next two years—and the experience of “big room” redesign, involving a whole team, is itself inspiring further, faster advances.


In fact, insourcing solves a whole bundle of problems—it simplifies transportation; it gives people confidence in the competitive security of their ideas; it lets companies manage costs with real transparency and close to home; it means a company can be as nimble as it wants to be, because the Pacific Ocean isn’t standing in the way of getting the right product to the right customer.


Many offshoring decisions were based on a single preoccupation—cheap labor. The labor was so cheap, in fact, that it covered a multitude of sins in other areas. The approach to bringing jobs back has been much more thoughtful. Jobs are coming back not for a single, simple reason, but for many intertwined reasons—which means they won’t slip away again when one element of the business, or the economy, changes.


"Raytheon's Missiles Are Now Made by Robots," by Ashlee Vance, Bloomberg Business Week, December 11, 2012 ---

Jensen Comment
What proportion of the Mac computers do you think will be built and tested by robots once Apple commences to build them in the U.S.A. instead of China and Ireland? Is this really going to make a dent in the number of unemployed workers?

Hi Zane,

It is interesting to contemplate what careers are the least vulnerable to technology advancements. I suspect barbers are pretty safe for a while.

But it is amazing how technology is changing the workplace.
  1. Surgeons can perform instrument surgery across thousands of miles (with local backups in case of emergencies). The remote surgeon is actually doing the cutting.
  2. I'm a little uncertain whether my primary physician can make a diagnosis without punching keys on a computer.
  3. Bus, truck, and even taxi drivers will one day be superfluous and relegated to emergency backup systems.
  4. Farm jobs like milking cows and combining thousands of acres of grain and feeding hundreds of cows and hogs are almost entirely automated today.
  5. A few years back I was on an American Airlines flight when the pilot announced that the entire landing was going to be turned over to an automatic pilot to test the landing system.
  6. Drones and robots will be conducting future wars.
  7. And the list of possibilities goes on and on, especially in education technology.

In times past it became interesting to find jobs that men could perform but women were unable to perform. For example, in the Air Force it was widely accepted that women could fly big planes but not supersonic fighter jets. I think that has been proved wrong these days.

In the same manner it's becoming interesting to find jobs that robots will be unable to perform in the future. And as organ transplants become more commonplace, there may even be a gray zone between what is human and what is robot. Today we can produce some organs like transplant bladders in a factory.

It's deemed possible today to breed humans without brains (primarily as repositories for human body spare parts).

Think of the possibilities for preserving a human body controlled by a robotic brain.

And think of the possibilities of transplanting a human brain into a robot.

Sorry for getting so carried away this early in the morning.


Teaching Case from The Wall Street Journal Accounting Weekly Review on December 13, 2012

Apple CEO Says Mac Production Coming to U.S.
by: Jessica E. Lessin and James R. Hagerty
Dec 07, 2012
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com WSJ Video

TOPICS: Capital Budgeting

SUMMARY: "Apple Inc. plans to build some Mac computers in the U.S. for the first time in about a decade, investing $100 million next year in an effort that could serve as a high-profile test of American manufacturing competitiveness....A company spokesman declined to comment on which parts would be made on U.S. soil. Piper Jaffray estimates that the sum would amount to 2% of Apple's 2013 capital expenditures."

CLASSROOM APPLICATION: The article may be used when discussing capital budgets. Questions ask the students to consider the political implications, often not quantifiable, of Apple's planned investments in U.S. manufacturing.

1. (Advanced) Define the term capital expenditures.

2. (Introductory) Why is Apple announcing now information about expenditures it expects to make in 2013? Based on the discussion in the article, list all factors you think are influencing the company's decision and timing of its announcement. (Hint: you may also refer to the related video to answer this question. Consider also the budgeting process in making your answer.)

3. (Introductory) Why is it important to consider the labeling requirements for identifying U.S. produced goods? Should these requirements be considered as part of the decisions about capital investment? Explain.

4. (Advanced) Define the term "supply chain." What structure has Apple put in place under its current system?

5. (Introductory) Based on numbers identified in the article, about how many U.S. employees does Apple currently have on staff, other than those in retail locations?

6. (Introductory) What are the challenges facing Apple in establishing this manufacturing in the U.S.?

Reviewed By: Judy Beckman, University of Rhode Island


"Apple CEO Says Mac Production Coming to U.S.," by Jessica E. Lessin and James R. Hagerty, The Wall Street Journal, December 7, 2012 ---

Apple Inc. AAPL -1.76% plans to build some Mac computers in the U.S. for the first time in about a decade, investing $100 million next year in an effort that could serve as a high-profile test of American manufacturing competitiveness.

