Monthly Archives: December 2013

Four things to read about Ryan-Murray

1. A simple summary. This is a good start before reading the opinion pieces.

2. Congressman Paul Ryan at National Review.

3. Megan McArdle says it is a better deal for Republicans than Democrats. I agree.

4. Kevin Hassett‘s 5 reasons a Republican would support this deal:

First, the deal is microscopic, so small as to amount to economic rounding error. Second, it reduces government pensions by changing an indexing formula, a method that might have a better chance of sticking than more straightforward reductions, making these future cuts more certain than most. And if the new indexing continues forever, then spending will drop in the long run by much more than it will increase over the next two years. Third, if House Republicans pass this, it will reduce uncertainty and help the economy. Fourth (though this weakens the previous point some), the deal appears not to lift the debt limit, so they can play that game again if they want to. Finally, assuming that the debt-limit increase is not going to lead to another showdown next year, this deal allows Republicans to talk about Obamacare all next year.

I have a longer piece with my thoughts on Ryan-Murray coming soon to National Review online, by my own political take (not from the NRO piece) is that getting the budget deal off the table will be helpful in 2014. The debt limit fight is still on for February, and getting the discretionary budget resolved now will make that a very clean debate about reforming entitlements. Second, Obamacare goes back to the front burner for the next 2 months, which is vital to making it right, let’s say.

The Moral Wage

There were two, maybe three, stories on National Public Radio this morning that relate directly to the minimum wage. One story covered the opening of new Wal-Mart stores in Washington, DC, which according to many liberal activists hurts poor workers in the area because Wal-Marts wages are too low. Yet most of the residents quoted on air were ecstatic about the new place. What gives?

It is tempting to say that critics are looking at the glass half empty — low wages — because the net benefit to society has to account for the local consumers who can suddenly shop locally, and get much lower prices on a vast array of goods than before Wal-Mart opened. Imagine if the debate wasn’t about worker pay but about consumer prices. Activists could protest high prices and agitate for price controls on things like milk, meat, bread, shoes, shirts, pens, and paper. Price controls for the poor! Except we all know that kind of thinking is a dead end. Experience over many centuries confirms that when government tries to control prices, the end result is some mixture of empty shelves, black markets, and corruption. (Remember this logic shortcut when you get into office, young public policy grad student: regulation => corruption.)

So why do activists protest the very store that offers lower prices “organically,” i.e., without regulatory intrusion? If I were an activist for the poor, and come to think of it, I am, then opening a big box store in the urban core is cause for celebration.

NPR separately did a great analysis of McDonald’s and the minimum wage. On this one, the liberal activists are agitating for a fifteen dollar national minim wage, and pressuring McDonald’s to make the change on its own. Really?  This is an idea that is so bad that I can’t take it seriously on its face. Indeed, many of my liberal-economists friends find it grating, too. As NPR noted, McDonald’s stores are quasi-independent franchises, so that each stores offers a wage unique to its situation. One employee at an airport-based McD’s made something like 15 or 16 dollars per hour. But guess how much the burgers cost there? Sometimes 2 dollars more.

On Wednesday, December 4, 2013, President Obama spoke about the economy and said, “I believe this is the defining challenge of our time:  Making sure our economy works for every working American.” Most heard his speech as a call to fight inequality, particularly when he called for a higher minimum wage. Egads, what a terrible idea. Even the Washington Post questioned the Presidents claims, awarding him 2 Pinocchios for pretending the economics is settled. Far from it.

I’d like to ask a simple question. Rather than coercing employers to pay a minimum wage, why not let them pay a moral wage?  I use that phrase to assert a simple point, one embodied by the NPR story about a new IKEA store opening in Spain. In that European nation, the youth unemployment rate tops 50 percent and labor regulations are some of the strictest in the word — take a stab at which is cause and effect. So IKEA opens and announces 500 or so job opportunities and gets something like 20,000 applications in the first 48 hours. Yet some complain the wages are too low.

Who complains?  Not the job applicants.

A moral wage is any wage that is not paid through coercion. If two consenting adults agree with full information beforehand to exchange one’s labor for another’s payment, it is a moral arrangement so long as both are fully aware of the scope of the labor. The employer who hides the fact that his operation involves toxic fumes is not engaging in full information.

What is immoral is for a third party to use the threat of violence to bar consenting adults from making such an exchange. That would be the government.

I don’t believe the economics of the minimum wage are as important as the moral aspect, but I think the economics are on the side of free exchange.  The shame of this undying debate is that the activists are winning, and their victory hurts the poor. Let’s remember that the last time the feds raised the minimum wage, in 2007, Democrats used their monopoly power to force a 40% hike on every employer in every small town in the U.S.

So much for diversity!

The one-size-fits all Pelosi wage was followed by the worst labor recession in nearly a century. The poor are suffering from it still, and the only reason the national unemployment rate is in single digits is because millions of poor Americans have given up trying to work. That’s the Obama recovery. Yet, no humility?  No sense of self-doubt or questioning of priors? Sadly, they are pushing for more of the same.