Commentary Magazine


Topic: minimum wage

Erick Erickson’s Callous Comments

Via Mediaite, the conservative blogger and editor-in-chief of RedState.com, Erick Erickson – while guest hosting for Rush Limbaugh – declared that most people who are getting minimum wage have “probably failed at life.”

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Via Mediaite, the conservative blogger and editor-in-chief of RedState.com, Erick Erickson – while guest hosting for Rush Limbaugh – declared that most people who are getting minimum wage have “probably failed at life.”

According to Mr. Erickson, “The minimum wage is mostly people who failed at life and high school kids. Seriously, look. I don’t mean to be ugly with you people. … If you’re a 30-something-year-old person and you’re making minimum wage you probably failed at life.” He went on to add “It is not that life dealt you a bad hand. Life does not deal you cards. It’s that you failed at life.”

This is wrong and offensive on several levels, starting with this one: Since when does a humane and decent society judge the quality and worth of one’s life based on how much money one makes? Mr. Erickson’s philosophy is a shallow materialism; this is certainly not a criterion a professing Christian (which is what Erickson is) would use. What matters in judging how people live their lives is the content of their character, not the size of their paycheck.

Let’s assume you’re in your mid-20s or early 30s and earning the minimum wage. In addition to that, you’re a loving and devoted daughter, regularly volunteering at a crisis pregnancy center, helping coach youth soccer, and treating others with respect and kindness. Have you really “failed at life”?

What if you’re a young man who was raised in the inner city, in a broken family, and received a miserable education. Still, you work hard, earning the minimum wage, and your word is good and you keep out of trouble. You’re even something of an example to your younger brother, who you’re trying to keep on the right path, away from a life of drugs and crime. Are you therefore a failure? And what if you’re a single mother who, instead of receiving welfare, works for the minimum wage? Do you deserve to be mocked by Erick Erickson?

Beyond this, the argument being advanced by Erickson that the circumstances you face aren’t to be taken into account – that it doesn’t really matter whether you’re born in Anacostia or McLean, whether your father works at a Georgetown University or is an inmate at the Central Detention Facility in D.C., whether you have an intellectual disability or an IQ of 120, whether you suffer from depression, autism, or OCD or you’re blessedly free of them – is foolish and callous.

To be clear, the issue here isn’t the merits of the minimum wage; it’s the cast of mind and disposition of heart that would lead Mr. Erickson to say what he did and how he did. That is to say, it’s not simply that the arguments Mr. Erickson advances are misguided; it’s his condescension and mocking tone toward those who are “flipping burgers” or “making my beloved Chick fil A biscuit in the morning” that compounds the offense. What Mr. Erickson is expounding isn’t conservatism; it is a crude and soulless attitude masquerading as conservatism. And it is these kinds of statements that both distort and damage conservatism.

It’s perhaps worth considering the words of another individual that serve as something of a contrast to what Mr. Erickson said earlier today. “There are no ordinary people,” C.S. Lewis wrote.

You have never talked to a mere mortal. Nations, cultures, arts, civilizations – these are mortal, and their life is to ours as the life of a gnat. But it is immortals whom we joke with, work with, marry, snub and exploit – immortal horrors or everlasting splendors. This does not mean that we are to be perpetually solemn. We must play. But our merriment must be of that kind (and it is, in fact, the merriest kind) which exists between people who have, from the outset, taken each other seriously – no flippancy, no superiority, no presumption.

Lewis would never have said that a person’s worth or contributions, whether their life was a failure or a success, was based on their income or educational level or social status. He wouldn’t have argued that because his faith would not allow him to argue that. Lewis believed that everyone, no matter at what station or season of life, has inherent dignity because we are made in the image of God and because we are valued by God. Even adults who make the minimum wage.

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Economics 101 for Bob Beckel

Bob Beckel, the liberal voice on Fox News Channel’s extremely successful The Five, likes to go off on rants regarding Wal-Mart. On Friday he was in rare form, damning the world’s largest retailer (and this country’s largest employer) for having caused more rival businesses to close than any other in history, and for buying most of its merchandise abroad. On other occasions he has complained that Wal-Mart doesn’t pay its employees a “living wage.”

