Red Clay Citizen

Minimum Wage: Still a Terrible Idea

Here's why. And here. And here, too.
-Max Borders

"Living Wage" Nonsense

Today's N&O offers up this article about a study that allegedly calculates a "living wage."

The study:

"tried to show what it actually takes to pay for housing, food, childcare, health care, transportation, taxes and other necessities across the state."

What did they find?

"The average family of four in North Carolina needs $42,841 annually to meet basic needs,"

That's right, not $42,840, not $42,842. They nailed it right down to the exact dollar amount. I'll spare you any stale attempt at "if you don't earn a living wage, will you die?" commentary, but the fact they arrive at such a specific dollar amount is worthy of ridicule.

Predictably, the 'findings' of this study say that a large share of families examined don't meet this income threshold. What appears to be left out is the amount of government aide these families receive. Leaving out potentially thousands of dollars of financial resources helps tilt the scales in favor of the study's intended narrative.

Even more predictably, the report cries out for more government, including:

"expanded support programs, such as childcare subsidies; a push for higher-quality jobs in business recruitment and expanded access to worker training programs."

It's amazing how a group that labels themselves "progressive" continues to champion the status quo of government interventionism.

Who's Paying Tax in N.C.?

Wouldn't you like to know. (Hint: Look out for those calling for the wealthy to pay their "fair share.")
-Max Borders

Myth of the Middle Class Squeeze

Drew Carey on the troubles of the middle class.
-Max Borders

No Better off than 1975?

If you believe that the average worker is no better off than in 1975, then you may be missing something.
(Beautiful addendum to this post from Steven Landsburg in the NYTimes.)
-Max Borders

Blame "Easy Credit" for Business Cycles

"Business cycles and economic downturns are a natural by-product of a capitalist economy." So the common refrain goes. Nonsense.

In this oldie-but-a-goodie Freeman article, Brian Summers dispels this myth.

"Critics of capitalism assert that recessions are caused by free enterprise. But when pressed on the matter, these critics can never find anything in the free market that would cause vast numbers of businessmen to simultaneously err."

Summers articulates in layman's terms what's really behind economic downturns and recessions; the causal relationship between easy credit and malinvestment.

"It is the easy money that misleads businessmen. Projects that formerly appeared too expensive—not likely to yield profits—suddenly seem less expensive ... economic recessions are primarily the result of government credit expansion which misleads businessmen into attempting dubious projects, creates a boom in the capital goods industry, and causes prices to rise. When rising prices scare the government into reducing the rate of credit expansion, the economy—particularly the over-extended capital goods industry—suffers a recession."

Keep this in mind as the Fed decides to cut interest rates. This is nothing more that an attempted quick fix. Enticing business owners to invest with easy credit will inevitably result in another downturn/recession. It may be one year or several years, but the only question is not if, but when? (Note: fiscal policy will also play a role in this, but once investors adjust to any tax changes, the monetary influence kicks back in)

One thing that is for sure, when the economy does head south, expect progressives to (wrongly) blame the evil free-market system for causing such hardship.

The Forgotten Man

Mitch Kokai has a great interview with Amity Shlaes on her wonderful book "The Forgotten Man," which is a public choice treatment of the Great Depression. For those of us who were sold, and have bought into, the mythology of FDR's big government saving the country from the Depression, its time to look at these years from a very different perspectives. (Here's the book.)
-Max Borders

Government Failure and MFs

Josh Hendrickson clarifies "market fundamentalism" (MF) and explains why it's not so much that MFs believe markets don't fail (although we have to define failure), but that government fails abysmally, and that fretting about inequality is poorly framed fetishism:

Those who are concerned with income inequality often present their argument as though there are two choices. One can either side with the market fundamentalists whose "blind faith" claims that the market will work itself out or they can side with "realists" who believe government intervention is necessary to correct for this market failure. However, this is a false dilemma. As Arnold Kling so eloquently explained, there are many of us who concede that markets fail, but we are much more concerned with government failure. And there is certainly reason to believe that the government will fail to equalize economic outcomes. For example, the most frequent solution to income inequality, and the one advocated by Krugman in nearly every interview about his book, is higher taxes on those at the top of the income scale. While this may give the appearance of lessening inequality, in actuality it does very little. Essentially, it is equivalent to twisting the ankle of the fastest runner in the world in an attempt to make other runners faster. In no way does this make other runners faster.

