Category: too much government

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free trade & free markets national politics & policies too much government

A Teachable Wage

The U.S. President wants to up the national minimum wage to $9 per hour.

Republicans tend to lose at such policy debates, sometimes by daring to tell the truth: That minimum wage laws tend to raise unemployment. But that doesn’t impress politicians, who can’t be bothered to look beyond the surface of such issues.

They present the minimum wage hike as a guarantee that higher wages get paid all around, that wages only go up, rather than what actually happens: some wages go up to meet the law, and others evaporate, as people are let go, jobs downsized, and new jobs go uncreated.

So why would congressional Republicans use the same old rhetoric to balk at the president’s plan?

Sometimes irony works. Republicans should take all the Democrats’ premises — we want higher wages, more wealth, etc., etc. — and up the ante:

“Yes, raising wages would be great! But why are you all such tightwads? Raise the minimum to $49 an hour! Or make the lowest rate comparable with congressional pay: $85 per hour!”

Then compromise and say they will only vote for the raise if the rate hike is a serious amount, not the president’s paltry $1.75 increase.

At that point, a more honest conversation will start up.

For the ugly truth is that the harmful effects of the current and rather low minimum wage laws rest mainly on folks who aren’t very likely to vote, or to notice why it is they are unemployed. But raise the rate to $49 per hour, or even $19, and the scam becomes obvious to all but the most dense.

Even Democrats would insist on a lower rate.

And then Republicans should demand that Democrats explain why. And reveal the perverse logic behind minimum wages for all to see.

This is Common Sense. I’m Paul Jacob.

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too much government

Oh, For a Smarter Obama

There are some things that can be endured only with irony, or a lot of drink (and I don’t drink).

Last night, as I listened to Barack Hussein Obama’s fifth “State of the Union” Address, I chose irony:

Obama just said he wants a smarter government, not a bigger one. So, surely, the new slogan will be: FREEZE GOVERNMENT SPENDING! Washington Will Simply Work Smarter for the Same Money! Now we’re united. Go Obama!

Live-blogging on Facebook in this manner allowed me to breeze through the rest of the tedium pretty well: my blood pressure didn’t rise one bit.

But this “smarter government” theme is actually a serious issue.

The problem with current government is not the IQs of the folks in our bureaucracies or running for office. The problem is the systemic effects of the incentives and disincentives that modern, barely limited government present to us all. We don’t need smarter government to improve conditions, we need wiser governance. And the wise person knows when to leave well enough alone.

Actually, there’s a lot of intelligence out there. And knowledge. But these are dispersed amongst “We, the People.” Government concentrates power, but it cannot concentrate knowledge or IQ in any multiplicative way. When people live under the right incentives — as provided by liberty and the rule of law — they become more responsible, they learn from their mistakes, and they even achieve some great things.

Government must learn to back off to allow this — or at least freeze spending!

I wonder if President Obama is smart enough, wise enough, to learn that.

Probably not as long as enough people laud him for saying inane things about “smart government.”

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Banning Consequences

When bad government policies create problems, government officials often pretend that the causes are unrelated to the effects. Instead they enact further bad policies. They may even seek to outlaw the effects, as if prohibiting puddles could stop the rain.

Suppose a government greatly expands the money supply, which leads to a general rise in prices obvious enough to cause people to complain about sticker shock. Governments may try to “solve” the problem with slogans and price controls.

In Argentina, which is lurching toward 30 percent inflation, they’re skipping the Whip Inflation Now buttons and going straight to the price controls. The government has temporarily frozen prices in the largest supermarkets. The two-month freeze is the result of an “agreement” between the trade group representing big stores and the Argentine government.

Now what happens?

Well, customers will race to the big stores, but small stores won’t lose business except in the short run. As the inflated demand outstrips a deflating stock of goods, the big stores and their suppliers won’t see much point in replacing goods that they can sell only unprofitably or at a loss. If they do replace the sold-off stock, they’ll likely do so with shoddier stuff in smaller packages.

