By a unanimous vote, with Chief Justice John Roberts writing the majority opinion and Justice Samuel Alito (joined by Justice Elena Kagan) and Justice Clarence Thomas writing separate concurrences, the Supreme Court today affirmed the “ministerial exception” which prevents federal agencies and courts from second-guessing churches’ decisions on who to hire and retain as teachers, leaders, and ministers. The Obama administration had taken the disturbing position that there should be no ministerial exception at all to stand between churches and the full panoply of official employment regulation, though it acknowledged that constitutional freedom of association might afford churches some autonomy. I wrote about the case last fall and Notre Dame’s Richard Garnett has an early account of today’s decision at NRO “Bench Memos”.

Remember the story of that once-great nation that sacrificed its well-paying manufacturing jobs for low-wage, burger-flipping jobs at the altar of free trade? At one time, that story was a popular rejoinder of manufacturing unions and their apologists to the inconvenient facts that, despite manufacturing employment attrition, the economy was producing an average of 1.84 million net new jobs per year every year between 1983 and 2007, a quarter century during which the real value of U.S. trade increased five-fold and real GDP more than doubled.

The claim that service-sector jobs are uniformly inferior to manufacturing jobs lost credibility, as average wages in the two broad sectors converged in 2005 and have been consistently higher in services ever since. In 2011, the average service sector wage stood at $19.18 per hour, as compared to $18.94 in manufacturing. (But I don’t recall buying any $25-$30 hamburgers last year.)

One reason for U.S. manufacturing wages being higher than services wages in the past is that manufacturing labor unions “succeeded” at winning concessions from management that turned out to be unsustainable. The value of manufacturing labor didn’t justify its exorbitant costs, which encouraged producers to substitute other inputs for labor and to adopt more efficient techniques and technologies.

With the superiority-of-manufacturing-wages argument discredited, new arguments have emerged attempting to make the case that there is something special – even sacred – about the manufacturing sector that should afford it special policy consideration. Many of those arguments, however, conflate the meanings of manufacturing sector employment and manufacturing sector health or they rely on statistics that don’t support their arguments or they become irrelevant by losing sight of the fact that resources are scarce and must be used efficiently. And too often the prescriptions offered would place the economy on the slippery slope that descends into industrial policy.

I recently submitted this rebuttal to this essay by an environmental sciences professor by the name of Vaclav Smil, who commits those errors. (Judging from the tone of his mostly evasive response to my rebuttal, Smil doesn’t seem to have much tolerance for views that differ from his own.) Perhaps most noteworthy among Smil’s slew of questionable arguments is his claim that manufacturing companies, like Boeing, valued at $50 billion, are better for the economy than service companies like Facebook, which is also valued at $50 billion because

[i]n terms of job creation there is no comparison… Boeing employs some 160,000 people, whereas Facebook only employs 2,000.

Granted, Boeing’s operations support more jobs. But is that better for the economy than a company that provides the same value using 1/​80th the amount of labor resources? Of course not. We need economic growth in the United States to create wealth and increase living standards. Economic growth and employment are not one and the same thing. In fact, the essence of growth is creating more value with fewer inputs (or at lower input cost). Creating jobs is easy. Instead of bulldozers, mandate shovels; instead of shovels, require spoons. Inefficient production techniques can create more jobs than efficient ones, but they don’t create value, which is the economic goal.

With 2,000 workers producing the same value as 160,000 – one producing the same value as 80 – Facebook is 80 times more productive than Boeing, freeing up 158,000 workers for other more productive endeavors (perhaps 79 more Facebook-type operations). If those companies were individual countries, the per capita GDP in Facebookland would be $25 million, but only $3.125 million in Boeingia. Where would you rather live?

Smil calls my assessment a cruel joke, presumably for its failure to empathize with unemployed and underemployed Americans, by considering value before job creation. But policies designed to encourage more Boeing’s, as Smil supports (or, in fairness, any businesses that employ at least X number of people or meet this requirement or that) would likely retard the establishment of firms, like Facebook, that produce the goods and services that people want to consume. The provision of goods and services that people want to buy – rather than those that policymakers in Washington think people want to buy (or are happy to force them to buy) – is the essence of value creation.

Thus, policies should incentivize (or, at least not discourage) the kind of innovation and entrepreneurship needed to create more Facebooks? This kind of business formation occurs in environments where the rule of law is clear and abided; where there is greater certainty to the business and political climate; where the specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where skilled foreigners aren’t chased back to their own shores; where there are limited physical, political, and administrative frictions; and so on. In other words, restraining the role of government to its proper functions and nothing more would create the environment most likely to produce more Facebooks in both the manufacturing and services sectors.

Motivated by Newt Gingrich’s assertions — which cast a cloud over private equity operations by characterizing Mitt Romney as a predatory capitalist who destroyed jobs during his tenure at Bain Capital — the chattering classes are playing fast and loose with the facts. If they want the facts, a recently released National Bureau of Economic Research paper authored by Steven J. Davis (University of Chicago), John C. Haltiwanger (University of Maryland), Ron S. Jarmin (U.S. Census Bureau), Josh Lerner (Harvard Business School) and Javier Miranda (U.S. Census Bureau) is just what the Doctor ordered. It’s time for the private equity critics to stop talking and start reading.