Beckel’s first claim is probably true and the second certainly is. The third claim, however, is economic sophistry.

Wal-Mart is a profit-seeking corporation. It is, in other words, a wealth-creation machine, nothing more, nothing less. Its management, therefore, has a fiduciary duty to the stockholders to maximize the return on their invested capital. It does that in the following three ways.

First, by paying the lowest wages that will supply the company with a satisfactory work force. If Wal-Mart can get a satisfactory worker for a given job at $7.25 an hour, why should it pay more? Bob Beckel never pays more than he has to in order to get what he needs; why should Wal-Mart? Wal-Mart employees are not indentured. They’re perfectly free to search for a job that pays better than the one they have. If they don’t, it’s because they have the best job around for their skill set and particular circumstances. If market forces do not produce a “living wage,”—about as subjective a term as you can find, right up there with “fair”—then it is government’s function to make up the difference through the Earned Income Tax Credit or other mechanism. Corporations are not WPA projects and shouldn’t be used as such by government fiat.

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Bob Beckel, the liberal voice on Fox News Channel’s extremely successful The Five, likes to go off on rants regarding Wal-Mart. On Friday he was in rare form, damning the world’s largest retailer (and this country’s largest employer) for having caused more rival businesses to close than any other in history, and for buying most of its merchandise abroad. On other occasions he has complained that Wal-Mart doesn’t pay its employees a “living wage.”

Beckel’s first claim is probably true and the second certainly is. The third claim, however, is economic sophistry.

Wal-Mart is a profit-seeking corporation. It is, in other words, a wealth-creation machine, nothing more, nothing less. Its management, therefore, has a fiduciary duty to the stockholders to maximize the return on their invested capital. It does that in the following three ways.

First, by paying the lowest wages that will supply the company with a satisfactory work force. If Wal-Mart can get a satisfactory worker for a given job at $7.25 an hour, why should it pay more? Bob Beckel never pays more than he has to in order to get what he needs; why should Wal-Mart? Wal-Mart employees are not indentured. They’re perfectly free to search for a job that pays better than the one they have. If they don’t, it’s because they have the best job around for their skill set and particular circumstances. If market forces do not produce a “living wage,”—about as subjective a term as you can find, right up there with “fair”—then it is government’s function to make up the difference through the Earned Income Tax Credit or other mechanism. Corporations are not WPA projects and shouldn’t be used as such by government fiat.

Second, by paying the lowest amounts for merchandise of satisfactory quality. In a globalized world, that often means buying goods manufactured abroad. The high-wage American economy cannot compete with low-wage third-world countries when it comes to low-tech manufacturing. Most of the cost of a T-shirt or a pair of socks, after all, is the labor. With transportation costs now very low, thanks to containerization, and tariffs at the lowest point in history—a policy pursued by both Democratic and Republican administrations over the last 70 years—buying abroad is the only option for most of the merchandise sold at Wal-Mart. Does Bob Beckel think it’s a good idea for Wal-Mart to buy domestically if that means T-shirts that cost $20 each?

Third, by offering better prices, better quality, and more choices to its customers. Thousands, perhaps tens of thousands, of mom-and-pop, Main-Street retail operations have gone out of business because of Wal-Mart. That is because the customers of those concerns found that they got better deals at Wal-Mart and started shopping there, instead of on Main Street. That was tough, no doubt, on mom and pop, but that’s the “creative destruction” that is an ineluctable aspect of capitalism. Without old-fashion businesses adapting or dying, the economy stagnates and innovation disappears. Just ask anyone who has lived in a socialist economy.

And while it was tough on tens of thousands of moms and pops, it was great for Wal-Mart’s tens of millions of customers, whose standard of living has been raised by Wal-Mart’s low prices, high quality, and convenience.

If Bob Beckel were to have his way—and he won’t—the American standard of living and the size of the American GDP would both decline sharply as prices rose and quality declined. That, of course, would mean fewer total jobs. As with so many liberals, Bob Beckel’s heart is in the right place. But the heart is an organ very ill-suited to economic analysis.

