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JakilaTheHun (99.93)

High Unemployment Partly the Result of Minimum Wage Increase and Obamacare

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March 15, 2012 – Comments (35) | RELATED TICKERS: SPY

From Malthusian Nectar blog

The stubbornly high unemployment rate over the past few years has perplexed many.  Even while the stock market recovered, unemployment has stayed historically high.  We’ve seen the rate finally start to come down a little bit over the past few months, but it still remains at historically elevated levels.

While part of the reason for high unemployment is the (temporary) weakness in the construction sector, recent government attempts to “increase compensation” might be a bigger cause than most people believe.   For decades, many politicians in the US have fancied this idea that the Federal government can increase the standard of living by legislative fiat.  It sounds silly when one puts it in those terms, but there’s widespread belief that it occurs.

Minimum wage laws don’t actually increase “real wages.”  They merely prevent unskilled laborers from obtaining employment, thereby making them poorer.  Of course, in most cases, employers will enact the wage increase, but it normally comes with either (a) a price increase in the goods or services it sells, or (b) a reduction in the amount of labor employed.  There is the third possibility that an employer entirely shuts down because of the wage increases, which means that the employer needs a new job, and so do all the employees — a double-whammy if there ever were one!

Overall, the net effect of all this is that there’s no real economic gain.  Either the wage increase causes inflation, thereby harming working class individuals’ ability to purchase the things they need; or it causes job losses, thereby enriching some workers (those who get paid the artificially high wages) at the expense of others.

Strangely, I’ve heard very few people even consider that this might be one of the reasons why unemployment is so high.   If there are groups that suffer disproportionately from minimum wage laws, it’s teenagers and African-Americans.  And indeed, some statistics have shown a black teenage unemployment rate well above 40%!

While Congress and Obama convince themselves that legislative fiat can increase the standard of living, many lower income black teenagers are deprived the opportunity to obtain valuable skills that might allow them to eventually escape poverty.   As someone who grew up in a lower-middle income family in Appalachia, I can personally vouch for how being able to work at restaurants in my younger years helped me improve my financial position, independence, and maybe most importantly, it kept me out of trouble.  It’s tragic that we may be denying many people the opportunity to do this, in the naive belief that we’re “helping workers.”

A Massive Increase

So how dramatic is the increase?  In 2007, the minimum wage was set at $5.15 per hour.  If you factor in government mandated benefits, such as Social Security and Medicare, the adjusted minimum wage jumps up to about $5.93 per hour in 2007.

In the past few years, Congress has raised the minimum wage to $7.25 and enacted Obama’s healthcare plan, which mandates a “minimum health care benefit” to every full-time employee.   It’s difficult to determine the exact amount of this “minimum benefit”, but the Federal government will impose a $2,000 per employee fine on all companies with 50 or more full-time employees that do not offer adequate health care coverage.

If you take that figure, divide it by 52 (# of weeks in year), and then divide again by 40 (average work week), then the benefit is about $0.96 per hour.  Factor in Social Security and Medicare / Medicaid and the new adjusted minimum wage jumps up to $9.30 per hour.

In other words, in a period of about 4-5 years, the United States has raised its minimum wage for full-time employees by a whopping 57%!  No wonder unemployment is sky-high!

It’s also worth noting that the new healthcare law would seem to disincentivize firms from hiring full-time workers, as well as prevent smaller firms near 50 employees from hiring new people.

Of course, there’s also the other takeaway here.  If you’re currently making $7.25 per hour in wages, you would probably make closer to $9.30 per hour, if the Federal government did not mandate how your earnings were spent.

All in all, too many Americans have convinced themselves that minimum wage laws and Obamacare have increased the standard of living, in spite of some compelling evidence suggesting that it might be causing artificially high rates of unemployment.   Both of these measures are anti-poor in nature and promote arbitrary distribution of wealth.

We could probably nip our unemployment problems in the bud much more quickly if we eliminated minimum wage and repealed Obamacare. 

35 Comments – Post Your Own

#1) On March 15, 2012 at 4:15 PM, rfaramir (29.33) wrote:

I completely agree. 

"The minimum wage law prices many of the inexperienced, the young, the unskilled and the disadvantaged out of the labor market. (For example, the minimum wage provisions passed as part of another act in 1933 threw an estimated 500,000 blacks out of work)" from http://www.fee.org/articles/great-myths-of-the-great-depression/

See also http://mises.org/daily/3478 and http://mises.org/daily/3261

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#2) On March 16, 2012 at 10:55 AM, Option1307 (30.06) wrote:

You're gonna make lots of friends with this! ;)

Good piece. +1!

Really enjoying these thought provoking articles you are posting to your Malthusian blog, keep them coming.

