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An Update on How the Minimum Wage Hurts Workers

It has been a while since I last blogged. A lot has happened recently that is worth commenting on. But, this post will focus on the correctness of my previous postings that the minimum wage hurts workers.

According to Andy Puzder, the CEO of CKE Restaurants – parent company of Carl’s Jr. and Hardee’s, in locations across the country where the minimum wage has been increased, his company’s franchisees are closing shops after their leases expire. “When the minimum wage increases, there are two things you can do,” he said. “One is you can reduce the amount of labor that you use or you can increase your prices.” Unfortunately, minimum wage increases do reduce jobs; as in the case above sometimes all jobs are eliminated.

But, Puzder is also correct about the causation between minimum wage increases and price increases. Many businesses in SeaTac, Washington, where the local minimum wage has recently been increased to $15, have imposed an 8.25 percent “Living Wage Surcharge” on goods and services to ease the increased cost of labor on business.

However, the bulk of the negative consequences of the $15 minimum wage in SeaTac have fallen on local workers. Those making the higher wage have reported losing their 401ks, paid holidays and paid vacations, free food, free parking, and overtime hours. In many cases, these benefits plus the lower state minimum wage added more value to workers’ earnings than the new $15 wage.

In the final analysis, the minimum wage does not enrich the working class or stimulate the economy like its proponents claim. Quite the opposite is true. The money involved to pay for the increased labor costs is not free. It comes from consumers in the form of higher prices and it comes from workers in the form of lost benefits and lost jobs.

Originally posted on The Jeffersonian:

About a generation and a half elapsed between November 22, 1963, to September 11, 2001: thirty-seven years, nine months, and twenty days. If you were born the day Kennedy died, your children would be youngsters on 9/11, as I was on November 22, 1963. We let something terrible happen in 1963: criminals murdered our president, and we did not raise holy hell when they lied about what they had done. A little over thirty-seven years later, the instititutional children of those criminals struck again, and we did the same thing. We let them get away with it.

After long, careful and thorough research, we have good evidence now that we permitted a coup in 1963. A long time passed – more than forty years – before many of us understood or believed that. We don’t know yet what occurred on September 11, 2001. The events of that day present more complications…

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A recent Post/ABC poll found that 56 percent of Americans would be in favor of the United States and its allies imposing sanctions on Russia for its role so far in the crisis in Ukraine.  This is not surprising given the fact that most Americans get their news one sound bite at a time delivered by a media that generally is complicit in spouting whatever the Washington, D.C. line is on a story.  And it doesn’t help that President Obama ignores the sins of his own government while lying that Russia’s decision to send troops into Crimea is a “violation of Ukrainian sovereignty and territorial integrity…and breach of international law.

Then, there is the obligatory bluster of America’s biggest warmonger – John McCain.  Not only does he favor sanctions against Russia, but he also wants Congress to send American tax dollars to Kiev and U.S. missiles to the Czech Republic to show those evil Ruskies that we mean business.  And just a few days ago he ranted that the Obama Administration is derelict in its duty because it won’t supply the new regime in Kiev with arms, ammunition, and intelligence support for Ukraine’s military.

What makes the view of 56 percent of Americans, John McCain and President Obama ridiculous is that the crisis in Ukraine has American fingerprints all over it.  A leaked phone call between Assistant Secretary of State Victoria Nuland and U.S. Ambassador to the Ukraine, Geoffrey Pyatt indicates American government involvement with protests and the eventual coup in Kiev.

And both Nuland and Pyatt were photographed in Kiev in December handing out baked goods and mingling with anti-government protestors.  For those that say this proves nothing, since when is it appropriate for a sitting ambassador to directly encourage protests against the government he is supposedly engaged in diplomatic relations with?  Can we now understand why ambassadors like Chris Stevens get killed?

The point is, whether the U.S. government supported the coup which overthrew the popularly elected president in Ukraine directly or indirectly is immaterial.  Washington’s support for the coup is primarily responsible for the current tensions between Russia and the U.S.  We rightly wouldn’t like it if Russia facilitated the overthrow of the government in Mexico and supported a new regime hostile to America in that country.  Why do Americans have a hard time feeling empathy towards others?

But, the American response to Ukraine is also wrongheaded because the new Washington supported regime in Kiev is filled with ultra-rightist Svoboda party members and other neo-Nazis.  These are hardly the kinds of folks that share our values of human rights and liberty.  But, in the view of Washington, damn the Ukrainian people as long as their leaders are supportive of the West, not Russia.  Thus, once again, our government is playing politics with the wellbeing of people in another country.  This can only lead to disaster, not a good outcome.