The world's most valuable company has faced political pressure to bring jobs home and reduce its reliance on foreign subcontractors whose treatment of workers has come under harsh scrutiny.

The investment is a small sum compared with the billions of dollars Apple spends annually on manufacturing world-wide, mostly in Asia, whose factories produce the bulk of its high-tech goods.

Apple isn't providing details about the plans disclosed by Chief Executive Tim Cook on Thursday, beyond stating that it will work with manufacturing partners and do more than assemble parts built elsewhere. It said the investment would go toward production of an existing Mac line.

A company spokesman declined to comment on which parts would be made on U.S. soil.

Investment bank Piper Jaffray estimates that the sum would amount to 2% of Apple's 2013 capital expenditures. The company spent $9.5 billion on product tooling, manufacturing process equipment and other corporate facilities and infrastructure in its last fiscal year.

"It is almost like a trial," says Carolina Milanesi, an analyst at tech research firm Gartner Inc. IT -1.40% "If it works it works, and if it doesn't work they can say they tried it."

Apple's plan runs counter to a decades-old shift of production of computers, smartphones, TVs and other gadgets to Asia, particularly mainland China.

The Cupertino, Calif., company has built up one of the industry's most sprawling and complicated global supply chains, a feat often credited to the efforts of Mr. Cook before he succeeded Steve Jobs as Apple's chief executive last year. Mr. Cook disclosed the new plan in interviews with NBC News and Bloomberg.

Apple has taken heat from human rights groups for safety incidents and high working hours in factories where their products are assembled, prompting Mr. Cook to invest in improvements. He has also publicly lamented the loss of manufacturing skills in the U.S. and played down the odds of bringing the bulk of production back from Asia, where years of investment have created sophisticated networks of parts suppliers and factories with specialized production tools.

But Tom Mayor, a Cleveland-based expert on manufacturing at Booz & Co., a management consulting firm, says Apple's latest move appears to be "more than just political expediency."

He said some technology companies have been rethinking their manufacturing strategies after last year's earthquake in Japan, which disrupted global supply chains.

Some now believe they should reduce reliance on Asia and avoid being caught "with a supply base that sits on the ring of fire."

Labor costs in China, which have been rising in the double digits annually, are also changing the equation on the margin.

Still Matt Sheerin, a senior supply chain analyst for Stifel Nicolaus, says doing PC manufacturing "in a very big way" in the U.S. doesn't make sense.

He says electronics manufactures like Flextronics International Ltd. FLEX -0.49% and Jabil Circuit Inc., JBL -0.64% which both make parts for Apple, have largely exited the PC business. "They would have to get major margin and price concessions or they would take a big hit," he said.

Flextronics and Jabil didn't respond to requests for comment.

Apple faces a series of challenges with the Mac production plan, including likely investments in production tools and training. Apple sold 18.2 million Macs in its last fiscal year.

Another hurdle will be qualifying for a "made in the U.S.A." label.

The Federal Trade Commission, which sets standards for such claims, says that products can carry that label only if "all significant parts and processing that go into the product" are of U.S. origin.

At least some of the parts in any sophisticated electronic device would be likely to come from Asia.

Continued in article

Jensen Comment

Hi David,

What was announced by the Fed is that we will have QE printing of greenbacks until unemployment plunges to 6.5%, That's like a homeless wino's pledge to give up rot gut wine when he wins the lottery and can afford a roof over his head.

We probably will never shrink unemployment down to 6.5% as robots take over more and more of the skilled and unskilled labor jobs. It will be interesting to see where Apple locates its new manufacturing plants in the United States. Some might argue that it's certain to be in a right-to-work state like California.

But I don't think wages and labor laws will be of much concern to Apple since the new Apple plants will be so highly automated.

The impact of the new Apple and other returning (re-shoring) automated manufacturing plants on the unemployment rate will be epsilon.

A huge world war might reduce unemployment below 6.5%, but then we will use emergency war funding needs to carry on with QE printing of money.

Sooner than we expect, the $100 per gallon gas prices and that $25 cup of coffee will be upon us. But never fear. The government took fuel and food prices out of their calculations of inflation rates. Did you ever wonder why?

Bob Jensen

Some on the hard right (including the author from the Hoover Institute) favor eliminating the tax-exempt bonds.
But the argument below fails to mention that this is a diversion tax revenues from local taxpayers to big (Federal) government is tax inefficient.
The argument below fails to mention that local taxes for municipalities and schools are not ipso facto more corrupt than an out-of-control earmarking Congress.
Why give the Federal government money for wasteful pork barrel projects that deprives needed local projects for sewers, roads, and schools?