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#3) On March 16, 2012 at 2:28 PM, ETFsRule (99.93) wrote:

"The stubbornly high unemployment rate over the past few years has perplexed many."

Keynesians have not been perplexed.

In previous recessions, we used increased gov't spending to help stimulate the economy, resulting in much faster recoveries. This time, we didn't. Our political climate and fearmongering over the national debt has made such policies impossible. The evidence can be seen here.

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#4) On March 16, 2012 at 2:37 PM, JakilaTheHun (99.93) wrote:

In previous recessions, we used increased gov't spending to help stimulate the economy, resulting in much faster recoveries. This time, we didn't. Our political climate and fearmongering over the national debt has made such policies impossible. The evidence can be seen here.

You do realize that we're running the largest government deficits (for several years now) since World War II?  I'm not sure how that qualifies as "austerity". 

The reason government "consumption and investment spending" is so low is because the Democrats (including Krugman) refuse to reform entitlement spending, which now dominates the entire budget.  In order to keep these unsustainable programs alive, they keep cutting other (more useful) parts of the government. 

Also, Paul Krugman supports increasing taxes, so that would make him less "Keynesian" than Reagan (ironically).  

 

Deficits do matter; but they matter in the sense that they create more money and increase inflation.

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#5) On March 16, 2012 at 2:53 PM, wolfman225 (63.83) wrote:

@ETFsRule--

 In previous recessions, we used increased gov't spending to help stimulate the economy, resulting in much faster recoveries. This time, we didn't.

^ Uh, what do you call TARP, bank bailouts, stimulus, QE 1&2, 99 weeks of extended unemployment benefits, etc.($5T+ addt'l federal debt in less than 4 yrs)?

 If increased gov't spending truly resulted in faster recoveries we'd have seen solid evidence of it long before now.  Not just unverifiable claims that it would have been much worse without the intervention, the claims that Obama's handling of the economy staved off a 2nd Great Depression, or the totally unquantifiable tally of "saved" jobs.

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#6) On March 16, 2012 at 3:10 PM, ETFsRule (99.93) wrote:

"You do realize that we're running the largest government deficits (for several years now) since World War II?"

Yes. Do you understand where those deficits came from?

"I'm not sure how that qualifies as "austerity"

Look at any objective, quantitative measure of changes in gov't spending and compare it to previous recessions. Then you will understand.

"The reason government "consumption and investment spending" is so low is because the Democrats (including Krugman) refuse to reform entitlement spending, which now dominates the entire budget."

No, the reason "consumption and investment spending" is low is because we aren't spending on anything that could reasonable be considered stimulus: infrastructure programs, etc. The very things Obama promised to invest in when he campaigned for his first term.

"In order to keep these unsustainable programs alive, they keep cutting other (more useful) parts of the government.  "

I agree, this is probably true. Also; this statement doesn't contradict anything that I said.

"Also, Paul Krugman supports increasing taxes, so that would make him less "Keynesian" than Reagan (ironically)."

How so? Reagan increased spending AND increased taxes on many occasions. I consider both of these people to be strongly Keynesian, although obviously Krugman fits the description a bit more closely.

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#7) On March 16, 2012 at 4:07 PM, ETFsRule (99.93) wrote:

"^ Uh, what do you call TARP, bank bailouts, stimulus, QE 1&2, 99 weeks of extended unemployment benefits, etc.($5T+ addt'l federal debt in less than 4 yrs)?"

Despite all this stuff, goverment spending has not increased nearly as much as in previous recessions. These programs weren't as large as you seem to think, and they were largely offset by spending reductions in other areas (ie: look at government employment). The numbers don't lie.

"($5T+ addt'l federal debt in less than 4 yrs)?" 

I never said that the debt didn't increase. That is a related, but different, issue. I am talking about the effects of gov't spending.

" If increased gov't spending truly resulted in faster recoveries we'd have seen solid evidence of it long before now.  Not just unverifiable claims that it would have been much worse without the intervention, the claims that Obama's handling of the economy staved off a 2nd Great Depression, or the totally unquantifiable tally of "saved" jobs."

I'm sure you realize that there is no such thing as a perfectly controlled experiment in economics. Still, there is more than enough evidence to support Keynesianism - for example, in the graphs that I linked to earlier. Or the fact that, in the current downturn, the countries that increased their gov't spending have universally had stronger recoveries than the countries which cut their gov't spending.

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#8) On March 16, 2012 at 4:28 PM, wolfman225 (63.83) wrote:

A "recovery" funded by increased government spending is nothing but an accounting trick.  I realize that common sense isn't used much in the field of macro economics and government, but I fail to see how government can help an economy based on private enterprise recover by taking resources away from it. 