Monetary inflation imposes hardship; price controls worsen the hardship. By the same logic, you help somebody whose leg you just broke by smashing his other leg too. You may think that this procedure would restore health, but actually—no.

This is Common Sense. I’m Paul Jacob.

Note on the illustration: The French assignat was an early instance of paper money inflation in Europe.

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national politics & policies too much government U.S. Constitution

Authorized, But in the Red

According to the late economist James Buchanan, there exist three basic categories of government functions: protective, productive, and redistributive.

The protective functions are most basic. As inscribed in the Declaration of Independence, we are to be protected by government not in a scattershot way, but by having our rights delineated and defended. Think courts and the military.

The redistributive functions make up the bulk of the federal government, today . . . according to a recent Heritage Foundation chart, “More than 70 Percent of Federal Programs Goes to Dependence Programs.” Most of these, like Social Security and Medicare, were not originally contemplated as tasks for the federal union, and are flagrant violations of the Constitution.

But some “productive” (business-like) functions were placed into the Constitution, the most famous being the authorization to create a postal service.

Though no longer an official wing of the U.S. Government, the Postal Service is still hamstrung by congressional micro-management, as the shrinking mail biz busies itself trying to erase red ink.

The current notion is to drop Saturday delivery of all but packages. The enterprise hopes to save billions on this reform, alone, and was able to initiate the service cut without Congress’s approval by gambling on what some are calling a legal loophole.

Perhaps as politically dangerous is the ongoing attempt to get rid of post offices in smaller communities, replacing them with “Village Post Offices” that private enterprise would run.

It’s worth noting that though the Constitution allows for mail delivery and a few other “productive” services, these aren’t very productive — at least, they tend to operate in the red.  Besides, what is authorized by the Constitution doesn’t mean required by the Constitution.

This is Common Sense. I’m Paul Jacob.

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national politics & policies too much government

Laboring for Unemployment

When you make it harder to hire people—as Obamacare does by imposing penalties on companies that fail to provide specified health insurance—you make it more unlikely that persons will be hired.

Consider the case of Automation Systems Inc., reported at National Review Online. After the economy went into a nose dive a few years back, the only way owner Carl Schanstra could keep the company alive was by slashing staff.

Automation Systems has managed to bounce back, and business is improving. Currently, Schanstra employs 37 people. He would like to hire lots more. But as soon his company employs more than 50, he’ll be socked with $40,000 in penalties and $2,000 for each additional employee. Even firms that already provide health care to employees will have to pay such penalties if they have 50+ workers and their insurance plans don’t offer as much coverage as Obamacare deems necessary.

When you must shell out $40,000 to the government—$40,000 more than all hitherto expected payout of salary and benefits—to hire your very next employee, you have a strong incentive to keep your company smaller than you might have liked. And workarounds like contracting consultants, as discussed last week, are not options for every company.

This reality may seem obvious to anyone with even modest knowledge of what it takes to create wealth and make a living. But somehow the obvious escapes the central planners in Washington.

Or maybe they just don’t care about the hardships their policies impose upon us.

This is Common Sense. I’m Paul Jacob.

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nannyism too much government

Rationing Pain Relief

If you doubt that ever-expanding government control over medicine hurts people, New York Mayor Michael Bloomberg is eager to disabuse you. How else to explain his new requirement that city-controlled emergency rooms restrict supplies of painkillers in the name of the war on drugs?

The idea is that if emergency rooms shrink supplies below what medical practitioners think reasonable, then it’s harder for addicts to get their fix.

Have personnel known that certain patients were addicted to painkillers and treated them with painkillers anyway? Or are painkiller addicts stealing the supplies? Whatever the rationalizations, it’s evident that substandard supplies will make it harder to help non-addicts in serious pain.

What about days when demand is especially high? Or when delivery of new supplies is disrupted?