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Obama’s Priorities v. Those of the American People

President Obama has recently said that the trend of growing inequality is “certainly my highest priority.” He might be interested to know that it’s not the highest priority for the people he was voted to represent.

Not even close.

A new Gallup poll found the 10 most important issues facing the American people to be, in order, (1) unemployment/jobs; (2) economy in general; (3) government; (4) health care; (5) federal budget deficit/federal debt; (6) immigration/illegal aliens; (7) ethical/moral decline; (8) education; (9) lack of money; and (10) poverty/hunger/homelessness. Even among Democrats, income inequality doesn’t rate. Neither, by the way, does raising the minimum wage, climate change, and gun control–three other issues Mr. Obama has made central to his second-term agenda.

So why is the president talking about issues that the public has so little concern about?

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President Obama has recently said that the trend of growing inequality is “certainly my highest priority.” He might be interested to know that it’s not the highest priority for the people he was voted to represent.

Not even close.

A new Gallup poll found the 10 most important issues facing the American people to be, in order, (1) unemployment/jobs; (2) economy in general; (3) government; (4) health care; (5) federal budget deficit/federal debt; (6) immigration/illegal aliens; (7) ethical/moral decline; (8) education; (9) lack of money; and (10) poverty/hunger/homelessness. Even among Democrats, income inequality doesn’t rate. Neither, by the way, does raising the minimum wage, climate change, and gun control–three other issues Mr. Obama has made central to his second-term agenda.

So why is the president talking about issues that the public has so little concern about?

Part of the explanation, I suspect, is that Mr. Obama really believes in his (progressive) agenda and feels more liberated in his second term to pursue it. But I also imagine that the president has very little to say that’s helpful to him or his party about unemployment and jobs, the economy in general, health care, and the debt. So Mr. Obama is turning to other issues, hoping to shift the American people’s focus from what they care about to what he cares about.

This effort is turning out to be a bust. The public is tuning the president out and turning him off. His words are like white noise, and he increasingly looks to be a lame duck–one day impotent, the next day irrelevant, drifting along in a world of his own. 

Mr. Obama seems to think that as a second-term president, he can talk about what he darn well pleases. Maybe. We’ll see what the voters think about that in November, when they get their chance to render their judgment on his second term. 

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CBO: Minimum Wage Snake Oil

Which of the following two factors would have the greatest impact on the economy: Raising the wages of less than a million Americans from slightly below the poverty line to slightly above it or putting half a million poor people out of work? The answer to that question may be the deciding factor in determining whether Congress accedes to President Obama’s demand to raise the federal minimum wage to $10.15 from the current figure of $7.50. But then again, it may not. Raising the minimum wage is a popular idea. The president’s catch phrase, that Congress should “give America a raise,” polled well before and after it was used in the State of the Union address. Every discussion of the proposal hinges on conservatives pointing out the potential harm to the economy and to employment in the government intervening in the market in this manner only to have their arguments dismissed by liberals who simply say that economic principles must bow to the public desire to give low wage workers more money.

But now that the non-partisan Congressional Budget Office has issued a report about the potential impact of the president’s minimum wage hike proposal, it’s no longer possible to ignore the fact that a lot more harm than good will be done if Congress is foolish enough to pass such a bill. The CBO report is being reported as having “mixed results,” and that is true. The report says the wage hike will boost the income of 16.5 million Americans. That is not news. You don’t need an economics degree to understand that giving people more money means they will have more money. However, the increase would be enough to push some 900,000 over the poverty line. That’s the good news for the president in the report. Less helpful to his cause is the fact that it also says that an estimated 500,000 Americans will loose their jobs, just as conservatives have been arguing all along.

