Tag Archives: political economy

A Thought on Minimum Wage

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The current minimum wage is $7.25/hr, and under the guise of that being not enough to live on (it works out to about $15,000/yr before taxes), there’s move afoot to raise the minimum—to anywhere between $9/hr and $15/hr.

I’ll ignore in this post the fact that the jobs that get minimum wage are low-skill and/or entry-level jobs whose product simply isn’t worth very much money.  I’ll ignore, also, the fact that very few minimum wage earners have this job as their sole source of income—it’s a second job, intended to supplement the income from the primary job.

I want, instead, to propose a wholly radical idea: how about reducing regulations, especially for small businesses (the ones hardest hit by minimum wage laws) and lowering tax rates (of which min-wage earners aren’t paying much, but which taxes contribute to the cost of the goods min-wage earners are trying to buy)?  Those tax and regulatory costs drive up our (which includes min-wage earners) cost of living, as the cost of the things we buy is driven by those regulatory and tax costs of doing business.

Here’s a brief look at (aggregated) regulation costs for small businesses.  Daniel Sutter, a Professor of Economics at Troy University, had this information in a recent piece in the Troy Messenger:

…compliance [with Federal regulations] often requires spending on new equipment, signs, or other changes to workplaces.  Both the Competitive Enterprise Institute and Small Business Administration estimate the cost of regulations at around $1.8 trillion.  …this $1.8 trillion (largely hidden) cost of [Federal] regulatory compliance exceeds the revenue from Federal individual and corporate income taxes combined.  It represents almost 12% of GDP, or nearly $15,000 per family, annually.

There’re those $15,000, again.  Also, that aggregate cost equals 10% of the current national debt.

Sutter also had this:

Automobile dealers, for example, must comply with over forty Federal regulations affecting every aspect of their business, from the showroom to the service bays.

They aren’t even allowed to run their own businesses without the Feds looking over their shoulder, telling them how to do so.

And it goes beyond compliance costs.

Regulation reduces the freedom of individuals and businesses to innovate or create new products.  Regulation reduces productivity growth, ultimately reducing standards of living, and particularly burdens small businesses, which are the source of many new jobs.  The greatest cost is likely the new products, services and businesses that are never created because of regulation.

Now, about those taxes….

The small business owner, rather than the business itself, typically pays the taxes on the business’ income, as that, and its costs, typically are passed through to him.

A small business might have an annual income of, oh, say, $500,000—and if it’s really successful, that’ll generate a profit of $50,000.  Any salary he might take out of the business is on top of that, but let’s ignore salary and only concern ourselves with the income tax on that profit.  On those $50k, he’ll pay roughly $8,400 in ordinary income tax—nearly 17% of that profit ultimately lost to the government—at 2013 single rates.  At married, filing jointly, the bite will be roughly $6,600—13% of his profit lost.

Rather than raising the minimum wage, and pricing the worker out of the labor market, it’d be better to enable the existing wage to go farther by getting rid of all those Federal regulations, and their costs, and lowering tax rates.

Another Government Takeover of an Industry

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…and for what purpose?

The US government has used the merger-approval process to increase its influence over the telecom industry, bringing more companies under its oversight and gaining a say over activities as fundamental as equipment purchases.

The leverage has come from a series of increasingly restrictive security agreements between telecom companies and national-security agencies….

And

The security agreements…compel [telecom companies] to honor requests to access their systems.  What’s new is that consolidation in the industry and an influx of overseas investment have left much of the industry under the government’s sway.

Thus,

Three of the top four wireless carriers now operate under such agreements….

Three of the major equipment suppliers have come under these agreements in recent years as well.

What requests?

The deals routinely require the companies to give the government streamlined access to their networks.  At their most restrictive, they grant officials the right to require firms to remove certain gear and approve equipment purchases and directors.

And

when T-Mobile and MetroPCS sought approval for their merger this year…the US secured 30 days’ notice before the company uses a new vendor for network equipment, and T-Mobile agreed to resolve any security concerns the government raises relating to new equipment providers, according to a 2013 amendment to the 2001 security agreement.

All of this comes under the mirage of trading freedom for security.

Makes me wonder what the government isn’t telling us about why they blocked the AT&T-T-Mobile merger a couple years ago.

An Argument for Reducing Federal Spending

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Treasury Secretary Jack Lew wrote a letter to House Speaker John Boehner (R, OH).  The gist of it:

[T]he Obama administration warned House Republicans that a deal on increasing the federal debt limit may have to come sooner than expected.

Anyone but a Progressive would see this as confirmation of the need to reduce spending, so as to reduce the debt and, consequently, the need to raise the debt ceiling.  The Progressives in our government, though, see this as a need to raise the debt ceiling: we have a credit card; of course there’s still money in the bank.

Or, it’s Mardi Gras all year ’round for Progressives.

Laissez le bon temps rouler.

As Sander Levin (D, MI), Ranking Member of the House Ways and Means Committee confirms:

It is time for Republicans to do the right thing

and spend and borrow more.

Obama’s Debt Ceiling Strategy

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Pass increased spending and give me more tax revenue.  Period.  Oh, and hands off my pet projects.

The House of Representatives will agree to a debt ceiling increase (want to agree, for good or ill), if President Barack Obama will agree to spending reductions equal to, or greater than, the increase in the ceiling.  Obama says he refuses to negotiate at all on the debt ceiling.  Just raise it.  Or he’ll be forced to shut down the government for lack of borrowing authority.

The House of Representatives, along with a bipartisan collection of Senators, want to reform our tax code and use any increases in tax revenue that might result solely to pay down the national debt (and so to mitigate any future need to raise the debt ceiling anew).  Obama says that tax reform must, by design, result in increased tax revenue, with that increase to be committed solely to support increased spending.  Otherwise, he’ll be forced to shut down the government for lack of revenue.

Many Republicans want to pass a budget for the coming fiscal year, or failing that a Continuing Resolution for the coming months, that contains clauses that defund Obamacare—a program that Obama has already admitted isn’t ready for adult use.  Obama has said he’ll veto such a budget, even if it means he must shut down the government for lack of spending authority or income.

Obama is perfectly willing to shut down the government and blow up our economy if he can’t have all of this.  Not one or two of them—all of them.

That’s the Point

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In a recent Wall Street Journal op-ed concerning the California state government’s response to a state court finding that the state’s high-speed rail authority had violated the 2008 ballot initiative authorizing $10 billion in bonds for the 500-mile train’s initial construction, thereby hamstringing (temporarily) this white bullet train, Allysia Finley quoted Governor Jerry Brown (D) as saying,

It’s not a setback.  As we speak we’re spending money, we’re moving ahead.

Indeed. Isn’t that the point of this project that only a Democrat could love?  To spend money?