“There is an idea that economists call … cycle budget. And what cycle budgeting does is it limits the growth of spending in a country or state or any governmental entity to some average growth rates and tax revenues over some time period.

“Now this doesn’t mean that spending can go up only by so much each year. It can only go up by the average of what your revenue has grown, which means that when the economy is expanding and growing very fast, likely — likely — spending will go up smaller than revenues. So, governments will accumulate a surplus. But then when the economy goes into a recession spending will go up faster than revenues, but then the government can tap into those savings that have accumulated during the good years.

“So this is a way of smoothing out, if you will, the availability of revenues over a long period of time. And countries that have adopted this — and one example is Switzerland — have had a much better fiscal situation than other countries like the U.S. and other western European countries.

“Now one big issue here is what to do about spending on particular social programs like Social Security and Medicare, which on trend are increasing because we have an aging population. What Switzerland does is exempt spending on those programs from these limits. So there are some issues here, but certainly this is an idea worth considering.”

“Well, it is changing. It is changing in the sense that we’re seeing each generation have a smaller increase in their educational standards compared to the previous. For example …, in the ’70s when we were in college and we finished college, our generation had on average about 2 and a half more years of education than our parents. Today’s generation has only about one-half year more education than our parents.

“Now several obvious reasons for that: One is that today’s generation of people and kids in college are coming from a more educated generation. So we have pushed education and the marginal returns, in economics lingo, have gone down.

“Secondly, the cost of education has gone up. And economists and others worry that this is deterring more kids, perhaps, from going to college.

“Then a third question is, well, maybe we’re tapped out. Maybe all the kids that can go to college are going, and we can’t really push any more to college. Now that’s an open question, but one way of answering that is to look at other countries, particularly western European countries. Do they have a higher educated population? And the answer is yes. Many of those countries do.

“So I think the bottom line is that we need to pay attention to this trend. We need to try to work to make college more accessible to those who want to go and can go to college. We shouldn’t necessarily worry that that gap in between the educated current generation and the previous generation is getting smaller. But we should recognize … that education is really the key to improving our standard of living in the future.”

“Well …, let me talk about four potential strategies that people talk about. One is speculation. Studies do show that speculation in the oil markets has contributed to higher gas prices. But it shows that it only contributed to the extent of about 15 percent of the increase. That is, speculation is responsible for about 15 percent of the increase in oil and gas prices. So if we could reign in speculation, that would help, but it clearly wouldn’t do the total job.

“Another strategy people talk about: reduced oil company profits. No question, oil companies make big profits, primarily because they sell a lot of oil and gas. The profits per gallon of gasoline are typically under 5 cents a gallon.

“Pump more oil. That’s what you hear. If the U.S. just pumped more oil — drilled and pumped more oil — that could reduce gas prices. We are pumping more oil. We do see that oil production in the U.S., it’s calculated, could increase by 66 percent over the next couple of decades. That translates to about 4 million barrels a day, but world usage is expected over that time period to increase by 31 million barrels per day. So pumping more oil would help, but again probably wouldn’t send oil prices and gas prices down.

“And lastly you hear people say, ‘Let’s get rid of the gas tax at the federal and state level.’ In North Carolina those taxes account for about 57 cents per gallon – (a) big part of what we spend. But where does that money go?  Well, most of it goes to help repair our roads, expand roads. So, if we took that away we’d probably have more road congestion.

“So there are issues and trade-offs with all of these strategies.”

“Well first of all …, there is no tie-in between the calculation of unemployment and people receiving unemployment benefits. There’s absolutely no tie-in there. The unemployment rate and the count on the number of people unemployed are done by separate survey, a separate sample of households, all households. It includes people who do receive unemployment benefits. It also includes people who are not receiving unemployment benefits, as well as people who are not even eligible for unemployment benefits. So, there is absolutely no-tie in there.

“So oftentimes you hear folks say, ‘Well, once someone goes off of unemployment benefits, even if they don’t have a job, they’re not counted as unemployed.’ That’s simply not true. Secondly on the point about self-employed people, there’s some who say, ‘Well, self-employed people, they’re not counted.’ They actually are counted. They are part of a sample. So if you have a self-employed person who doesn’t have work, who has lost their job or whose business has failed, they are going to be part of the statistical sample, and they are included in the unemployment count.

“And then lastly sometimes I hear people say, ‘Well, these rules about who’s included in the unemployed, and who’s not, there are new rules that are meant perhaps to make the unemployment look better or worse than it is, that’s also a mistake.’ These rules on how we measure unemployment have been around for decades — since the 1930s. So there’s been no change (in) how we do this. So, I think it’s important to know here that it’s a separate survey. It tries to include everyone, and it’s been a consistent survey for over 70 years.”

“Well, number one … we do have some new federal legislation that was passed two years ago that has a goal of spotting trouble in financial institutions early and taking action to head it off so that the federal government does not have to come in and bail out financial institutions. There (are) disagreements among economists as to whether indeed this will work and certainly we’ll have to see over time as that this new law gets applied.

“There (is) another group of economists that say, ‘Hey, the answer to this is simply to try to move, particularly financial institutions that are very large, chop ’em up. Make ’em smaller.’ That is so that we don’t have a lot of big banks — that we have many, many smaller banks.