I would love to debate this supposed "conservatism" nonsense that is not really conservatism at all
"A Trillion Dollar Tax Increase That Republicans And Obama Should Agree To," by By Peter Schweizer, Forbes, December 13, 2012 ---

Liberals Opposed to Cap on Tax Deductions (SALT)
"Tax Plan Is Popular, but Not Quite Fair," by James B. Stewart, The New York Times, December 14, 2012 ---

Mitt Romney may have lost in November, but the ghost of the Republican presidential candidate lives on in the debate over tax reform and the fiscal cliff.

Mr. Romney’s proposal to limit itemized deductions to a fixed dollar amount, which surfaced during the campaign as a way to close loopholes for the wealthy and broaden the tax base, has attracted a surprising amount of bipartisan support, given its origins in conservative Republican circles.

“There’s renewed interest” in the cap on deductions, Senator Kent Conrad, the North Dakota Democrat who heads the Senate Budget Committee, told The Times last month as budget negotiations heated up.

The political appeal of a proposal that limits deductions without actually naming any — inciting the powerful interests and lobbyists that support them — seems obvious. But many tax experts said that a fixed dollar cap is anything but the evenhanded approach to closing loopholes it appears to be.

Moreover, without addressing larger tax preferences, like a lower rate on capital gains, it does almost nothing to cure the so-called Buffett problem, in which Warren Buffett’s secretary pays a higher effective rate than her billionaire boss. It doesn’t even raise much revenue.

Some tax experts have gone so far as to say it’s a conservative Trojan horse, a stealth tactic that protects the very wealthy while targeting Democrats who itemize deductions and live disproportionately in high-tax states like New York and California. It would also affect donors who support elite colleges, universities, museums — even experimental theater — which are perceived as havens for liberals.

And it would hit people like me: taxpayers in higher brackets who rely on earned income as opposed to investment income or an inheritance, who give to charity and live in a high-tax state. Assuming a $35,000 limit on itemized deductions, my federal tax last year would have risen to 27 percent of my adjusted gross income, from 22 percent.

I wouldn’t mind paying more as long as people who make vastly more did, too. But limiting the itemized deductions of the top 400 taxpayers with an average adjusted gross income of $202 million in 2009 (the most recent year available) would have raised their taxable income by an average of $32 million and their average rate to 25 percent from 20 percent, assuming a marginal rate of 35 percent, and even less if they pay a lower marginal rate, as most do.

That’s a lower rate than I paid, because nearly half their income, on average, was from capital gains.

Martin Feldstein, a Harvard economist and the chairman of the Council of Economic Advisers under President Reagan, is widely credited with the idea for an across-the-board cap on itemized deductions as a way to help lower the deficit. His proposal last year called for capping deductions at 2 percent of adjusted gross income.

Mr. Romney embraced the concept, but proposed a fixed dollar cap as low as $17,000 rather than a percentage. Since then, the idea has been embraced by politicians from both parties and the centrist research organization Third Way.

(The proposed cap on deductions shouldn’t be confused with President Obama’s proposed 28 percent cap on the rate at which deductions can be claimed by high-income taxpayer

Continued in article

Some on the hard right (including the author from the Hoover Institute) favor eliminating the tax-exempt bonds.
But the argument below fails to mention that this is a diversion tax revenues from local taxpayers to big (Federal) government is tax inefficient.
The argument below fails to mention that local taxes for municipalities and schools are not ipso facto more corrupt than an out-of-control earmarking Congress.
Why give the Federal government money for wasteful pork barrel projects that deprives needed local projects for sewers, roads, and schools?

I would love to debate this supposed "conservatism" nonsense that is not really conservatism at all
"A Trillion Dollar Tax Increase That Republicans And Obama Should Agree To," by By Peter Schweizer, Forbes, December 13, 2012 ---


"Mortgages in Reverse:  Taxpayers get hit by another federal housing money loser," The Wall Street Journal, December 14, 2012 ---

Spare a thought for Shaun Donovan, who must be tired of crafting nuanced explanations of how his agency costs taxpayers billions of dollars. The latest example came this month when the Housing and Urban Development Secretary told the Senate that the Federal Housing Administration's once-modest reverse-mortgage program is the latest drain on taxpayers thanks to gross mismanagement.

