The Heavy Hand of Government

| November 17 2013
Mike Kapic

By Mike Kapic

The Administration, the alphabet bureaucracy, and their liberal supporters continue to mislead and misdirect the American public with inept and misguided policies. Policies that inch us closer to the European style of a sectarian social society. Indeed, we’ve allowed our government to invigorate a welfare system that not only includes the poor, but has crawled into the middle class, and encompasses many in the Big Business arena (e.g., corporate farms). And it’s weakening our basic foundation.

The cancer is widespread across our society. Misinformation, such as “freebies,” are being promoted in healthcare and other programs. The liberals are promoting Americans as victims of the 1% and their greedy corporations. There is a threat of ‘dark money’ that seems to be at the root of America’s problems. Government advertises that assistance is better than working for a living, that amnesty is the only fair policy for people who have broken the law. That Christian values are unfair to the peoples of the world, that climate change should be solved by the U.S., and that only government can solve all of our problems.

A small and gullible electorate has bought into some of the left’s rhetoric, led by the liberal money machine that has been very smart and successful in selling its snake oil. Unfortunately, an uneducated and indifferent portion of the populations are accepting the ideology as gospel. Liberals are using their own naiveté to pitch false claims in the form of subliminal advertising as it has worked for Madison Avenue.

Part of the problem rests in the core thinking of the liberal mind and its ability to sell a corrupt idea, like Rep. Pelosi reminded us that the ACA “had to pass in order to see what’s in it.” Nobody is that stup . . . never mind. Where’s Darwin when we need him?

That left wing mental weakness extends to the field of economics. Which is a real puzzle to me since so many Democrats, like Pelosi, Hillary, and Soros, are millionaires and billionaires. How did they get rich on so much economic ignorance?

Take for example, the insistence that only government can produce economic output. The lefts argument, although weak, goes to the core of the liberal heart … and only that far. It never advances to the brain. If, in your heart, you believe there should be a minimum wage, for example, that is set at some arbitrary number by a central planner (a bureaucratic clerk without a corner window who punches in 9 to 5), then you missed Econ 101. Life is hard and if we allow the really hard stuff to stop part way to full analysis, we are doing ourselves and our fellow countrymen a disservice. Also, if we ignore the historical facts of previous policies, we’re doomed to repeat their failures.

The history of economics is some 5000 years old, originating in the Middle East, yet it is probably one of the most complex concepts in the existence of mankind because it involves many humans who don’t think alike, making self-interested decisions that profit themselves, and as it turns out, benefits everyone else. Everyone!

Liberals have to understand that in this millennias old system, consumers are at the top of the food chain, making decisions that affect which and how many of something will be made by producers. Consumers demand something, producers supply the goods and services, and where the two curves meet is the sweet spot, called the price.

If a third party plays with any of the components of those three elements, our world becomes skewed. By example, let’s take raising the minimum wage. It’s a fair argument to say that everyone should be able to earn a ‘living wage’, whatever that is, but shouldn’t we be allowed to sell our labor at the price we negotiate? If a third party, a union, the government, a court, makes the decision for us, and we accept, we’ve given up our freedom, our liberty to control our own lives.

Next, what should the minimum wage be? It’s at $7.25 today. What about $9.56 an hour? That’s an arbitrary number. Why not $35 or $125 an hour? OK, so we have to develop some rules for the central planner to guide her in the decision process. That will probably include another regulation that’s bound to take more tax money. Should we compensate for that tax by increasing the minimum wage an equal amount? Just asking.

Let’s assume the government chooses $9.00 per hour and say a shoe maker, Tom, is working at a shoe manufacturer for $8.00 an hour, a wage he and his employer had agreed to. His employer, Acme Shoes, had previously set the price for a pair of shoes that will cover all of Acme’s costs plus a small profit. He knows that price works because Acme’s been selling these shoes for several years now, and sales have been good.