Indeed, if ever there was blind faith, it is with letting government bureaucracies attempt to solve problems, "equalize" society, and plan utopias -- all which ignore the knowledge problem. MFs shun government action precisely because we have neither blind faith nor hubris. We stand humble before the inherent complexity and pluralism of a society in which knowledge-for-problem-solving is a local phenomenon.
-Max Borders

"C" is for Contemptible Cow

Boundreaux today:

Although de rigueur among "progressives," Jim Salvucci is mistaken to describes bourgeois values as "empty" and consumerism as "mindless" (Letters, November 17).  Bourgeois values encourage hard work, sobriety, thrift, honesty, and self-reliance - all which earn their practitioners the ability over time to enjoy greater material comforts and amusements.  What is truly empty is the value that counsels A to live off of the wealth given to him by B and which B confiscated from C.  And what is truly mindless is the notion that society progresses as greater numbers of us live as A's or as B's, and all the while thinking of C's as being nothing more than contemptible cows to be milked for the "general good."

-Max Borders

The Poor Get Richer, and the Rich Get Poorer

The Wall Street Journal comments on a recently released US Treasury Department study that examines income mobility in the US over the last decade. Not surprising to those of us who understand the dynamic nature of our economy, upward mobility has been quite healthy.

"The study, to be released today, is a careful, detailed piece of research by professional economists that avoids political judgments. But what it does do is show beyond doubt that the U.S. remains a dynamic society marked by rapid and mostly upward income mobility."

Furthermore, the study shows evidence contradicting the chorus being sung by the "real wages have been stagnant" crowd:

"Also encouraging is the fact that the after-inflation median income of all tax filers increased by an impressive 24% over the same period. Two of every three workers had a real income gain -- which contradicts the Huckabee-Edwards-Lou Dobbs spin about stagnant incomes. This is even more impressive when you consider that "median" income and wage numbers are often skewed downward because the U.S. has had a huge influx of young workers and immigrants in the last 20 years. They start their work years with low wages, dragging down the averages."

The biggest losers over the last decade? The extremely rich.

"Only one income group experienced an absolute decline in real income -- the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005."

Kind of takes the wind out of the sails from those populist, class warriors constantly trying to tell you that only the rich get richer, while the poor get poorer.

The article concludes with this comment directed at those "progressives" who think that the tax code exists to "reduce inequality":

"The great irony is that, in the name of reducing inequality, some of our politicians want to raise taxes and other government obstacles to the kind of risk-taking and hard work that allow Americans to climb the income ladder so rapidly. As the Treasury data show, we shouldn't worry about inequality. We should worry about the people who use inequality as a political club to promote policies that reduce opportunity."

Middle Class, Moving Targets

One from Boudreaux:

1. Judith Warner writes that "More and more people are being priced out of a middle class existence" ("The Clinton Surprise," October 19).  This statement is true, but only because more and more Americans are getting richer.  Consider the percentage of American households in each of these different annual-income categories in 1967 and in 2003 (all reckoned in 2003 dollars):

                       1967    2003
$75K and up     8.2       26.1
$50K - $75K    16.7     18.0
$35K - $50K    22.3     15.0
$15K - $35K    31.1     25.0
under $15K      21.7     15.9

If the middle class is disappearing, it's doing so by swelling the ranks of the upper classes.

2. And Russ Roberts on Will on middle class mendacity/confusion about SCHIP expansion, which many people clearly don't understand...