Government has no resources of it's own.  All it can do is appropriate resources from the private sector for re-distribution according to where it decides they should go.  Government doesn't create wealth, it simply moves it around (a process all to often dictated by political favoritism and payback, not sound monetary policies).

As I understand from a very brief reading of Keynes, his theory of economics is that government increases spending in lean times to help lessen the effects of a recession, then reduces spending when times are good, allowing for expansion of the private sector and the generation of increased opportunity for individuals and businesses to create wealth.  On the surface, this sounds like a reasonable idea.  On the surface.  The problem is that government seldom, if ever, voluntarily returns power it has assumed back to the people once the "emergency" is over.

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#9) On March 16, 2012 at 4:30 PM, DJDynamicNC (< 20) wrote:

It is interesting that the empirical example you provided just so happens to include the biggest economic crash since the Great Depression. Quite the coincidence.

I believe the phrase "correlation does not equal causation" is worth bandying about in these situations.

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#10) On March 16, 2012 at 4:32 PM, DJDynamicNC (< 20) wrote:

"government increases spending in lean times to help lessen the effects of a recession, then reduces spending when times are good, allowing for expansion of the private sector and the generation of increased opportunity for individuals and businesses to create wealth."

That's the goal...

"The problem is that government seldom, if ever, voluntarily returns power it has assumed back to the people once the "emergency" is over."

And that is, indeed, the problem.

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#11) On March 16, 2012 at 6:20 PM, ETFsRule (99.93) wrote:

"On the surface, this sounds like a reasonable idea. On the surface."

You're saying that, in theory, Keynes' ideas sound ok to you if they were followed correctly?

"The problem is that government seldom, if ever, voluntarily returns power it has assumed back to the people once the "emergency" is over."

It's not a question of power, it's a question of fiscal responsibility.

From the non-Keynesian side, We have seen time and time again that neoconservatives have mindlessly run up massive levels of debt by running deficits during good times.

Keynesians have not followed this path. Keynesians have used very brief periods of increased spending during recessions, coupled with fiscal tightening during good times, to make sure we never ran up a high level of debt. That's not a theory, that is reality. Look at the periods when Keynesians were in office (from WW2 until the mid-to-late 70's, plus the Clinton presidency). These were the most fiscally responsible presidents that we have ever had.

DJDynamicNC (52.86) wrote:

"It is interesting that the empirical example you provided just so happens to include the biggest economic crash since the Great Depression. Quite the coincidence."

Was this directed towards me? I don't understand the point you're trying to make here.

Either government spending helps countries recover faster, or it doesn't. That's the question.

Is there a better scenario to look at than a large-scale, global economic crisis?

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#12) On March 16, 2012 at 6:49 PM, devoish (96.47) wrote:

"government increases spending in lean times to help lessen the effects of a recession, then reduces spending when times are good, allowing for expansion of the private sector and the generation of increased opportunity for individuals and businesses to create wealth."  - wolfman225

That's the goal... djdynamic

"The problem is that government seldom, if ever, voluntarily returns power it has assumed back to the people once the "emergency" is over." - wolfman225

And that is, indeed, the problem". - djdynamic

Government spending and government power are two differnet things.

Try the second sentence like this " "The problem is that government seldom, if ever, voluntarily reduces spending it has assumed back to the people once the "emergency" is over."

Then remember that in a Democracy we are the Government and very few rich people are willing to surrender the benefits that accrue to them through Governmnent spending. Poor people have surrendered the benefit of unions and that is a big reason they have not shared in the productivity gains they have earned. Now poor people are arguing for the surrender of their social security and medicare.

Despite the complete foolishness of statements like this "Government has no resources of it's own."  it is actually the reverse that is true. Government can marshall the forces of this entire Nation to fund SSI or Medicare or renewable energy or to pump out its oil reserves or keep them in the ground. You get permission from all of us through Government to pump our oil or use our water or pollute our air.

Note to Jakila: You have written more pure junk. $5.00 an hour, $10.00/hour or $25.00/hour. The floor still needs to be swept, the burger still need flipping, and the lawn still needs mowing. No matter what minimum wage is, all this work still gets done. Mitt Romney, Lloyd Blankfein et all can take a pay cut, or sweep their own floor and flip their own burgers, and pick their own tomatos if they don't want to pay a living wage.

Best wishes,

Steven 

 

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#13) On March 16, 2012 at 7:44 PM, JakilaTheHun (99.93) wrote:

Devoish,

You view the world as a battle between "good" and "evil" (sort of like George W. Bush.) You are offended when anyone challenges your ideas.  And you lash out at anyone who disagrees with you.

What you have never done is promote civil discourse.  Or provide logical argument to support your views.  Or treat those who you oppose as human beings that simply disagree with you. 