The Washington Examiner ran this Heritage Foundation chart on January 10 under the title (not online) “Defense spending at lowest levels in 60 years”:

Dramatic, eh? It shows defense spending plunging for the past 40 or more years. Except … wait a minute … has defense spending plunged? This chart from the Cato Institute’s Downsizing Government project sheds some light:

In fact, Pentagon spending in real, inflation-adjusted dollars has roughly doubled since 2000 and is up about 50 percent since 1970, at the height of the Vietnam War. (And note that the recent figures don’t include the cost of the ongoing wars.) So what’s going on? Why the difference in the charts? The Heritage chart, of course, focuses on Pentagon spending as a percentage of the federal budget. And what has happened to the federal budget in the past 40 years? Well, as it happens, another Heritage Foundation chart shows that pretty clearly:

Obviously, the big story in the federal budget over the past 40 years is the dramatic rise in spending on transfer payments. Does the Heritage Foundation really want to suggest that when spending on Social Security, Medicare, and Medicaid rises, military spending should rise commensurately? That when President Bush creates a trillion-dollar Medicare prescription drug entitlement, he should also add a trillion dollars to the Pentagon budget to keep “Defense Spending as a Percentage of the Federal Budget” at its previous level?

Cato and Heritage scholars have often differed on U.S. foreign policy and the defense budget that it implies. But surely neither group would actually suggest that U.S. national security should be measured by the relationship of military spending to entitlement spending. Surely we would agree that military spending must be sufficient to ensure U.S. security and not tied to some extraneous factor. So I invite the creators and promoters of the above chart to explain exactly what they think it proves.

By the way, Heritage’s Rob Bluey, in introducing this chart, writes, “The chart also debunks the myth that our Founding Fathers were isolationists.” But again context matters. I’ll leave the debate over foreign policy in the early Republic to another day. But if total federal spending in 1820 was $19.4 million, and 53 percent of it was for defense, what that tells us is that the federal government was wonderfully small in the early years of the Republic. I’m pretty sure that $10 million military budget didn’t pay for two wars, troops in 150 countries, or a million-man standing army.

In recent years, drone warfare technology has made tremendous strides, allowing modern war to be conducted in many respects by remote control.

This may seem like a boon to technologically savvy countries like the United States, and in a sense it clearly is. But the moral calculus of war is rarely that simple. While drones can and do shield front-line troops from danger, and can often substitute for them entirely, they also have other effects. Drones can make it more likely that we will enter into wars, for example, and if so, then it’s no longer clear that they help the ordinary soldier. Drones may increase casualties among noncombatants; their pinpoint accuracy is only as good as the human intelligence behind them, which now may be more subject to manipulation, not less. And drones are also available to hostile states and nonstate actors, including terrorist groups like Hezbollah.

To discuss these issues, Cato Unbound this month has assembled a panel of experts on drones and ethics of war. Our lead essay is by David Cortright of the University of Notre Dame; he is joined by Benjamin Wittes of the Brookings Institution, as well as Daniel Goure of the Lexington Institute, who will contribute on Friday; and Tom Barry of the Center for International Policy, whose reply will appear on Monday.

Conversation will continue throughout the month, so be sure to subscribe via RSS if you want to see the discussion as it happens.

It has just been over a week since President Obama made his “recess” appointments to the Consumer Financial Protection Bureau and the National Labor Relations Board. I suggested last week that this might turn out to be Obama’s “Court-Packing” moment, where he begins to discover that (some) Americans actually do care about the Constitution. While its clearly too early to say anything with certainty, it appears I may have been correct.

On January 3th, the day before the appointments, Obama’s job approval ratings, according to RealClearPolitics, averaged 47.2 approval and 47.8 disapproval. Basically a tie.

Today, his job approval is at 44.5 and disapproval is 50.3. Moving over the course of a week from a tie to a spread of almost 6 percentage points. 

Usually we have not seen such large changes over the course of a week. Now obviously one cannot contribute all this decline to the recess appointments, but there were no other big Presidential announcements or even big economic news over the last week that could account for such a slide in support. So while this doesn’t prove anything, it does suggest these appointments, even if they are making his base happy, are coming at the expense of the support of independents.

One of the ways Massachusetts officials have tried to temper RomneyCare’s cost overruns was by denying participation to legal immigrants. Last week, the Commonwealth’s highest court ruled that restriction violates the Massachusetts Constitution:

Massachusetts cannot bar legal immigrants from a state health care program, according to a ruling issued Thursday by the state’s highest court…

The ruling said that a 2009 state budget that dropped about 29,000 legal immigrants who had lived in the United States for less than five years from Commonwealth Care, a subsidized health insurance program central to this state’s 2006 health care overhaul, violated the State Constitution.

“This appropriation discriminated on the basis of alienage and national origin,” wrote Justice Robert J. Cordy of the Supreme Judicial Court, ruling that the action “violates their rights to equal protection under the Massachusetts Constitution.”…

State officials say they will abide by the decision, although they are not yet sure how to pay for the change.

“This decision has significant fiscal impacts for the commonwealth, adding somewhere in the range of $150 million in annual costs to what is already a very challenging budget,” said Jay Gonzalez, secretary of administration and finance.

No doubt their “pay for” will involve another unpopular minority.

Former Romney/​Obama advisor Jonathan Gruber has written that RomneyCare was already costing the state $50 billion more than projected by 2009. Of course, supporters have been hiding RomneyCare’s costs (and exaggerating its benefits) all along.