Or as Mr. Donovan delicately put it to Tennessee Senator Bob Corker, the FHA's reverse-mortgage business is an "important" issue that the agency needs "to make changes on." You don't say.

HUD's independent actuary estimated last month that the FHA will lose $2.8 billion this fiscal year on reverse mortgages, and in the worst case $28.3 billion, with the losses stretching through 2019. The feds have no idea how big the pool of red ink might be.

For those who haven't seen former Senator Fred Thompson's TV ads, reverse mortgages are a type of home-equity loan for Americans age 62 and older who have mostly or fully paid off their mortgage. If the borrower can pay real-estate taxes, insurance and other fees, he can borrow against the home and stay in it until death. Then the lender demands repayment with interest.

The problem is that taxpayers, via the FHA, insure lenders against the funds they advance plus accrued interest, and borrowers can also borrow to pay the fees. FHA did fewer than 50,000 reverse-mortgage deals a year until 2006, when the housing mania went galactic. By 2007, the agency was insuring more than 100,000 reverse mortgages, and by 2009 the average FHA-backed reverse mortgage reached $262,763, often paid in a lump sum.

At least FHA guarantees for home purchases foster Congress's professed goal of homeownership—though we've seen in the housing bust how that misallocates capital. But guarantees for reverse mortgages go to people who are already homeowners who want to cash out of a real-estate asset. That's fine if they want to do it at their own risk. FHA's guarantees are essentially a subsidy for older Americans to spend down their savings. FHA crowded out competitors and now accounts for 90% of outstanding reverse mortgages.

The FHA's analysts didn't foresee an extended period of house price declines and didn't price mortality risk properly. Many loans are now worth more than the house itself, and heirs decided to walk away. FHA has to foot the bill for selling the house and make good on the shortfall between the net proceeds and what lenders are owed on the insurance. Taxpayers are ultimately on the hook.

So now comes the usual Beltway talk about reform to try to save a program that shouldn't exist. The National Reverse Mortgage Lenders Association wants to limit the amount that borrowers can draw upfront and have lenders do more stringent underwriting and set aside money to cover taxes and insurance. Mr. Donovan told the Senate he wants to make the program "much more effective and safe."

Continued in article

The sad state of governmental accounting (it's all done with smoke and mirrors) ---

Fortune 500 Corporations Holding $1.6 Trillion in Profits Offshore

"Obama's Electronic Medical Records Scam," by Michelle Malkin, Townhall, December 14, 2012 --- Click Here

. . .

The program was originally sold as a cost-saving measure. In theory, modernizing record-collection is a good idea, and many private health care providers have already made the change. But as with many government "incentive" programs, the EMR bribe is a tax-subsidized, one-size-fits-all mandate. This one pressures health care professionals and hospitals across the country into radically federalizing their patient data and opening up medical information to untold abuse. Penalties kick in for any provider that hasn't switched over by 2014.

So, what's it to you? Well, $4 billion has already gone out to 82,535 professionals and 1,474 hospitals, and a total of $6 billion will be doled out by 2016. But the feds' reckless profligacy, neglect and favoritism have done more harm than good.

Don't take my word for it. A recent report released by the Department of Health and Human Services Inspector General acknowledged that the incentive system is "vulnerable to paying incentives to professionals and hospitals that do not fully meet" the program's quality assurance requirements. The federal health bureaucracy "has not implemented strong prepayment safeguards, and its ability to safeguard incentive payments postpayment is also limited," the IG concluded.

Translation: No one is actually verifying whether the transition from paper to electronic is improving patient outcomes and health services. No one is actually guarding against GIGO (garbage in, garbage out). No one is checking whether recipients of the EMR incentives are receiving money redundantly (e.g., raking in payments when they've already converted to electronic records). No one is actually protecting private data from fraud, abuse or exploitation.

Little is being done to recoup ill-gotten payments. In any case, such "pay and chase" policing after the fact is a crummy way to run government in lean times -- or in fat times, for that matter.


Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm


Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Bob Jensen's Tidbits Archives ---

Bob Jensen's Pictures and Stories

Summary of Major Accounting Scandals --- http://en.wikipedia.org/wiki/Accounting_scandals

Bob Jensen's threads on such scandals:

Bob Jensen's threads on audit firm litigation and negligence ---

Current and past editions of my newsletter called Fraud Updates ---

Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm

Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm

American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm

Bob Jensen's fraud conclusions ---

Bob Jensen's threads on auditor professionalism and independence are at

Bob Jensen's threads on corporate governance are at


Shielding Against Validity Challenges in Plato's Cave ---

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/