Religious zealots are offended by the idea of evolution.  They want to believe that humans were created superior to all other creatures via a higher power.  Yet, science says we evolved from other species. 

You are offended by the idea that poverty can't be solved via government fiat.  You want to believe a magic wand can be waived to fix it; that you are righteous and those who oppose you are "evil." 

Poverty can't be fixed by magic and you are no more righteous that those you oppose.  Economics is a science and you can't magically fix the problems of poverty with a few laws. 

You can exacerbate it, however, by depriving the poor the freedom to contract their services out at a market rate.  And depriving them the freedom to purchase goods and services that are most beneficial to them.   

No reason to argue any more, but I have found your dogmatic views of the world and insulting style as not terribly productive.  

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#14) On March 16, 2012 at 7:53 PM, ETFsRule (99.93) wrote:

Changes in gov't employment during the early 80's recession and recovery.

Changes in gov't employment during the current recession and recovery.

Gee, I wonder if this affects the slow recovery in overall unemployment...

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#15) On March 16, 2012 at 8:01 PM, JakilaTheHun (99.93) wrote:

ETFsRule,

I agree with you on government employment; but that doesn't really change my criticism.  The reason why government employment is shrinking is largely because the Democratic Party is seeking to maintain three completely unsustainable programs:

(1) Social Security

(2) Medicare / Medicaid

(3) Public Employee Defined Benefit Pension Plans

But the Democrats have set these three things as "off limits" in spite of the fact that they seem to be growing at absurd rates.  So, in order to lower the budget, they cut government employees instead. 

I've talked about this trend for a few years now and how it's unbeneficial. But this doesn't really have all that much to do with Obamacare and minimum wage. 

And in spite of attempts to spin it as "austerity"; it's not really.  "Austerity" would involve not running major government deficits.  This is just dumb spending.  But dumb government spending is the norm and that's the problem. 

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#16) On March 16, 2012 at 8:09 PM, JakilaTheHun (99.93) wrote:

In fact, you could say the reason I've shifted away from Keynesian economics on spending issues is precisely this reason.  For years, I lobbied the same criticism --- that if the government merely used the money 'in the right ways', it would work.

But the government, by its nature, very rarely uses money in the right ways.  It's simply not incentivized to spend wisely and invest in value-adding projects. 

Government money is "free money" for politicians; if they make poor investments, they don't lose money. If they reward their friends, cronies, or even themselves (as they often do indirectly by boosting the value of their own real estate holdings), they directly benefit.

So even while I largely agree with Keynes in the abstract, I'd argue his ideas on spending very rarely work in the real world, precisely because this tendency for government to be misincentivized. 

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#17) On March 16, 2012 at 8:10 PM, ETFsRule (99.93) wrote:

I have done a similar 5-year graph for each recession dating back to 1960. Every single time, there was a significant increase in government employment following the recession (sometimes as high as a 20% increase after 5 years!).

The current recession is the only exception, with government employment lower than at the start of the recession.

1960-1965

1969-1974

1973-1978

1981-1986

1990-1995

2001-2006

2007-2012

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#18) On March 16, 2012 at 8:10 PM, ETFsRule (99.93) wrote:

.

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#19) On March 16, 2012 at 8:38 PM, ETFsRule (99.93) wrote:

"But the Democrats have set these three things as "off limits" in spite of the fact that they seem to be growing at absurd rates. So, in order to lower the budget, they cut government employees instead."

In terms of the budget, the issue is the GOP and "Starve the Beast". It's really not about stupidity, or unsustainable spending. The GOP simply ran up the debt on purpose, because that was their plan. It started with Reagan and the neocons.

When Keynesians were in charge, there was never any problem with the federal debt.

Regardless, I'm not an advocate of "big government", and I have no problem with reducing some of these programs. I am just advocating short-term stimulus - which I call "Keynesianism" out of convenience (although I realize I am oversimplifying things a bit).

Short-term stimulus seems to have a 100% success rate, as far as I have seen (compared with lack of stimulus). Cutting spending during a downturn has always made the situation worse.

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#20) On March 16, 2012 at 8:38 PM, ETFsRule (99.93) wrote:

. (posting periods so my other posts will post)

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#21) On March 16, 2012 at 8:56 PM, wolfman225 (63.83) wrote:

@Devoish--Government spending and government power are two differnet things.

They are precisely the same thing.  The greater the government's control over the country's resources, the greater the power.  Put another way, the more money the government can confiscate from the private sector for the purpose of redistribution, the more influence it wields, while at the same time it weakens to some extent the ability of the private sector to resist government control (ie, power)

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#22) On March 16, 2012 at 8:58 PM, JakilaTheHun (99.93) wrote:

In terms of the budget, the issue is the GOP and "Starve the Beast". It's really not about stupidity, or unsustainable spending. The GOP simply ran up the debt on purpose, because that was their plan. It started with Reagan and the neocons.

