Democrats Don't Get Basic Economics

Human Events Online ^ | August 18, 2006 | Greg Franke

[WmShirerAdmirer]

One of the most poignant moments in the presidential debates prior to the 2004 election occurred when Sen. John Kerry was pontificating about how he would halt the outsourcing of American jobs overseas.

After outlining his approach—which predominantly consisted of giving incentives to American businesses to refrain from such nefarious behavior—Kerry was stopped cold by moderator Charles Gibson. To his everlasting credit, Gibson asked how Kerry could reasonably expect this to be effective when any incentives that could be offered would still pale by comparison to the amount companies would save by paying so much less per worker abroad than American workers would have to receive.

To this, Kerry could only sheepishly reply that he never said he’d be able to stop all outsourcing.

This exchange largely served to puncture Kerry’s balloon on an issue the Democrats had pinned high hopes on in seeking to derail President Bush’s re-election.

This anecdote is highly relevant to numerous issues today in which even an elementary knowledge of economics is all that would be required to discern the folly of very dubious (albeit politically popular) proposals.

Foremost among these is the continual harping by the Democrats that an increase in the minimum wage is needed as a life-raft to any poor souls out there struggling to provide for a family on $5.15 an hour.

Though a recent attempt failed to ram a hike in the federal minimum wage past Congress on the back of a morally right (and economically defensible) reduction in the death tax, efforts to jack up the minimum wage at the state level continue unabated.

The major current battleground is Ohio, where a campaign is underway to initiate a referendum, and where the likes of Hillary Clinton and John Edwards have landed in attempts to burnish their credentials as crusaders for the disadvantaged.

One liberal columnist in the Buckeye State even went so far as to lament that with the high cost of gas these days, not to mention pesky things like rent, food, heating, car insurance, etc., the head of a household trying to make ends meet on minimum wage just doesn’t have a chance.

This embarrassing attempt at economic analysis then stated that ‘reasonable people’ could agree on this.

Sure they could—if these ‘reasonable people’ happened to be as economically clueless as a kindergartner trying to fathom Dostoyevsky.

Though it’s hard even knowing where to begin refuting such insipidity, the public interest requires making the attempt.

Of course, our compassion-filled ignoramus is quite right—a primary family breadwinner indeed doesn’t have a chance earning minimum wage. This would be terrible except for one very salient point—they don’t have to.

First of all, it’s common knowledge—to anyone wishing to know—that the majority of minimum wage earners are not family providers struggling to bring home the bacon. They’re young, predominantly single people just getting started in their working careers. Thus, they have no need for all of the items listed above for anyone but themselves.

They’re the ones who stand to be hurt most when an increase in the government-mandated wage rate does what it always has—make people with lesser job skills more expensive to employ than the value they give in return, and therefore expendable.

Of course, it should go without saying—especially to people of moderate intelligence—that this will also hold true for anyone who actually does live from paycheck to paycheck on minimum wage and trying to support a family. And as hard as that is to do on $5.15 an hour, ‘reasonable people’ can certainly agree that it’s infinitely harder to do without any job at all.

However, those who should find themselves in such a deplorable state should take heart—they won’t be thrown to the wolves. In Ohio, for example (as well as any other state), there exists government aid including a plethora of job and family services, exemptions from income tax—and even tax credits for people who pay no taxes.

Not only that, but such people often have family members or relatives they can stay with to help get through the rough patches. (How else do those ‘discouraged workers’ who have left the job market manage to keep body and soul together? They can’t just opt out of living, after all).

Despite the self-evidence of all this—and the confirmation of nearly every economic experience in the memory of mankind—liberals persist in their frantic attempts to attach some semblance of rationality to their crusade.

To that end, they point to various recent ‘studies’ that have come out, vacuously proclaiming that somehow all history has been wrong and that—lo and behold!—artificially increasing wage rates doesn’t tend to increase unemployment after all. But unfortunately for the proponents of this nonsense, the veracity of many such conclusions is undermined by the utilization of a myriad of clever but misleading techniques.

Thomas Sowell’s chapter on minimum wages in the very aptly-named book "Basic Economics" is an excellent source for more on this.