But now Acme Shoes is told to pay Tom a dollar an hour more for his work. Will Acme receive another dollar’s value for Toms work? No, because the free market didn’t demand it, a third party did. In order to stay in business, Acme will have to increase the price of the shoes to cover the new labor cost. What is likely to happen at the shoe store? In our liberal heart, we want people to come in and buy the same shoes but at the higher price. Will they? Now however, it’s up to the consumer to decide. It depends if the buyer likes the shoes at the higher price. That decision will affect demand.

If the increase in price results in decreasing demand, Acme will have to make a decision in an effort to stay in business. With a reduced demand in shoe production from the consumer, he’ll find he has too much labor for the reduced output and will probably have to cut costs. With fewer shoe orders, Tom or some of his coworkers will lose their jobs because of the government mandated minimum wage.

Tom lost more than his job and income. More importantly, he lost his liberty to freely sell his labor at an agreed upon price determined by himself and his employer. Regardless of what that price was: $2 an hour or $100 an hour. Tom lost.

This is true of states that have or raise minimum wages. Government’s minimum wage policies hurt those low on the lower income ladder, the very ones it’s supposed to help. Minimum wages do help organized labor, unions, which use the artificial wage to leverage their member’s wages up, upping their own wages. This can also affect inflation and the general health of the economy. Minimum wages force those in the bottom income rungs into government dependence in a slow or weak economy, resulting in higher unemployment for the country. Or the newly unemployed have the option of going into a non-regulated field, such as crime.

Low starting wages are accepted by most people, 97% of all entry level, into low skill jobs, as a ladder to higher wages through on-the-job training and gaining experience like working with others, being on time, finishing the job, etc. When the government removes the bottom rungs of the wage ladder, the unintended consequence is to keep the lower wage earners from moving up the ladder and into the middleclass and this compound the problem by adding to the welfare rolls.

As good as their hearts are and as hard as they try, the liberal mind has yet to wrap itself around that natural human concept. Evidence from around the world shows that fixing wages forces low-skill workers out of the job market. Liberal politicians and bureaucrats in the Department of Labor are now trying to broaden the minimum wage to include domestic worker, folks who come in and clean homes for a living. The President wants more wage constraints on an economy that’s being hurt by similar dysfunctional policies.

If history has anything to say about it, entry wage employees, and now domestic workers, should be cautious of the heavy hand of government.

 

***

“A more insidious effect of minimum wages, as racists everywhere know, is that it lowers discrimination costs. Say a white and a black were equally productive and an employer prefers white workers to black workers. Since he has to pay $9 an hour no matter whom he hires, the cost of discriminating against the black worker is zero. But if it were legal for the black worker to offer a lower price, there’d be a cost to discrimination.” Walter Williams

3 comments
Lisa
Lisa

Agree.  Now...how do we convince the voters who continue to place inept politicians in the powerful position that is destroying the real American dream instead of serving the people.

MeJim2
MeJim2

@Lisa I agree as well.  However, I also believe there should exist a minimum wage standard that would ensure individuals were actually paid a fare day's wage for a fare day's work.  We both know there are many employers who wouldn't blink an eye at working us all day for nothing.  That's one of the reasons why we've lost so much our industry footprint in America.  

WesternFreePress
WesternFreePress moderator

@MeJim2 Minimum wage laws create unemployment among the people who can least afford it. And I do not believe there are employers who would pay nothing for work, and they would not be in business long if they did. This is not the 19th century or the early industrial revolution, when modern economy was just being born. This is 2013; there is far too much competition for competent labor. No one can pay nothing, because the competent labor will go to the people who pay something, and to the people who pay better, and so on.

Evidence is also found in the decline of the private labor union. Private labor union membership is down to about 7%. Unions long tried to convince us that without them, work would quickly turn into a Dickensian nightmare . . . but lo and behold, 93% of the private sector is non-union and it is not a Dickensian nightmare at all. 

It is an error to make economic policy based on a picture of what economies looked like in the Industrial Revolution, when really they were just being born.