"Starve the beast" has actually contributed more to American growth in the past few decades than anything else.  The tech boom was directly a result of the '80s tax reforms, which increased the amount of venture capital in the system.  It shows the difference between how the government spends money (military, Social Security, Medicare) and how the private sector spends the money (investment in business). 

The reasoning that 'lowering taxes' is to blame for wasteful spending is illogical, but it's becoming a common Democratic refrain. That the government never actually misspends --- all problems are related to the fact that taxes aren't higher.  And the solution is to constantly raise taxes.

Yet, this solution goes against the core of Keynesian economic reasoning.  The entire idea behind a Keynesian stimulus is to pump more money back into the economy, so as to jump-start the private sector.  Most modern neo-Keynesians don't seem to share Keynes' original rationale:  they view government spending as inherently superior to private investment.

So people like Krugman end up advocating absurdist things under Keynesian reasoning such as raising taxses AND increasing spending.  In this sense, many neo-Keynesians have more in common with socialists than with Keynes.  You can't claim to be 'jump-starting' the private sector by taxing it more and depriving it of more cash. 

So blaming the Reagan tax cuts (which, btw, didn't actually reduce government revenues meaningfully) seems ridiculous.  Certainly, Reagan's wasteful military spending was not beneficial; nor was Bush's.  But the Democrats have advocated the same policies. The only reason it worked out during the Clinton Administration was because the tech boom created so much tax revenues, that it didn't matter. 

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#23) On March 16, 2012 at 9:29 PM, ETFsRule (99.93) wrote:

""Starve the beast" has actually contributed more to American growth in the past few decades than anything else. The tech boom was directly a result of the '80s tax reforms, which increased the amount of venture capital in the system. It shows the difference between how the government spends money (military, Social Security, Medicare) and how the private sector spends the money (investment in business)."

Hmmm, then why was our economic growth so high in the 50's and 60's (and the Clinton presidency), when taxes were higher? The low taxes/high growth doesn't seem to be a very compelling correlation.

"So blaming the Reagan tax cuts (which, btw, didn't actually reduce government revenues meaningfully) seems ridiculous. Certainly, Reagan's wasteful military spending was not beneficial; nor was Bush's. But the Democrats have advocated the same policies. The only reason it worked out during the Clinton Administration was because the tech boom created so much tax revenues, that it didn't matter. "

I didn't merely say that Clinton was more fiscally responsible than the GOP. I said that Keynesian presidents are ALWAYS more fiscally responsible than the GOP.

The fact is, every democratic president of the last 60 years has decreased the national debt/gdp ratio while they were in office (except for the non-Keynesian, Obama). Every republican president of the last 60 years has increased it.

You don't have to blame it solely on tax cuts, but you do have to explain it somehow. So please explain - is it just a coincidence that Reagan, Bush 1, and Bush 2 all racked up massive debt during their presidencies?

You used the tech boom to explain Clinton's handling of the deficit... but then, why didn't these republican presidents also benefit from the tech boom?

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#24) On March 16, 2012 at 9:30 PM, ETFsRule (99.93) wrote:

.

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#25) On March 16, 2012 at 10:56 PM, devoish (96.47) wrote:

Jakila,

Austrian economics supporters have the almost unique ability to look at something and say it is not there. 

You are the one who earlier posted an article that said a lack of zoning prevented refineries from being next to neighborhoods. This despite the presence of refineries next to neighborhoods in your example of an unzoned city.

You are disrespecting us with blatant untruths.

 Minimum wage laws don’t actually increase “real wages.”  They merely prevent unskilled laborers from obtaining employment, thereby making them poorer. 

This is blatantly untrue also. This Country has had minimum wage laws when unemployment was 4%, 5% 7% and 10%. Yemen has no minimum wage and 35% unemployment. Qatar by contrast has no minimum wage and less than 1% unemployment.

Minimum wage laws do not prevent employment as much as they prevent slavery and abuse. As minimum wage increases, at what point does a higher minimum wage cause increased employment by creating more paying customers? Obviously a low minimum wage does less to increase employment.

 Government money is "free money" for politicians; if they make poor investments, they don't lose money. If they reward their friends, cronies, or even themselves (as they often do indirectly by boosting the value of their own real estate holdings), they directly benefit. - Jakila

Cappng income would solve that, whether unions or progressive taxation were used. 

Wolfman225.

They are not precisely the same thing.  