-Max Borders

Subsidizing the Non-Poor

In light of the outing of the Democrat's S-CHIP poster child (more about which you can read here), we should pause to consider all the ways in which taxpayers are asked to subsidize the non-poor (often the rich) in this country:

1. The most obvious is corporate welfare like the Goodyear deal here in North Carolina. It's done in the name of protecting jobs, but corporate executives benefit at the public trough.

2. "Arts" funding. Whether it's ballet, opera, or theater, most municipalities require taxpayers who never attend high culture events to bankroll them. Those who do attend - overwhelmingly wealthy people - receive a subsidy to indulge their elite tastes. But if there is a market in such elite tastes, isn't tax exemption enough? Why must the average taxpayer kick in for a rich person's ticket? And while I realize that the performing arts are also sometimes supported by philanthropists, that's all the more reason to stay out of the pockets of taxpayers, particularly since such so often involves 'art' people find morally objectionable -- such as this infamous example.

3. Wealthy folks fill their pools, water massive lawns, and run their companies on water subsidized by taxpayers. Overconsumption + drought invariably leads to rationing (just as it will with socialized medicine). But it need not be so. All this cost-shifting can easily be resolved by dynamic pricing. And you can give all people - even the poor - a basic fee-based allotment to insure that no one goes without due to price.

There are lots more ways non-poor get subsidies. Feel free add yours in the comments...
-Max Borders

Coverage Isn't Out of Reach

So writes Max in his op-ed than runs in today's News & Observer about the SCHIP expansion bill.

Read it here.

Turner's Teaser

Steve Turner's teaser follow-up at the Progessive Pulse is worth a read, and the comment section is happening. Check it out. This is a long overdue conversation between market liberals and redistributionist progressives. -Max Borders

The Poverty of "Poverty"

Being poor sure ain't what it used to be. Consider this from a report by Heritage:

To understand poverty in America, it is important to look behind these [census] numbers—to look at the actual living conditions of the individuals the government deems to be poor. For most Americans, the word "poverty" suggests destitution: an inability to provide a family with nutritious food, clothing, and reasonable shelter. But only a small number of the 37 million per­sons classified as "poor" by the Census Bureau fit that description. While real material hardship certainly does occur, it is limited in scope and severity. Most of America's "poor" live in material conditions that would be judged as comfortable or well-off just a few generations ago. Today, the expenditures per person of the lowest-income one-fifth (or quintile) of house­holds equal those of the median American household in the early 1970s, after adjusting for inflation.

So much for the class-warfare narrative. This Edwards populism is really about income equality, not poverty. And as I wrote yesterday, egalitarianism a la Edwards is merely the outgrowth of greed and envy.

Here are some interesting bullets to chew on as you consider the next John Edwards diatribe:

>43% of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.

>80% of poor households have air conditioning. By contrast, in 1970, only 36% of the entire U.S. population enjoyed air conditioning.

>Only 6% of poor households are over­crowded. More than two-thirds have more than two rooms per person.

>The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)

>Nearly three-quarters of poor households own a car; 31% own two or more cars.

>97% of poor households have a color television; more than half own two or more color televisions.

>78% have a VCR or DVD player; 62% have cable or satellite TV reception.

>89% own microwave ovens, more than half have a stereo, and more than a third have an automatic dishwasher.

(Update: I hope information like this will serve as an antidote to stuff like this by Rob Christensen, once a solid, less-biased political reporter who as begun engaging in class warfare.) -Max Borders

Feel free to move there anytime

Rob Scofield over at NC Policy Watch once again professes his love of high taxes and big government. Following his laughable assertion that two of this nation's most heavily regulated and/or subsidized industries - health insurance and cable - are "largely private institutions," he then lets loose with this doozy:

The fact remains that the vast majority of taxes paid by modern Americans go toward the provision of essential services that dramatically improve the quality of life in a way that would be simply impossible if everything were left to the, dog-eat-dog, Wild West model of society favored by the market fundamentalists. In this sense, most taxes that Americans pay are no different than their mortgage (or rent) payments or their food bill – except that they’re often more cost-efficient.