One of the neatest shell-games he cites is that of the alleged ‘scientific’ data counting only the effects on firms still in existence after the forced wage-hike. This conveniently forgoes the unpleasant necessity of counting the jobs lost when other firms did suffer the misfortune of going under.

Oh well, we know the adage that there are lies, damn lies, and statistics. This is why long-standing common sense must prevail in such cases.

The upshot of this—as Sowell and countless others point out irrefutably time and again—is that the law of supply and demand is immutable, and that no matter how much we’d like to improve the lot of people with no experience and no marketable job skills merely by issuing a decree from on high, it simply can’t be done.

Stubborn behavioral reactions, in the form of greater unemployment or higher prices (when increased costs are inevitably passed on to customers) see to that.

The result is that any increased buying power envisioned by the magic wage increase will be substantially watered down for those lucky enough to keep their jobs—or eliminated entirely for those who aren’t.

All of this goes a long way toward explaining the futility of any number of flawed proposals—though it never seems to register on certain people.

For example, trying to address illegal immigration by granting amnesty—or even cracking down on illegals—without dealing with the incentive employers would still have to hire them: namely, relief from the exorbitant cost of hiring legal workers.

Or, on the other side of the economic spectrum, attempting (by short-sighted means such as woefully insufficient incentives or counter-productive punitive measures) to keep white-collar jobs from being shipped to other countries where the cost of doing business is a fraction of that prevailing in the U.S.

In short, the folly of minimum wage increases can be summed up by a simple math problem that any public school student (we hope) could figure out: Will poor workers be better off with a job at a lower minimum wage, or without a job at a higher one?

Liberals, go to the head of the class—please!

Mr. Franke is a freelance writer in Portage, Ohio, a former military linguist in psychological operations, specializing in russian, and is presently working on a book project detailing the Cold War-era hockey rivalry between Canada and the Soviet Union.

[WmShirerAdmirer]

Also See "Funding Liberalism With Blue-Chip Profits"

http://www.freerepublic.com/focus/news/1688616/posts?page=1

[JHBowden]

What sucks is that they don't want to get it.

I've explained to Democrats I know many times about how minimum wages put people out of work, how government subsidies raise the price of goods in a market and so forth, and they simply don't want to believe it.

Leftists are all heart and no brain. I wish they'd consider that policy that logically hurts real people isn't compassionate.

[MrEdd]

Sun rises in East...

[rottndog]

What sucks is that they don't want to get it.

Actually, many of them do get it, but since it conflicts with their religion of socialism, they will always be opposed to it.

[SaxxonWoods]

Exactly right. Liberals are not interested in policies that cause Capitalism to succeed. Capitalism is bad, and must be reformed into Socialism. Attempts to explain economic theory to such people is a waste of time. Students must be taught economic theory before their minds are poisoned with liberal claptrap. A basic education in economics will make one immune to Socialist ideas. As for the already poisoned, they are dying off.

[Cobra64]

The concepts in Economics 101 are common sense and tie to individuals' everyday life.

Both of my children majored in Business and Economics. When they hear a lib whining to raise taxes, thus confiscating more of labor, they throw things at the TV.

A tax is a confiscation of labor.

Any of you FReepers who have kids still in school, I'd strongly suggest that your press them to take at least two Economics courses. There is NOT a lot of math involved. Some simple algebra to illustrate supply and demand curves and intersects. Anyone who understands economics, will have a strong foundation in understanding their personal finances and what motivates a business to compete and grow. These concepts roll right into Marketing.

It's not rocket science.

/lecture

[Ouderkirk]

Bottom line is if you're making %.15 / hour you're doing something wrong...and basically you're too stupid to be making more than that.

Consider a raise in the minimum wage as a tax increase. it will raise the earnings of a lot of teenagers who live with their parents into the ranks of w-2 tax filers who actually paid taxes instead of having their withholdings returned to them.

[rottndog]

A tax is a confiscation of labor.