 Put another way, the more money the government can confiscate from the private sector for the purpose of redistribution, the more influence it wields, while at the same time it weakens to some extent the ability of the private sector to resist government control (ie, power)

 Put another way, the more money the private sector can confiscate from the Americans for the purpose of redistribution to themselves, the more influence it wields, while at the same time it weakens to some extent the ability of the Government to resist financial corruption (ie, power)

Another way to look at your arguments is as though we are all American. 

  Put another way, the more money the Americans can confiscate from the Americans for the purpose of redistribution, the more influence Americans wield, while at the same time it weakens to some extent the ability of the Americans to resist American control (ie, power).

Your argument is a catchy slogan but useless in a Democracy where we are all the Government.

Voting rights were very important to our founding fathers. Some founding Americans wished to wield greater power over other founding Americans by denying voting rights to some. Other Americans wished to reduce their own power by distributing voting rights among everyone. One man one vote.

If money is power, equal pay is Democracy. Fortunately, leadership is power, money influences power. But it is not precisely the same thing.

Best wishes,

Steven 

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#26) On March 17, 2012 at 8:57 AM, wolfman225 (63.83) wrote:

 "Put another way, the more money the private sector can confiscate from the Americans for the purpose of redistribution to themselves......"

OK, Steven.  I'll try one more time.  I know that your ideological view of the world and the evil that is capitalism blinds you to other points of view, but, here goes.....

The private sector you seem to hate so much doesn't "confiscate".  In a free market system, private enterprise exists soley by providing a wanted/needed good/service at a price point that the customer sees as a fair exchange (value for value).

Government, on the other hand, feels no obligation to produce value, since it can (and does) force (confiscate from) the American people, through taxation and the levying of various fees, to buy it's "products".

I realize that you have the religious conviction (religious=absolute belief in the absence of objective evidence) that government is good and that more of it would be better, but there is nothing really wrong with individuals seeking to increase their own standard of living and a secure future for themselves and their family via private enterprise and the profit motive.

Americans aren't inherently different that other people.  We don't have some special genes in our DNA.  What has made the American Experiment such a success in a comparatively short time span is the way our country and out government has been set up to give pre-eminence to individual rights, responsibilities, and opportunity.  No other country provides it's individual citizens with the opportunities we enjoy. 

 You see government as required to prevent people from abusing each other economically?  I see government as a necessity, like fire.  Valuable if kept in check, devastating if not.  Minimal regulation is a good thing.  We all need a set of consistent rules and guidelines for our economic contests but government always stifles activity to a certain extent; too much government smothers the people's ability (and eventually, the urge) to provide for themselves and that, my friend, is a cruel, even evil thing to do to a free people.

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#27) On March 17, 2012 at 11:32 AM, JakilaTheHun (99.93) wrote:

Hmmm, then why was our economic growth so high in the 50's and 60's (and the Clinton presidency), when taxes were higher? The low taxes/high growth doesn't seem to be a very compelling correlation.

This myth is parroted around quite a bit, but there's not much substance to it.  In American history, taxes were highest in World War I and during the Great Depression. 

We lowered taxes in the early '20s, and then Herbert Hoover raised them back closer to WWI levels during the Great Depression.  Taxes were cut by a Republican Congress after World War II, and by President Kennedy in the 1960's. Then, finally, by Reagan in the 1980's.

The "taxes were high" in the '50s argument has never held muster, becuase it conveniently ignores the fact that taxes were *EVEN HIGHER* most of the preceeding two decades. 

 

I didn't merely say that Clinton was more fiscally responsible than the GOP. I said that Keynesian presidents are ALWAYS more fiscally responsible than the GOP.

The fact is, every democratic president of the last 60 years has decreased the national debt/gdp ratio while they were in office (except for the non-Keynesian, Obama). Every republican president of the last 60 years has increased it.

You're getting a bit hackish.  In fact, you seem to be so blinded by your ideology here, that you conveniently sidesteping the fact that debt-to-GDP fell the most during the Eisenhower Administration.  It also fell during Nixon's Administration. In fact, debt-to-GDP was on a downward trajectory from about 1946 to 1980.  But remember --- that's not all on the shoulders of policymakers. 

Reagan was a Keynesian.   And more than any other President since FDR, he enacted Keynesian policies.  In order to stimulate the economy, he initiated a series of tax cuts and deficit spending (mostly on the military).  Yet, debt-to-GDP rose the most during his Administration (at least before Obama, who I agree is not a Keynesian --- but neither is Krugman in any realistic sense.)

I think you're trying to conveniently paint a rosy picture for your own ideological views, rather than trying to discover reality.  I'm not a Democrat; I'm not a Republican; and while I agree with a lot of Keynes' work, I'm not a Keynesian. 