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Which of the following two factors would have the greatest impact on the economy: Raising the wages of less than a million Americans from slightly below the poverty line to slightly above it or putting half a million poor people out of work? The answer to that question may be the deciding factor in determining whether Congress accedes to President Obama’s demand to raise the federal minimum wage to $10.15 from the current figure of $7.50. But then again, it may not. Raising the minimum wage is a popular idea. The president’s catch phrase, that Congress should “give America a raise,” polled well before and after it was used in the State of the Union address. Every discussion of the proposal hinges on conservatives pointing out the potential harm to the economy and to employment in the government intervening in the market in this manner only to have their arguments dismissed by liberals who simply say that economic principles must bow to the public desire to give low wage workers more money.

But now that the non-partisan Congressional Budget Office has issued a report about the potential impact of the president’s minimum wage hike proposal, it’s no longer possible to ignore the fact that a lot more harm than good will be done if Congress is foolish enough to pass such a bill. The CBO report is being reported as having “mixed results,” and that is true. The report says the wage hike will boost the income of 16.5 million Americans. That is not news. You don’t need an economics degree to understand that giving people more money means they will have more money. However, the increase would be enough to push some 900,000 over the poverty line. That’s the good news for the president in the report. Less helpful to his cause is the fact that it also says that an estimated 500,000 Americans will loose their jobs, just as conservatives have been arguing all along.

How do you weigh the impact of these two aspects of a wage hike? It’s actually not all that complex. Nor does it require knowledge of higher calculus. While the increase will marginally help some people, the difference won’t be enough to make much of a difference for them. An extra $3 per hour would be useful to anyone. But the difference between $7.50 or whatever low wage some people are currently earning and the $0.00 they will be receiving when their employers are forced to lay them off because of the increased costs the new law will impose on their businesses will be felt far more both by the newly unemployed and the government that will now have to pay them unemployment benefits. The damage the minimum wage increase will do far outweighs the minimal helps it gives some recipients.

The problem with highlighting the advantages the extra money will give those who will receive the hike is that the jobs affected are still entry-level positions which were never meant to be enough to support a family. While we should not entirely dismiss the help a wage increase gives an individual, the figures are so modest that they are not likely to make that much of a difference. The wage hike will be welcomed but it won’t be enough to change anyone’s life.

Moreover, a large percentage of those who will benefit from the increase are not the working poor or any other kind of disadvantaged group. These are largely made up of teenagers of middle and upper middle class families working at summer or part-time jobs who will be among the biggest winners of the minimum wage proposal. The report points out that a whopping 29 percent of those who will benefit from the president’s largesse are actually members of families earning three times the income deemed to be at poverty level while a further six percent come from families with six times or more the poverty level.

Balanced against the minimal help given the working poor and well-off teenager is the far greater pain of those who will lose their jobs. Sending half a million Americans into the ranks of the unemployed and the grinding poverty that goes with it is bad enough. But doing so will also place intolerable demands on the public purse that will be further drained to pay for the poverty benefits for which these newly unemployed will now be eligible.

What do Democrats say to these facts? Their answer seems to be the traditional liberal practice of sticking their fingers in their ears and saying, “la, la, la.” The administration and people like House Minority Leader Nancy Pelosi are now reduced to claiming that the CBO is wrong and that there will be no impact on employment even if logic and basic economics tells us otherwise.

The minimum wage increase may be popular but, as the CBO points out, it remains economic snake oil. Though succumbing to public sentiment and the president’s demagoguery may seem like the better part of valor, Republicans need to stand their ground and protect the nation and the half million poor Americans at risk from this dangerous proposal.

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SOTU: Obama Goes Through the Motions

There was plenty of big talk in the 2014 State of the Union address. President Obama exhorted Americans to accept his baseless claim that the economy is reviving and urged them to believe his jarringly upbeat view of the nation’s future. He tried to sound assertive as he vowed to use executive orders to get his way if Congress didn’t give him what he wanted. He touted ObamaCare. And he closed with an inspiring story of a wounded Army Ranger. But there’s no mistaking that this was a speech given by a president mired in second-term doldrums. There were not only a total of zero new ideas; almost everything in it was recycled from past addresses including a grimly risible vow to close the terrorist prison at Guantanamo Bay, Cuba that he has kept open throughout his presidency even though he’s been promising to close it since 2008.