Perhaps the biggest idiocy of the American position on the crisis in Ukraine is the belief that we could enact sanctions against Russia for her part in the crisis with no consequences for ourselves and our trading partners.

First of all, Russia is a major trading partner with all of Europe.  Sanctions against her would also harm her trading partners.

China would support Russia and the two of them could stop using U.S. dollars for international purchases.  Both could also completely stop buying U.S. debt.  The consequences for our economy would be devastating and quite possibly be the final nail in the coffin for the dollar as the world’s reserve currency.  Washington would be faced with two choices:  continue to spend at current levels and face hyperinflation at home or live within its means by drastically cutting federal spending and face social unrest from Americans who have become accustomed to federal largess.

The above scenario is inevitable in any event, but Washington would expedite the event by imposing sanctions on Russia now.

At the end of the day, the U.S. should leave Ukraine alone.  She has already caused enormous harm to the Ukrainian people.  And pushing the envelope by imposing sanctions on Russia could wreak economic devastation on her economy.  That is why the American policy toward Ukraine is wrongheaded.

Obamacare and False Claims

 

Kevin Short over at the Huffington Post produced a wrongheaded post this week titled, “Obamacare Just Made Americans Richer Without Anyone Noticing”.  Citing a report issued by the Commerce Department’s Bureau of Economic Analysis and calculations made by the Wall Street Journal, Short claims Obama’s so-called Affordable Care Act (ACA), better known as Obamacare, was responsible for three-quarters of the rise in Americans’ spending and income growth in January.  Thus, according to Short, the ACA in its first month of operation has already made Americans richer.

The problem with Short’s analysis and the reason why Americans didn’t notice they were richer is because they aren’t.  Short’s claim is nothing more than typical Keynesian bunk.

So, how did the ACA make Americans’ richer in January according to Short?  Well, the expansion of Medicaid funding to the tune of about $19 billion and $15 billion in subsidies received by Obamacare enrollees did the trick.  The logic goes, because some Americans received a combined $34 billion in federal largess, that money will be spent in the economy providing new jobs for countless Americans.

Of course, what Short fails to mention is where the money for those welfare benefits (Medicaid and subsidies) came from.  Did they come from an increase in worker productivity?  Did they come from an expansion of business and employment?  No.  In fact, according to the Institute for Supply Management  its employment gauge in February declined for the first time in 25 months and currently stands at its lowest reading since March 2010.

Obviously, the money came from taxpayers, either through direct tax payments or debt monetization by the Federal Reserve.  Neither approach represents an expansion of the economy or wealth production.  What has happened is akin to taking money from one pocket and transferring it to the other.  Only in Short’s world and the world of Keynesians everywhere is this considered prosperity.

But, what is even more troublesome is how that $34 billion was spent in January.  Again, according to the Bureau of Economic Analysis, Obamacare handouts may have been responsible for a $29 billion increase in health care services.  Besides utilities, all other spending categories experienced a decline.

What this means is if Obamacare further increases government spending on health care, then the cost of health care will rise even higher.  All of that new money entering the health care industry will bid up prices to heights never seen before.  This is precisely the reason health care costs have been on the rise for the last 50 years.

Over the last few years, there have been many false claims made about Obamacare.  From “you can keep your coverage and doctor” to health care costs will decrease to more Americans will have health care coverage, there has been no shortage of mistruths.  And now we have the outrageous claim that the ACA is making Americans richer.  Not only does taking from one citizen and giving to another not make us richer, increased government spending on health care will surely make us poorer.

President is Pushing Another Failed Policy

A couple of weeks ago, I received an email update from President Obama which discussed his signing of the Executive Order raising the minimum wage to $10.10 an hour for federal contract workers.  Within his remarks the President stated his belief that, “It’s the right thing to do”, raising the minimum wage for federal contract workers.

Naturally the President used the news of the Executive Order as a segue to lobby Congress to raise the federal minimum wage from $7.25 to $10.10 an hour for all American workers.  He claims raising the minimum wage “would move millions of Americans out of poverty”.  In fact, Obama indicated that, “Raising the minimum wage would grow the economy for everyone”.  The latter remark is based on his undying Keynesian dogma that more spending is the key to growing the economy.

There’s only one big problem with the President’s position on raising the minimum wage.  It’s called the Law of Demand.  According to this law of economics, with all other factors being equal, when the price of a good or service increases, demand for that good or service decreases and vice versa.

In the case of minimum wage laws, the service in question is the labor offered by workers.  Since minimum wage laws make the price of labor artificially higher the demand for labor decreases per the law of demand.  Consequently, some workers will receive pink slips and others will not be hired.  Higher unemployment will result.