I'm not even really sure what your argument has to do with my blog, as I made no macroeconomic arguments about economic recovery.  In fact, contrary to your contention, the economy has 'recovered' --- it's just that unemployment is still high in spite of this.  And the reason unemployment is still high is partly the result of the factors I mention above. 

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#28) On March 17, 2012 at 1:19 PM, JakilaTheHun (99.93) wrote:

Austrian economics supporters have the almost unique ability to look at something and say it is not there.

I'm not an "Austrian economics supporter."  And even if I were, it would be completely irrelevant to the arguments made. As I already said, you're trying to paint the world as being divided between "good" and "evil".  Since you disagree with Austrian economics, you paint it as "evil", rather than focus on the underlying logic and reasoning provided.


This is blatantly untrue also. This Country has had minimum wage laws when unemployment was 4%, 5% 7% and 10%. Yemen has no minimum wage and 35% unemployment. Qatar by contrast has no minimum wage and less than 1% unemployment.

Under your reasoning, there's no difference between setting a minimum wage of 1 cent and a minimum wage of $1,000,000/hour.  They are exactly the same, according to your statement above.

Yes, the country has had minimum wage laws when unemployment was 4%, 5%, and 10%.  There's also such a thing as "real Dollars", and the minimum wage has tended to decline in "real Dollars"over time.  

In fact, in real Dollars, minimum wage hit its highest level in the late '60s and early '70s and stayed high all the way through the mid '80s:

http://en.wikipedia.org/wiki/File:History_of_US_federal_minimum_wage_increases.svg

During the late '80s and early '90s, it finally started to fall back towards reasonable levels.  Unemployment has tended to be highest when the real minimum wage has been the highest.   No big surprise. In the past few years, the real minimum wage has skyrocketed, while the unemployment rate has also risen.

Minimum wage does not "raise wages."  It prohibits low-skilled laborers from contracting for employment at wages that others are willing to pay.  No one has an unlimited willingness to pay.  Minimum wage is an anti-poor law. 

 

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#29) On March 17, 2012 at 7:13 PM, devoish (96.47) wrote:

Jakila,

I would accuse you of being blinded by "ideology". Blinded by your ideology to the real condition of neighborhoods so you can argue against zoning. Blinded by your ideology to the different impacts of lowering taxes from different levels so you can argue for endless tax cuts. Blinded by your ideology to the different inpacts of different minimum wage levels in your original post, treating them all as the same and then saying it is wrong of me for treating levels from $1.00 to $10,000. as the same.

Wolfman225

Give up already and stop trying to convince me of what is not true. Our Government - which is all of us - agreed among most, persuaded some and forced others to pay to build the framework of roads and harbors, weather satellites, and water systems, and damns and docks, 110v electric and GPS satellites, that made it possible to have Trimble navigation, and Google maps and the time and effort they save us that we can turn to better things. It is only since the ideology that "government is the problem" has been sold by Libertarians and Austrian economics as if Government is the only problem, that America is becoming the servant of wealth that the "one man one vote" of Democratic Government was designed to prevent, and marked the beginning of the end for the Government policies that allowed ample room for great wealth and the "middle class" platform from which opportunity was launched.

A launching pad with slavery outlawed, and without the conquest of new lands. Not perfect, but better than any small government or unregulated free market has every done. But not as well as some better regulated markets have done. 

Best wishes,

Steven 

 

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#30) On March 17, 2012 at 8:31 PM, wolfman225 (63.83) wrote:

"It is only since the ideology that "government is the problem" has been sold by Libertarians and Austrian economics as if Government is the only problem,"

I haven't heard anyone claim that "Government is the only problem", only the biggest and most intractable of the many we face. 

OK, I give up.  It's clear that you are impervious to alternative points of view.  I'll stick with my occasional banter with DJ.  While we don't hold the same political views, we can at least engage in a civil exchange of ideas, acknowledging each other's valid points while offering constructive criticisms where we disagree, and give each other credit for holding honestly thought out opinions, as opposed to accusations of simply vomiting out what we've been indoctrinated with, each suspecting the other of nefarious motives.

One last thing, we are not governed by a Democratic Government.  We were set up as a Representative Republic.  Quite a different thing.  A true "democracy" is nothing more than mob rule, where those who hold a simple majority can run riot over the rest.  Say goodbye to minority rights.

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#31) On March 18, 2012 at 8:39 AM, devoish (96.47) wrote:

Wolfmann225, 

I haven't heard anyone claim that "Government is the only problem", only the biggest and most intractable of the many we face.

CO2 induced global warming is the biggest and most intractable of the problems we face. 

Austrian economics is a marketing tool used to blame every problem on Government. From zoning, to traffic, to poverty.

David in Qatar taught me that, when he argued against universal health care because it causes market distortions, yet holds the Gov't provided healthcare opf Qatar up as a nice place to live.