Although everything in this message was poll-tested and designed to be popular, this State of the Union (SOTU) did nothing but reinforce the impression that the president is mechanically going through the motions. The press had been prepped to believe the president would come out swinging tonight, defying Congress and vowing to seize the reins of government into his own hands. But what the country heard instead was confirmation of what many had already suspected after a disastrous 2013 for the president: he has passed over the historic bridge from celebrated re-election to the status of an irrelevant lame-duck.

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There was plenty of big talk in the 2014 State of the Union address. President Obama exhorted Americans to accept his baseless claim that the economy is reviving and urged them to believe his jarringly upbeat view of the nation’s future. He tried to sound assertive as he vowed to use executive orders to get his way if Congress didn’t give him what he wanted. He touted ObamaCare. And he closed with an inspiring story of a wounded Army Ranger. But there’s no mistaking that this was a speech given by a president mired in second-term doldrums. There were not only a total of zero new ideas; almost everything in it was recycled from past addresses including a grimly risible vow to close the terrorist prison at Guantanamo Bay, Cuba that he has kept open throughout his presidency even though he’s been promising to close it since 2008.

Although everything in this message was poll-tested and designed to be popular, this State of the Union (SOTU) did nothing but reinforce the impression that the president is mechanically going through the motions. The press had been prepped to believe the president would come out swinging tonight, defying Congress and vowing to seize the reins of government into his own hands. But what the country heard instead was confirmation of what many had already suspected after a disastrous 2013 for the president: he has passed over the historic bridge from celebrated re-election to the status of an irrelevant lame-duck.

Virtually every item in the president’s speech had been heard before and introduced with greater passion and urgency in the past. Everything on his long, dreary laundry list had a tired feel to it, showing the country and the world that his only answer to the nation’s problems is to continue recycling the timeworn and ineffective policies that he’s been peddling for five years.

All his proposals were cribbed from the 2013 State of the Union including calls to address income inequality, raise the minimum wage, invest in solar energy, universal pre-kindergarten, and student loans. But the difference between the two speeches could be measured not simply in terms of the mind-numbing number of tedious repetitions, but in the drab, lethargic affect the president projected as he droned on. Last year he managed to convey the liberal agenda with confidence and urgency. That energy was completely lacking in tonight’s speech. After a year of scandals and a disastrous rollout of his signature health-care plan—whose problems were never once mentioned in the speech—the president seems unable to muster the requisite emotional enthusiasm or the intellectual firepower to challenge or inspire the nation.

As to specifics, the much-trumpeted “year of action” on inequality was merely a rehash of the same proposals that have already been rejected.  The only new idea he presented was an absurd call for all employers to give their employees raises, a shameless populist appeal that makes no economic sense. The man who promised to turn back the oceans and remake America is now reduced to an utterly pathetic plea that America should get a raise. Even the talk of governing by executive orders was delivered more as a talking point than a genuine appeal for change.

On foreign policy, his strongest words were delivered in a threat to veto new economic sanctions on Iran that he thinks will upset his diplomatic outreach to the Islamist regime. His drive for détente with Iran—bolstered by false claims about inspections and Iran destroying its uranium stockpile—seems to fire him up but his chutzpah in proclaiming Syria—where he endured total humiliation in 2013—as a triumph for his policies shows just how shockingly removed from reality this administration has become.

With three years to go, there is still plenty of time for Obama to continue spinning his wheels on a health-care plan that is a fiasco and proposals such as the minimum wage that will only serve to increase unemployment. But tonight made clear that there is nothing new left in his bag of tricks. The sounds you’re hearing now, and will for the next three years, are the querulous quacks of a very lame duck.

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Obama Has Already Proved He Can’t Govern

One of the highlights of President Obama’s State of the Union speech tonight is his announcement of an executive order raising the minimum wage for those working for contractors doing business with the federal government. The measure is a political trifecta for the president: he gets to bypass Congress, play to the populist grandstand, and inject some life into a moribund presidency with three years left before it officially expires. Tonight’s event and the speaking tour on which the president embarks tomorrow is designed to send the less-than-credible message that he is very much in charge of the government, has the political juice to beat the Republicans while raising his poor favorability ratings, thus reassuring himself, if no one else, that he is no lame duck.