Like any central planner confident in his own omniscience, Bloomberg is sure that limiting the supply of painkillers below the level judged adequate by hospitals could never make it harder to help persons in pain. He also says, if so, so what? “[So] you didn’t get enough painkillers and you did have to suffer a little bit. . . . There’s nothing that you can possibly do where somebody isn’t going to suffer. . . .”

His rationale, here, would “justify” making it harder to obtain anything whatever that enhances our lives if that thing might also be used destructively. A counsel to impair life in the name of saving it.

Bloomberg adds callousness to his hubris, topping it off with absurdity.

This is Common Sense. I’m Paul Jacob.

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too much government

The Budget Math Deficit

The White House once promised to answer any petition posted at its .gov site that garnered at least 25,000 signatures. (It has since increased the minimum.) Facetious persons urged it to build a Death Star like the planet-destroyer in Star Wars.

Well, the petition got the necessary signatures, and the Obama administration responded: No, we shan’t build a Death Star. One reason given? Paul Shawcross, a budget official, noted the prohibitive cost.

“We’re working hard to reduce the deficit, not expand it,” he says.

Really?

Now consider a widely reprinted lesson in accounting offered a little more than a year ago by Laurie Newsom of the Gainesville Tea Party. Newsom suggested that to better understand the government’s spending antics, drop eight zeros from the budget numbers. Newsom cited annual tax revenue of $2,170,000,000,000, a federal budget of $3,820,000,000,000, new debt of $1,650,000,000,000, national debt of $14,271,000,000,000. And “budget cuts” of $38,500,000,000.

Delete eight zeros and pretend that the national government is just one household. So instead of federal revenue of $2.17 trillion, we have one household bringing in $21,700. But in the same year, its residents are spending $38,200 and adding $16,500 to a credit card with an outstanding balance of $142,710. One the other hand, the family has “cut” $385 from its spending.

Sound like a very disciplined effort to get the fiscal house in order?

Things that can’t continue forever, don’t.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Attacking Wage Employment

I don’t know what the optimum ratio of employees to independent contractors would be. No one does. But we can be pretty certain that the current skewing of the economy towards less wage employment and more independent contracting by Obamacare is not a good thing.

You see, “one consequence” of the health reform package, writes economist David Henderson on EconLog, “is an increase in contracting out to avoid the 50-person threshold.”

Now, if there were a general shift towards part-time employment and professional contracting as a result of businesspeople and workers appraising their advantages on the open market, we’d just note this with interest or a shrug and say, “whatever the market decides.”

After all, people might substitute wage contracts for performance contracts (or vice versa) for reasons given by Nobel Laureate R.H. Coase, who figured out why firms exist at all: contracting out isn’t costless. It takes time to negotiate each deal, each task, etc. My friend Dr. Henderson will correct me, I hope, if I’m wrong, but employing labor full-time — by bundling numerous tasks together — is usually easier and cheaper than seeking out specialists and consultants for each task you want done.

In recent years we’ve seen a rise in consulting professionals, in part because the Internet has reduced the costs associated with working from a distance. But today’s switch to independent contractors (as well as to part-time employment) is a result of Obamacare raising the cost of keeping full-time employees. Of course businesses will seek to . . . economize.

And we know such substitution is suboptimal because people are doing it under duress, the threat of force behind Obamacare.

This is Common Sense. I’m Paul Jacob.

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ideological culture too much government

Seize the Epoch

President Obama was sworn in for a second term on Sunday, re-enacting the rite on Monday so he could leverage the attention of a traditional news day.

Obama makes a good speech. He intones “We, the People,” with a pause in the middle: “We . . . the People.” He tells us to seize the moment.

But I’m not at all sure he’s seizing — or sizing up — the facts. He says, “we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it.” As I understand it, those who do very well have increased in number. Many folks have moved out of the middle-income earning category into the upper regions. We’ve more millionaires now than ever — even adjusted for inflation. Their ranks aren’t exactly shrinking.