David in Qatar taught me that when he supported the "civil" discussion of the Tea Party at healthcare debates until the day they won elections when he denied them like Judas, so he could continue to campaign against democratic Government of the people, by the people.

Jakila reminded me austrian economic theory is a marketing campaign against government, when he declared Houston a city with no zoning, and declared that it was no zoning laws which prevented refineries from being next to neighborhoods and prevented junkyards from being next to residences. Despite the refineries next to neighborhoods and the junkyards next to residences that do actually exist there even moreso than in places with zoning.

Lying to us is not Civil discourse and you need not pretend it is. 

Give up already.

Best wishes,

Steven

 

 

 

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#32) On March 18, 2012 at 7:18 PM, ETFsRule (99.93) wrote:

"This myth is parroted around quite a bit, but there's not much substance to it. In American history, taxes were highest in World War I and during the Great Depression.

We lowered taxes in the early '20s, and then Herbert Hoover raised them back closer to WWI levels during the Great Depression. Taxes were cut by a Republican Congress after World War II, and by President Kennedy in the 1960's. Then, finally, by Reagan in the 1980's.

The "taxes were high" in the '50s argument has never held muster, becuase it conveniently ignores the fact that taxes were *EVEN HIGHER* most of the preceeding two decades."

You're changing the subject. Nothing that I said was a myth.

All I said was that growth was higher in the 50's and 60's, compared to the 80's. That statement is 100% true. I made this comparision because you claimed that the economic growth of the 80's was the result of tax cuts.

If the growth of the 80's was caused by tax cuts, then how could growth have been even higher in the 50's and 60's?

"You're getting a bit hackish. In fact, you seem to be so blinded by your ideology here, that you conveniently sidesteping the fact that debt-to-GDP fell the most during the Eisenhower Administration. It also fell during Nixon's Administration. In fact, debt-to-GDP was on a downward trajectory from about 1946 to 1980."

Sigh. Yes, debt was indeed on a downward trajectory during this time. That's because Keynesianism was being followed, by both parties, during this period of time.

Debt will always decrease, if Keynesian policies are followed for any reasonably long period of time.

"Reagan was a Keynesian. And more than any other President since FDR, he enacted Keynesian policies. In order to stimulate the economy, he initiated a series of tax cuts and deficit spending (mostly on the military). Yet, debt-to-GDP rose the most during his Administration (at least before Obama, who I agree is not a Keynesian --- but neither is Krugman in any realistic sense.)"

Reagan was a half-Keynesian. Tax cuts are a monetary policy, therefore they are not Keynesian in nature. Keynes advocated using fiscal policy to stimulate the economy, not monetary policy.

As you said, Reagan continued to increase the debt even after the economy was already growing. Therefore he wasn't really a Keynesian. His presidency marks the time when Keynesianism was abandoned. He paved the way for the neocons who came later and continued to increase the debt for no good reason.

"I think you're trying to conveniently paint a rosy picture for your own ideological views, rather than trying to discover reality."

I have no ideology. I was citing facts - unlike you, who baselessly tried to argue that the Bush and Reagan tax cuts somehow improved the economy.

"I'm not a Democrat; I'm not a Republican;"

Neither am I. I am an Independant for life.

"I'm not even really sure what your argument has to do with my blog, as I made no macroeconomic arguments about economic recovery. In fact, contrary to your contention, the economy has 'recovered' --- it's just that unemployment is still high in spite of this. And the reason unemployment is still high is partly the result of the factors I mention above.  "

And I'm not sure why you brought up all this nonsense about tax cuts and deficits.

This blog seemed to be addressing the question of why unemployment is still so high. I explained the correct answer to you, and you seemed to agree with me, before going off on various tangents.

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#33) On March 24, 2012 at 3:05 PM, valuemoney (99.99) wrote:

ETFsRule.........well said!

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#34) On April 23, 2012 at 11:32 AM, Quantemonics (98.74) wrote:

Of course the minimum wage is WAY TOO LOW, if gas spikes to $5 and $6 a gallon in 2012 on the coming attack of Iran's nuclear sites.

Not many people can "afford" to work a part-time, minimum wage job they must drive to, if the cost of running the car is greater than the pay rate received for 3-5 hours of effort.  A spike in welfare payouts and unemployment is coming from the skyrocketing rise in oil about to begin.

"Minimum wage" rates were considerably higher in reality after adjusting for accurate inflation in the 1960s, when JFK started such.

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#35) On May 31, 2012 at 5:24 PM, TigerPack1 (88.76) wrote:

http://www.zerohedge.com/news/guest-post-income-disparity-solution-restore-minimum-wage-1969-levels

I wish it was this easy!

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