In fact, a Congressional Budget Office report last week confirmed just that.  It indicated that Obama’s proposal to raise the minimum wage from $7.25/hour to $10.25/hour would result in the loss of possibly 1 million jobs.

And there are other reports issued by economists who know the laws of their science, which have found that minimum wage measures cause higher unemployment.  It’s also important to understand that that higher unemployment will result in greater income inequality between rich and poor.

At the end of the day, the President’s belief that raising the minimum wage will grow the economy is ridiculous.  In the first place, the law of demand tells us that less people will be working.  In the second place, the president is assuming that the money businesses earn which does not go to higher wages for their employees, somehow gets sucked down a black hole.  Does he not understand that that money could be channeled into productive enterprises like plant expansions, training for employees, and research and development?  All are enterprises which ultimately lead to job creation and higher pay for workers.  Even my 8th grade economics students understand this.  They also understanding that raising the minimum wage is not the right thing to do.

Don’t Prepare Your Kids to be Slaves of the State

As we all know, the jails are full of victimless criminals in America.  Whether they are street walkers, gamblers, or drug users, many are serving time not for hurting anyone, but as protection against themselves or because they committed an act considered immoral by society’s moral elite.

However, adults are not the only ones punished for not hurting anyone.  Young children are usually placed in time out, spanked, or have their toys confiscated by their parents for committing the victimless crime of not sharing.

Picture this, little Jonny has a friend over to play, but refuses to give him a turn with his slinky.  After much quibbling between the two young lads, Jonny’s dad intervenes by taking the slinky away from Jonny and giving it to Jonny’s friend while Jonny is placed in time out on the couch to think about what he did.

But, what did little Jonny do?  He did not hurt his friend or violate his friend’s rights.  After all, he didn’t steal from or hit him.  What he did was obnoxious and inhospitable by societal norms, but no crime worth punishing was committed.  Little Jonny’s toys are his property and it is his decision whether or not to let others play with them.

If you disagree, then consider why adults are held to a different standard?  If my neighbor wishes to borrow my hedge trimmer, but I don’t loan my tools out to anyone, does some authority figure come along and take it from me and give it to my neighbor while I am placed in time out in a ten by ten cell?  Most people would say that is a preposterous example that would never happen.  Agreed, then why are kids punished for not sharing their toys?

Like adults, kids have a choice to make.  If they don’t share their things, when they are at a friend’s house, that friend may not share his things with them.  Worse yet, a child who doesn’t share may not have any friends even if he wanted them.  The bottom line is that the natural world has a way of working these issues out.  There are plenty of incentives for little Jonny to share.

But, let’s return for a moment to the example about the neighbor who wanted to borrow my hedge trimmer – the example is not so far-fetched upon closer consideration.  In America, it has become all too commonplace for our neighbors to ask for authority figures (government) to make us share our income with others or face time in prison.  Whether it is big bank bailouts, the military industrial complex, public employee unions, corporate and individual welfare, or foreign aid, Americans are constantly required to share their money with others or face jail time.

And that is really the lesson to be learned about punishing kids for not sharing their things with others.  It teaches them at a young age that property rights equates to selfishness and prepares them to be subservient slaves to the state which takes their property through taxation or price inflation and gives it to others.

At the end of the day, sharing should come from the heart not because you will be placed in time out or put in a cage.  Parents should teach their children empathy for others while respecting their property rights.  In an age of massive public assistance spending and “too big to fail” bailouts, property rights have taken a back seat to political expediency.  It is time property rights were once again respected. Parents can begin that process with their young children.

Originally posted on The Jeffersonian:

Do you remember about ten years ago when the so-called vulcans on Bush’s national security council rather contemptuously dismissed their opponents? The vulcans prided themselves on their hard-headed realism in international affairs. Their critics said that going to war in Iraq ignored the realities of politics in that part of the world. Cheney’s vulcans, who tried to make everyone who disagreed with them feel like a sissy, replied, “We create our own reality.”

Now you see the reality they made. The vulcans wanted a friendly, peaceful regime in Iraq, secure access to oil shipped through the Strait of Hormuz, a bulwark against sworn enemy Iran, no home anywhere for al Qaeda, and a stable environment that would sustain friendly countries like Turkey, Saudi Arabia, Jordan, Lebanon, Egypt and Israel. Look what we have instead:

  • Civil war in Afghanistan, Iraq, Syria, Egypt, and Libya.
  • Refugees by the millions in Iraq, Kurdistan…

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