The union that the president will claim tonight is still strong, though it is not a dictatorship. While the commander in chief has the power to make foreign policy and wage war and—thanks to the courts—can impose environmental regulations, the Constitution set up impassable obstacles to prevent a president from ruling without the consent of Congress. The notion that Obama can govern by executive order is just as much an illusion as the idea that imposing higher minimum wages will improve the economy and create more jobs rather than lose them.

But while Obama will garner some partisan applause by unilaterally raising the wages of some workers to $10.10 from $7.25, the impact of this measure is as much trickery as is Obama’s belief that he can govern alone bypassing Congress. The president’s frustration at his inability to get his liberal laundry passed by Congress may be understandable. But freelancing from the Oval Office isn’t the answer to divided government. Good-faith negotiations and deal making—practices to which this aloof president has always disdained—are the answer.

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One of the highlights of President Obama’s State of the Union speech tonight is his announcement of an executive order raising the minimum wage for those working for contractors doing business with the federal government. The measure is a political trifecta for the president: he gets to bypass Congress, play to the populist grandstand, and inject some life into a moribund presidency with three years left before it officially expires. Tonight’s event and the speaking tour on which the president embarks tomorrow is designed to send the less-than-credible message that he is very much in charge of the government, has the political juice to beat the Republicans while raising his poor favorability ratings, thus reassuring himself, if no one else, that he is no lame duck.

The union that the president will claim tonight is still strong, though it is not a dictatorship. While the commander in chief has the power to make foreign policy and wage war and—thanks to the courts—can impose environmental regulations, the Constitution set up impassable obstacles to prevent a president from ruling without the consent of Congress. The notion that Obama can govern by executive order is just as much an illusion as the idea that imposing higher minimum wages will improve the economy and create more jobs rather than lose them.

But while Obama will garner some partisan applause by unilaterally raising the wages of some workers to $10.10 from $7.25, the impact of this measure is as much trickery as is Obama’s belief that he can govern alone bypassing Congress. The president’s frustration at his inability to get his liberal laundry passed by Congress may be understandable. But freelancing from the Oval Office isn’t the answer to divided government. Good-faith negotiations and deal making—practices to which this aloof president has always disdained—are the answer.

The actual number of workers affected by the wage increase he will impose on federal contractors will be small. But even so, it shows just how great the disconnect between the president’s rhetoric and the reality of job creation has become. Nowhere in the speech or in the campaign-style pep he’ll give later this week is there any specificity about where the money to pay the higher wages will come from or what the government will do to help the workers who may lose their jobs altogether as a result of cutbacks that companies will be forced to endure as a result of this transparent grandstanding.

The point of the president’s entirely disingenuous focus on the minimum wage is to preview the Democrats’ intention to play the populist card this year with their bogus concerns about income inequality. Although the measure polls well, the increase will do more to help middle-class teenagers rather than to help the working poor who understand that minimum-wage positions are intended, to be gateway jobs, not a way to permanently support families. Indeed, most Americans understand that this is, at best, a sideshow intended,  like so much else in the liberal repertory, to divert them from the larger issue of a still weak economy.

Five years into the Obama presidency, it is no longer possible for the president to credibly blame, as he has done every previous year, the country’s economic woes on his predecessor. Instead, he will blame Congress, specifically the Republican majority in the House of Representatives, for thwarting his agenda.

But the problem for the president is not just that he has never learned the art of negotiating with Republicans or even with Democrats who disagree with him. His bid to govern unilaterally through executive orders is, after all, nothing new. Even in his first two years, when he had Democratic majorities in both houses of Congress, he was even more intransigent. He pushed through a health-care bill that vastly expanded the reach and power of the federal government without a single Republican vote and has since persevered in implementing this ObamaCare disaster by choosing to ignore and to suppress any criticisms of this gargantuan error rather than to try to deal with its flaws. Thus, we have already seen Obama’s approach to unilateral governance, and the results are as bad as his critics expected.

