Category Archives: regulation

Obama’s Minimum Wage

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In his Tuesday State of the Union speech, President Barack Obama, among other spending demands, called for a boost to the Federal minimum wage from the current $7.25/hr to $9/hr.

Obama insists such a wage boost will “take millions of Americans out of poverty.”  However, this 24% increase in hourly wage represents a 24% increase in the cost of labor to an employer or potential employer.  This hinders employment; it doesn’t help it: that 24% is money with which an employer could do a number of other things: more product development, more advertising, more capital plant improvement, all of which lead to more hiring, or more hiring directly.

Worse, a government-mandated minimum wage increase is a permanent drag on employment and on our economy.  The ones who are the most hurt by this thing—the ones who will be laid off because the value of an hour of their work doesn’t reach $9 or those who won’t be hired in the first place, because the job available isn’t worth $9—are those who can least afford the damage.  Our youth, teens and early-20-yr-olds, already are suffering 20%-plus unemployment (almost 38% among black teens, a sharp increase during Obama’s administration), and have done for a number of years.  This is experience and job skills these people are not accumulating, and so future wage gains—even future jobs—they’re denied for that lack of experience/skill.  They’ll always be behind where they could have been had they been employable at a wage an employer could afford (which is based not just on a company’s top line, but also on those alternative uses for the money).

That lack of experience, with its concomitant loss of income potential, virtually locks those folks into their poverty condition—which represents an additional drain on our nation’s resources in the form of higher welfare support costs.

It also represents lost opportunities for our society, our nation, in the form of foregone creativity, productivity, innovation that these folks might have been able to provide had they only been employable early enough in their lives that they could have developed the knowledge base and the skills to generate these.

No, instead, we don’t have enough people employed, so we’ll raise the price of employment.  Yeah.  That’s the ticket.  We’ll go with that.  And we’ll ignore the inherently racist nature of minimum wages (or don’t disparate outcomes apply here?).

Collective Action

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While the failed trick itself is interesting, what’s relevant here is the interesting event at around 1:00 in the video.

See the folks acting collectively and on their own initiative, without need of government…help…to intervene in the incident to disable the snowmobile to prevent it resuming its runaway journey and then to help the injured spectator.

Do we allow that anymore?  Where was the government?

Out of Control Regulations

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This time at the state level.  The Daily Caller has the story of Louisiana overregulation.

Fresh Markets was selling gallons of milk for $2.99 as part of a weekly promotional deal.  Louisiana requires that retailer price markups be at least six percent above the invoice and shipping costs of the product.

You read that right.  It turns out that $2.99 was less than 6% above the state-allowed minimum price for milk.  Louisiana regulators actually put a floor under the price at which milk is allowed to be sold.  No matter what the private business’ imperative might be for setting a lower price.  No matter how much forcing inflated prices hurts the poor.

State Agriculture and Forestry Commissioner Mike Strain said this with a straight face:

They can sell it six percent over cost all day long.  It’s when they sell it below cost that it becomes a problem[.]

Because selling at cost is actually selling below cost.  Because selling below cost—below actual cost—is a decision poor, dumb businessmen shouldn’t be allowed to make—even as a loss leader.

When even the Courts

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…ridicule Progressives.

From Bloomberg comes this item.  Our illustrious regulatory engine, the Environmental Protection Agency, has (rather, had) a rule that required refiners to mix 8.65 million gallons of cellulosic ethanol into their gasoline output last year.  In light of the fact that last year’s actual US production was 20,000 (!) gallons, all of which was exported to Brazil, the American Petroleum Institute went to court to get the mandate overturned.

Last week, the DC Circuit agreed.  In the court’s ruling is this gem:

Apart from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry.  “Do a good job, cellulosic fuel producers.  If you fail, we’ll fine your customers.”

Of course, the court also was serious in its ruling.  Citing Railway Labor Executives’ Ass’n v. Nat’l

Mediation Bd in the bowlegs, the court noted

(“Were courts to presume a delegation of power absent an express withholding of such power, agencies would enjoy virtually limitless hegemony….”).  Yet that is precisely what EPA appears to have done in projecting cellulosic biofuel production for 2012.

The case is American Petroleum Institute v U.S. Environmental Protection Agency, and the ruling can be seen here.

Naturally, in response to the ruling, Progressive whining has begun.  Bloomberg reports this, as well.

As a result of the ruling and uncertainty, investments in the nascent industry may fall, said Michael Frohlich, a spokesman for Growth Energy, which represents ethanol producers.

“It dampens any future investment, and creates a further level of vulnerability[.]”

Never mind that if the “nascent industry” can’t stand without government favoritism, it’s not ready for market in the first place.  But the collective views of individual Americans—free market imperatives—don’t count.  Only the collective views of Big Government do.

The Cost of Price Supports

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They’re disastrous for our food costs, which harms our poor especially, and they drive the “need” for food stamps.  Here are some numbers, from a recent op-ed by Burleigh CW Leonard in The Wall Street Journal.  The parity prices for some farm products are these:

  • corn: $12/bushel vs actual market price of $7.01
  • wheat: $18.30 vs $8.33
  • rice: $42.20 per hundred weight vs $14.80
  • milk: $52 vs $21.10.

We care about parity prices because the Agriculture Adjustment Act of 1938 and the Agricultural Act of 1949 require, unless other temporary support prices  are specified by subsequent Congresses, that farm support prices be set to parity according to a formula based on farm prices extant in 1910-1914 [sic].

Notice that: farmers (read: agribusiness, who are the vast majority of our modern farm industry, not the mom and pops over whom our politicians shed so many crocodile tears) can get three times the market price of rice from those supports so they produce to their heart’s content and sell the excess to the government.

This doesn’t actually happen to a great extent, though, because of an epicycle in the government’s Ptolemeic orrery of controls: the government imposes on each farmer (agribusiness) limits on how much (rice) he can produce.  I won’t get into the inconsistent manner in which such limits get applied across farm products.  Nor will I get into the interference such controls represent in each man’s right to choose for himself what he will produce with his labor (and what price he will charge for that produce, or that labor).  (Nor will I get into the mandatory diversion of food into fuel products, which is what the ethanol mandates are.  That’s for another discussion entirely.)

It’s sufficient, here, to see that the price distortion remains.  And the “need” for food stamps remains.

Leonard is on the right track with the solution he offers:

…craft a new long-term farm bill.  Its first step should be to repeal permanent law that governs commodity price support programs.  Then the default setting for US agriculture would be a free market….

He goes too far, though.  There’s no need for a new “long-term bill.”  His proposed bill’s first step is nearly sufficient by itself: repeal the Agriculture Adjustment Act of 1938, the Agricultural Act of 1949, and associated laws.  Then take the only additional step necessary: stop instituting other price support legislation.

Watch the need for food stamps fall precipitously.

There is nothing to fear from free market competition but fear itself.