Wow, his fear of free markets is almost palpable. It's amazing how every time they describe government services, the word "essential" immediately precedes it. I think they must program their computers to automatically insert that. In his view, adults in this country are incapable of deciding what will improve their quality of life. Those decisions must be made by elitists and bureaucrats who, of course, know what's best for you better than you do. If he has any credibility left by the end of the above paragraph, I think it's lost when he claims that paying taxes in return for government run monopolies....er services is "more cost-efficient" than privately agreed upon transactions such as buying food.

Furthermore, he turns green with envy as he displays some data comparing Connecticut with North Carolina:

Connecticut, there are a large number of categories in which those same people have a heckuva’ lot more “freedom” than North Carolinians. Here are just a few from the Census Bureau:

Median Income: Connecticut – $60,941; North Carolina – $40,729

Population Living in Poverty: Conn. 8.3%; N.C. – 15.1%I

nfant Mortality: Connecticut – Conn. 5.4 per 1,000 live births; N.C. – 8.2

Violent Crime: Connecticut – 275 per 100,000 people; N.C. – 468

Persons over 25 with a Bachelor’s Degree: Conn. – 36.9%; N.C. – 25.4%

Public School Teacher Average Salaries: Conn. – $57,337; N.C. – $43,211

Number of Physicians: Conn. – 363 per 100,000 people; N.C. 253

Traffic Fatalities: Conn. – 0.92 per 100 million vehicle miles; N.C. – 1.62    

Pity the poor fools.

This is his proof positive that folks in Connecticut have a higher standard of living and that they are perfectly happy paying one of the highest tax rates in the nation.

There is one bit of data from the census that is conspicuous by its absence - what do the people of Connecticut themselves feel about living there? Apparently, they just don't know how lucky they should be paying such high taxes and receiving such great "essential services," because they have been fleeing the state in large numbers (see page 6 of report). But I'm sure the fact that Connecticut has been one of the largest losers in terms of domestic migration and also sports one of the nation's highest tax burdens is mere coincidence in Scofield's world.

Schofield: Subsidizing Poverty

Rob Schofield has a piece on how to destroy jobs in the economy and how to keep poor people dependent by incentivizing them to remain poor. For a better alternative in poverty alleviation, try this from Brian Balfour.

Robin Hood Narratives, Zero-sum Thinking

Here's more of what we've come to expect from the wealth-is-one-big-pie crowd:

"In an era of falling wages for folks in the middle and at the bottom, a disappearing middle class and unprecedented incomes at the top, the tax cut on the rich is one of the latest, best worst example of the new American plutocracy — a place where the wealthy shamelessly line their pockets at the expense of the many; slowly transforming our country into a banana republic on steroids while the press and the public snooze idly by on the sidelines."

Sigh. The sad part is, this narrative of fat rich people making snow angels in gold coins while the poor choke on dried breadcrumbs is again becoming the master narrative of government intervention. There is never a thought to opportunity costs of redistribution, of damage to the economy (i.e. damage done to jobs at the margins), and to new investment opportunities that would create jobs and make people less dependent. It's always about redistribution. Never about the unintended consequences of redistribution. It's about taking from "the greedy." But they ignore the fact that greed creates wealth. Robin Hood is a far easier story to tell than the story of how prosperity is a positive-sum arrangement created by individuals engaged in exchange.

While I agree that there are fat-cats in the General Assembly colluding with business - many of whom are probably corrupt - I cannot abide this constant narrow-minded soak-the-wealthy rhetoric, which blames people for being successful, creating prosperity, and providing opportunities for us all. The government never created anything it did not first take. We should never forget that.

