Tag Archives: political economy

Another Perspective on Minimum Wage

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Mark Perry has one in his Carpe Diem column for AEIdeas.

In a recent post, I posed the question: rather than calling it “an increase in the minimum wage from $7.25 to $10.10 (or $15) per hour,” if we instead called it “imposing a $2.85 (or $7.75) per hour tax on employers who employ or hire unskilled workers,” would it make any difference to those who support “an increase in the minimum wage”? Maybe not for some of the strongest advocates of a higher minimum wage, but perhaps it would make a difference for some weaker advocates who were never challenged to think of it that way?

He then calculates the associated payroll taxes (a tax on the tax, or a surtax, in his construction) based on full time work (i.e., 40-hour work weeks) and the larger minimum wage increment, but what would that surtax work out to for the typical minimum wage worker’s half-time employment?

The employer tax of $2.85 would work out to an additional tax of $2,850 per year per part-time minimum wage employee. The surtax on that under current payroll tax law would come to just under $220 per year per employee, or a total employer tax of just under $3,070 per year. Per employee.

How many small business employers (the Walmarts of the world are an aberration) can afford that additional labor cost tax? At what point does an employer, of any size, decide the work being done isn’t worth the mandated cost and either stops doing it or automates it?

“Must Pass” Legislation

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Alan Blinder, he of Princeton University, has a piece on this subject in The Wall Street Journal. Among other things, he wrote

The resolution funding the Department of Homeland Security expires at the end of this month. Both parties want DHS to remain fully operational, but the bills passed so far include provisions that would roll back the president’s executive actions on immigration. Mr Obama has threatened a veto. If neither side blinks, members of the Coast Guard, the TSA, and the border patrol might soon see their paychecks suspended, though they would be required to continue working.

His entire piece went on in this vein, castigating Republicans for attaching such “extraneous” provisions to a number of bills, past and future in this Congress. He did so while ignoring the fact that the Democrats have done this in the past; both parties have. Good, bad, or indifferent, it’s a hoary old way of getting lesser matters enacted: on the backs of larger ones.

He also ignored an underlying critical item. If the thing truly is “must pass,” then Senate Democrats must stop their filibuster, allow debate (on, for instance, the DHS funding bill), offer amendments, and then allow an up or down vote in the Senate. Following which the thing would go to conference (since it would then differ from the House-passed version) and an agreed compromise voted on in each house of Congress. Filibustering is the very sort of thing the Harry Reid Faction decried Republicans for doing the prior six years (and which both parties have done for the last century or so), and the very sort of thing that provided the excuse for the Harry Reid Faction to cancel the filibuster where it was inconvenient to the then-majority Democrats.

No. If the Democrats continue to block debate on must pass legislation, if they insist on their filibuster, the consequences are entirely on them. In the present case, if the DHS goes unfunded, then those Senate Democrats will owe their own paychecks to the members of the Coast Guard, the TSA, and the border patrol for whom Blinder shed his copious crocodile tears.

A Greek Exit

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In a piece in Wednesday’s Wall Street Journal, about Greece’s economic status and its relations with the rest of the eurozone, Matthew Karnitschnig had this remark

[A] Greek exit would prove that the eurozone isn’t inviolable and trigger speculation over the future of other weak links, such as Portugal, Ireland and even Spain, in the currency bloc. The euro crisis could return in full force.

Perhaps the crisis could return. But only briefly, and only if misunderstood by the leaders of the eurozone. After all, what’s the long term (or even the medium term) downside of losing “other weak links” in the eurozone? What would be left would be, by definition, stronger.

More Excessive Government

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US financial regulators are focusing renewed attention on Wall Street pay and are designing rules to curb compensation packages that could encourage excessive risk taking.

Regulators are considering requiring certain employees within Wall Street firms hand back bonuses for egregious blunders or fraud as part of incentive compensation rules the 2010 Dodd-Frank law mandated be written, according to people familiar with the negotiations. Including such a “clawback” provision in the rules would go beyond what regulators first proposed in 2011 but never finalized.

Congress created a bureaucracy, and it expanded it enormously with that Dodd-Frank. Now the bureaucrats have to do something to justify their existence. Regulators gotta regulate. And so we get this.

Never mind that the free market is a fine regulator, and “certain employees” and their “Wall Street firms” employers will be severely and promptly regulated when those excessive risks fail.

Government intrusion isn’t just not needed, though, it’s counterproductive. Now businesses, on and off Wall Street, will incur additional costs as they seek compliance, additional costs as they seek work-arounds, additional costs from the expanded field for nuisance suits (and legally legitimate ones), additional costs as they’re forced to negotiate even more complex compensation packages in order to hire the best, rather than the second best.

Such regulatory nonsense also is in large part duplicative and so wasteful. For instance:

Some banks are already voluntarily recouping money from employees who engage in misconduct or excessive risk.

We already have adequate laws (not regulations) on the books to handle both criminal and civil misconduct. Additional regulation here would be useless.

Too, that some businesses think such procedures are appropriate for them does not at all justify government interfering to impose such procedures on all of business.

Update: Corrected a typo in the third paragraph: Government intrusion isn’t just not needed….  <sigh>

The Judicial Branch and the Law

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In a couple of weeks, the Supreme Court will hear a case involving Federal subsidies to health coverage purchasers who bought their plans on ObamaMart instead of State exchanges. The Obamacare law limits those subsidies to purchasers via State exchanges argue the plaintiffs; the government demurs.

Some ACA critics fear the Supreme Court may hesitate to block the current subsidies because of a lack of confidence in the legislative branch in general.

Against that backdrop, Supreme Court Justice Ruth Bader Ginsburg has said

The current Congress is not equipped really to do anything[.]

That claim is the pseudo-logic President Barack Obama uses to justify his Executive Orders and “executive actions” that deliberately bypass Congress, and unconstitutionally so.

Justice Ginsburg, and others of like mind on the Supreme Court, may be entirely right on Congress’ ability—or willingness—to act. However, she, and they, would do well to remember that the Constitution they’re sworn to uphold does not authorize the Court to legislate in place of, or in addition to, Congress.

Justice Ginsburg and her fellows would do well to remember that the judiciary’s task is first to determine whether a law comports with the Constitution as the Constitution is written, and if it’s legitimate, to apply that law as that law is written.

Full stop.