I like to look at it in terms of a tax being a confiscation of a portion someone's life, given that labor is time in one's life that they can't get back, that is exchanged for wages. I would like to see tax dollars discussed in terms of man-lives, as in it takes so many man-lives to produce so many billions of dollars in taxes. I know there is a techno geek out there somewhere that can crunch the numbers and come up with a statistic.

[CPOSharky]

Demonrats think corporations pay taxes. Talk about stupid.

(Of course they think we are the stupids and don't know better.)

[TruthShallSetYouFree]

Bottom line is if you're making %.15 / hour you're doing something wrong

Like holding down the SHIFT key while trying to type 5.15 / hour? :) (Sorry, I couldn't resist.)

[Cobra64]

A tax is a confiscation of labor.

I like to look at it in terms of a tax being a confiscation of a portion someone's life, given that labor is time in one's life that they can't get back, that is exchanged for wages. I would like to see tax dollars discussed in terms of man-lives, as in it takes so many man-lives to produce so many billions of dollars in taxes. I know there is a techno geek out there somewhere that can crunch the numbers and come up with a statistic.

Thank you. Excellent extension of my idea. You take it to a more granular level, or, the lowest common denominator, since one's time on this planet is finite. The folks who work, whose labor/time is confiscated is paid to those who do not work. Thus, we are giving our time to others. The libs love this idea though.

[CougarGA7]

As I have tried to explain to liberal friends in the past, Democrat tax policy only works if whenever someone makes a dollar they CREATE that dollar, and whenever someone spends that dollar, the dollar is DESTROYED.

But that's not how money works. Smart tax policy encourages the same dollar to change hands more often.

This reasoning seems so basic and sound to me and yet they still cant see it. /shrug.

[TASMANIANRED]

Also artificially raising minimum wage is inflationary.

It cuts into every dime that people have managed to save..

[okie01]

Democrats aren't even honest enough to tell you the real reason why they want to increase the minimum wage.

It has nothing whatsoever to do with "helping out the working poor". Instead, it has to do with giving all the union labor whose contract is tied to a multiple of the minimum wage a hefty increase.

Thereby increasing the dollars the unions will contirubute to the Democrat coffers, of course.

[rottndog]

It has nothing whatsoever to do with "helping out the working poor". Instead, it has to do with giving all the union labor whose contract is tied to a multiple of the minimum wage a hefty increase.


DING DING DING DING DING DING DING DING!!!!

You have hit the nail on the head!!!! No further explanation is necessary.

[Alia]

The author of this article is so, very, right.

They’re the ones who stand to be hurt most when an increase in the government-mandated wage rate does what it always has—make people with lesser job skills more expensive to employ than the value they give in return, and therefore expendable

MAJOR BINGO. You know, I've always wanted to directly ask a Democrat, using the fearmongering lie about minimum wage... "If your proposed minimum wage doesn't "happen", are you threatening gang violence, newer waves of thefts of properties?" I'd really just like to ask this very directly, on camera, Actually.

[supercat]

Ignoring the constitutional problems with such a law, imagine that the government passed a law forbidding employers from paying anyone born on a Tuesday less than $50/hour.

Would there be more Tuesday-born people seeking forged non-Tuesday-born credentials, or more non-Tuesday people seeking forged Tuesday credentials?

[Harrius Magnus]

I'd make the unfortunate point that as long as leftists control public schools, the factory of poorly educated voters will continue to hum along, ensuring more blood-letting, "class" warfare, and thus, more liberals in control. It is the perfect, evil, perpetual slavery machine.

[supercat]

In short, the folly of minimum wage increases can be summed up by a simple math problem that any public school student (we hope) could figure out: Will poor workers be better off with a job at a lower minimum wage, or without a job at a higher one?

The only way that minimum-wage laws increase anyone's wages is by eliminating from the marketplace people whose labor output is worth less. The decrease in the number of available workers relative to the number of jobs thus pushes up prices for those workers who remain in the marketplace.

Given a choice between having the government subsidize the pay of people who haven't developed skills and experience sufficient to earn a living, versus forcing such people to receive their entire income from welfare, I'd much prefer the former. Democrat politicians, however, prefer the latter.

[Harrius Magnus]

Most insightful comment I have read today. Thank you.