Minimum Wage Blues

Congress, in exchange for caving on war funding, must have struck a deal to get in their economically unsound minimum wage legislation that is sure to hit to small businesses particularly hard. I have argued elsewhere that this type of intervention in the economy is a bad idea for a number of reasons. Congressional lefties clearly don't understand the nuances of labor supply and demand -- clouded as they are by meaningless concepts such as "living wage." Alas, here we have another blow against the margins of businesses already plagued by the price of healthcare they've been saddled with the responsibility for providing due to our skewed tax code. Sigh. No joy watching these government circuses in our state and in Washington trying to fix and plan our economy like 'intelligent designers.'

Unemployment up

The NC Employment Security Commission reported today that the unemployment rate for April jumped from 4.5% to 4.8%.

Sure would be a good time for some good ole' economic stimulus.

Hmm... what do you think might be a good idea for that?

Maybe something like $300 million in temporary taxes we've been owed for 4 years?

The Politics of Envy (and Guilt and Indignation)

George Leef rightly points out the place of envy in the mind of the left. He might add guilt and indignation...what I have called elsewhere the Stone-Age Trinity:

The late philosopher Robert Nozick pointed out that when people compare themselves to one another, they are disposed to feel one of two emotions -- guilt or envy. Guilt when someone has a lower station than you; envy when someone has a higher station than you. I would add a third to this mix: indignation. That's when you compare someone of a higher station to someone of a lower station, and feel that something is wrong. I refer to this complex of emotional responses to unequal life-stations as the "Stone Age Trinity."

The trouble with these evolved propensities is that they are not appropriate for large-scale societies -- i.e. acting on it politically doesn't work. And the failures of egalitarian thinking are failures of degree (from the USSR to Continental Socialism to the Great Society Welfare State). The left would do better to focus these emotions to social change in their communities, rather than society-wide restructuring carried out at the hands of the coercive state. Then again, their is a measure of elitism in every egalitarian that longs for power, too. That is why we must always watch our wallets.

Speaking of Poverty

Food for thought for our 'progressive' friends, from Arnold Kling. The moral? Unrestricted capitalism is by far the best poverty alleviation tool. This suggests to me that the term 'progressive' is being woefully misapplied these days.

N.C. Budget Roundup

For a roundup of Civitas policy briefs on the N.C. state budget, visit here.

Inequality, Education and Entrepreneurship

A good piece by my former Editor-in-Chief Nick Schulz on the relationship between education, entrepreneurship and greater income inequality. If inequality is a problem, what do we do about it?

The sensible response to concerns about rising inequality, then, is not to focus on leveling incomes to minimize inequality. It is instead to increase the number of people building their human capital; and the degree to which they build up that capital through education and learning of new skills. From a political standpoint, this is tougher to sell than bash-the-rich class warfare. But it does no one any favors to offer quick fixes that ignore the underlying dynamic at work.

I agree that politicians should focus on the requisite moves to encourage skill building and specialization. But a lot of this process is organic -- requiring that government simply get out of the way. A good place to start might be a radical change in our concept of education in this country, one that will begin with the toppling of the public education monolith. (Nevermind that people's concerns about income inequality may just be an emotional biproduct of our human past.)

Living Wage: What is that?

I never ceased to be amazed by what progressives think is good policy (from the Progressive Pulse):

Maryland approved the first-in-the-nation living wage bill. HB430, sponsored by Del. Herman Taylor, requires state contractors to pay employees a living wage. The bill creates a two-tier system: wages in urban areas will be at least $11.30 per hour; wages in rural areas will be at least $8.50 per hour. Maryland’s minimum wage is the same as North Carolina’s, $6.15 per hour.

A "living wage" may ring true to some. Alas, it's bad economics.  It doesn't help the poor, and it places marginal employees back on the dole. I've written about this elsewhere in an Examiner piece I think explains the backwardness of this, one of the left's favorite false idols.