“And indeed what we see, if you look at the data, is there has become more concentration in financial institutions. Now there’s a rhetoric to that. Other economists say, ‘Well, if you do that, if you pass a law that says, well, a bank in the U.S. can’t be only so big, what’ll happen is that many people who do banking business and they want to do business with a big bank will simply go offsite. They’ll go offshore. They’ll go to European banks or Asian banks.

“A final solution may be to simply say — the government say – ‘Hey, big bank, if you get in trouble, we’re not going to help you.’ Probably, however, for that threat, if you will, to be taken seriously, we would have to go through a recession, and we’d have to see the government actually follow through on its threat not to help. And, of course, that would mean we’d have to go through some financial pain.

“So, this is a big, big issue. There’s not a real clear answer. But it’s certainly an issue that we’re going to continue to have to deal with in future economic down turns.”

“Well …, a couple of economists tried to estimate this. And what they did is they looked back in recent economic history and they looked at how low the unemployment rate went before a new recession began. Unfortunately recessions come and go. We will have another recession down the road. We certainly don’t hope it’s soon. But, for example, if you look at after the 2001 recession, the unemployment rate got down to 6 percent nationally. Before then we hit the new recession beginning in 2007. After the 1990-91 recession it got down to 4.7 percent. After the 1981-82 recession the national unemployment rate got down to 5.1 percent. So there appears to be a little bit of a pattern here in terms of the low unemployment rate in recent years actually being higher.

“What these two economists did who have estimated … how far it could get down this time is they looked at a lot of data, a lot of trends. Their answer is that they think national unemployment, which right now is over 8 percent, could get as low as 6.5 percent. That’s their estimate for the absolute bottom before we hit another recession. Obviously, we’d like it to be lower. But at least what these economists are forecasting is that it will still trend down in the near term.”

“It’s really a good term …, because what it refers to is a movement of U.S. company jobs that used to be in foreign countries now back to the U.S. So they’re coming back onshore, if you will. And we’re hearing more and more about this. And the main reason is what we’re seeing in some foreign labor markets — particularly China — is a dramatic increase in the last couple of years in their labor costs. As those countries have expanded, as they’ve moved up the economic ladder, as they’ve experienced inflation, their labor costs have been growing very rapidly, And in some cases, certainly not all, but in some cases, it now makes sense and it’s actually cheaper for U.S. companies who have jobs in those foreign countries to actually bring them back to the U.S.

“We’ve had, for example, … in North Carolina some examples of furniture companies that had been located here in North Carolina. They moved their operations to China, and now they’re bringing them back here to the U.S.

“Now we shouldn’t get real excited. This is still a trickle, and it’s likely not going to bring all those jobs that we’ve lost to foreign countries back. But it does show that the economic sands seem to be shifting, and they’re shifting in a way that is favorable to U.S. companies here doing business on U.S. soil.”

“This may seem confusing …, but the explanation, I think, is based on the notion that we’re always seeing jobs added and lost. Even in the best of economic times, we have what economists call job churning. There (are) some economic sectors that are growing. There are some that are declining. And you’re going to get commensurate job changes there.

“For example, if you look at the economic expansion between 2002 and 2007, on average each month the government reported there was a net gain of 200,000 jobs. But that 200,000 came from a difference between 2 million jobs added and 1.8 million jobs destroyed or lost.

“So, you’re always going to have some good and some bad in the job market. What we hope — what we hope to find — is that the good outweighs the bad.”

“Jobs are not being created at the same pace across the economic spectrum. The biggest strong gains — the strongest job gains to date since the job market bottomed out in early 2010 – (have) been in professional and business service jobs — essentially that means business jobs, both in terms of folks who work there in professional capacities as well as the administrative support. So that’s seen the strongest job gains.

“That’s been followed by very good job gains in the leisure and hospitality sector. That makes sense, because as the economy has come back, people are eating out more and they’re taking more vacations. So, we’ve seen a good rate of growth in that sector.

“The most consistent job gains continue to be in health care. That’s a growing sector, a very labor intensive (sector). We saw that sector even add jobs during the recession.

“We’ve had modest improvements in manufacturing jobs, but you have to have the right skills, and we’ve had slight, very slight gains in construction — not the kind of gains we typically see in economic recovery.

“Government, in total, interestingly, has actually been cutting jobs over the last two years.”

“It sure does. …. For a long time a particular organization in the country, now this is a private sector organization, has tracked cost of living differences between states. We just got the numbers for 2011. It does show a wide variation. For example, it costs 86 percent more in terms of what you need to spend to achieve a certain standard of living in Hawaii than in Oklahoma.

“Now some would say well that’s Hawaii. Hawaii’s different. Well, let’s just look in the continental U.S.: The spread there is 50 percent. So we do see a significant difference in the cost of living, even within the continental U.S.

“Now where does North Carolina rank on this one? Well, fortunately for those of us who live in North Carolina, we rank on the low side. We are actually the 21^st least costly state to live in, according to the recent data.

“Now these differences are important to consider when, for example, a person may be considering alternative job offerings between states. It may be that you get a higher job offer in terms of salary in one state, but that may be all eaten up by differences in the cost of living.

“So it’s important to consider that as well as different amounts of spending between states.”