Many of us are struggling, though. And we struggle under the watch of a general “progressive” mindset. You can’t blame income trends on the “free market.” Though some sectors of the economy are pretty free — the important new technology sector, for instance, and much of consumer retail — the medical and financial sectors are heavily regulated and managed by government, and the housing market has been transformed by multiple government policy initiatives. And here, with these three institutions, is where we’ve taken the biggest hits.

And where some of the worst effects on the poorer amongst us can be felt — and where the biggest pro-rich policies can be seen. Think bailouts, for starters.

The Progressives long ago seized the epoch. The necessity of the moment is to seize it back from them. Their policies of government intrusion and management have rigged the game to get us where we are now.

This is Common Sense. I’m Paul Jacob.

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national politics & policies political challengers too much government

Fiscal Brinksmanship

“America,” President Obama insists, “is not a deadbeat nation.” Mounting evidence to the contrary.

He chastises Republicans for even contemplating a default on the debt. At a news conference this week, he called any attempt to use the debt limit authorization issue to negotiate federal spending down “absurd,” and akin to a hostage situation. Refusing to raise the ceiling, you see, would “crash the economy”:

He demanded that Republicans in charge of the House of Representatives approve a rise in the federal government’s authority to borrow money to pay existing obligations — without seeking policy concessions in return.

The BBC goes on to quote the president, who clarifies his stance. “While I’m willing to compromise and find common ground over how to reduce our deficits,” said the president, he insists that he will definitely not “have that negotiation with a gun at the head of the American people.”

It’s an interesting approach: accuse Republicans of dangerous brinksmanship, while continuing to overspend and increase debt to the very brink of insolvency.

What Obama won’t recognize is that fiscal conservatives, today, play the same role as a parents cutting up their college kid’s credit cards after the young spendthrift had racked up an extraordinary debt. Obama plays the role of the kid saying: I’ve already budgeted spending, you can’t cut up the credit card — that’d be irresponsible!

It was different in 2006, when Senator Obama opposed raising the debt ceiling and called the increasing debt levels a sign of “a failure of leadership.”

Now that he — and not a despicable Republican — has the leadership role, he’s changed his tune. He says his former cry of “irresponsibility!” was itself irresponsible.

The very best thing we can say about this? The president has been captured completely by the forces he once opposed.

This is Common Sense. I’m Paul Jacob.

P.S.Soon after the last period of the above squib was struck, I turned on Fox. And there was Sean Hannity, leading his nightly political opinion show with the president’s remonstrance of Republicans for daring to fix tight the debt ceiling. Hannity noticed what I noticed — indeed, what it turns out a lot of people noticed: Obama’s repudiation of a practice that he himself had engaged in in 2006.

But notice what Hannity is trying to prove: “how reckless, irresponsible and fundamentally dishonest a man [Obama] is.” Hannity sees Obama’s press conference performance as indicative of the president’s hypocrisy, demagoguery, and slipperiness-with-facts.

The case can be made, and Hannity has made it. The trouble is, the way Hannity makes it, to his audience, just skips over precisely this kind of behavior from Republicans. For, remember, Republicans repeatedly voted to increase the debt limit while their guy, Bush, was in charge. Another person to notice the differences between Junior Senator Obama and Second-Term President Obama, young Ms. Julie Borowski (“Token Libertarian Girl”), showed more savvy on Facebook than Hannity does on his primetime program:

Most Republicans are against raising the debt ceiling under Obama. But most were all for it during the George W. Bush administration.

Most Democrats are for raising the debt ceiling under Obama. But most were all against it during the George W. Bush administration.

Pssh, here’s a better idea. Dramatically cut spending. Stop manufacturing fake crises and raising the debt ceiling almost every year to finance drunken spending sprees. And why they are at it, members of Congress should pass a budget for the first time in over three years. It’s no wonder that a recent Public Policy Polling survey finds that cockroaches are more popular than Congress.

No doubt, since insecticide is cheaper and more effective than politics.