Try as they might to change the subject, the negative impact of ObamaCare on the economy and the lives of millions of Americans will remain the single most important domestic issue in 2014. The minimum wage is economic snake oil. But so, too, is the president’s feckless effort to pretend he can magically bypass Congress. Rather than breathe new life into a presidency that has gone seriously off the rails, this stunt will merely confirm that the White House is as helpless to raise the president’s poll numbers as it is to improve the economy. Rhetoric may have won Barack Obama the presidency, but it cannot make up for his inability to govern.

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Democrats Sacrifice Unemployed Pawns

On yesterday’s Sunday news shows, Democrats doubled down on their preferred issue of the new year: income inequality and unemployment insurance. Both Senate Majority Leader Harry Reid and senior Senate Democrat Chuck Schumer railed at Republican opponents of extending unemployment benefits and sought to portray the GOP as a conclave of heartless Scrooge McDucks chuckling while the jobless suffer. This is good politics for liberals, whose New Year’s resolution was to do everything in their power to change the national political conversation from the ObamaCare debacle, as well as good television. Given the popularity of these proposals, the discussion about the course of the debate has largely followed the lines Democrats like. Thus, the reluctance of most congressional Republicans, especially the leadership of the House of Representatives, to act on President Obama’s proposal to again extend unemployment insurance plays into themes that work well for Democrats such as fairness, conservative apathy about the “47 percent” who get federal benefits (to use Mitt Romney’s infamous and foolish formulation), and a “do-nothing Congress” led by a dysfunctional Republican Party.

It’s debatable whether Republicans are doing themselves a favor by opposing the president on issues where he and his allies can appear to claim the high moral ground. But there are two main problems with this strategy for the Democrats. One has to do with how much traction these liberal talking points really have with the electorate in a midterm election year in which Democrats are defending far more competitive House and Senate seats than their opponents. The other goes to whether Democrats are actually serious about helping the unemployed or anyone else disadvantaged by the income inequality they’ve been talking about. If their genuine goal were to really extend the benefits, all they would have to what their media cheerleaders keep telling the GOP they must do in every other context: compromise. If they were to agree to some spending cuts in order to pay for the benefits, it’s likely that even the House GOP would go along with the idea. Yet since they won’t, it is evident that their purpose is not so much to alleviate the travails of the unemployed as it is to outmaneuver the Republicans. As such, any tactical advantage the Democrats may gain may be fleeting.

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On yesterday’s Sunday news shows, Democrats doubled down on their preferred issue of the new year: income inequality and unemployment insurance. Both Senate Majority Leader Harry Reid and senior Senate Democrat Chuck Schumer railed at Republican opponents of extending unemployment benefits and sought to portray the GOP as a conclave of heartless Scrooge McDucks chuckling while the jobless suffer. This is good politics for liberals, whose New Year’s resolution was to do everything in their power to change the national political conversation from the ObamaCare debacle, as well as good television. Given the popularity of these proposals, the discussion about the course of the debate has largely followed the lines Democrats like. Thus, the reluctance of most congressional Republicans, especially the leadership of the House of Representatives, to act on President Obama’s proposal to again extend unemployment insurance plays into themes that work well for Democrats such as fairness, conservative apathy about the “47 percent” who get federal benefits (to use Mitt Romney’s infamous and foolish formulation), and a “do-nothing Congress” led by a dysfunctional Republican Party.

It’s debatable whether Republicans are doing themselves a favor by opposing the president on issues where he and his allies can appear to claim the high moral ground. But there are two main problems with this strategy for the Democrats. One has to do with how much traction these liberal talking points really have with the electorate in a midterm election year in which Democrats are defending far more competitive House and Senate seats than their opponents. The other goes to whether Democrats are actually serious about helping the unemployed or anyone else disadvantaged by the income inequality they’ve been talking about. If their genuine goal were to really extend the benefits, all they would have to what their media cheerleaders keep telling the GOP they must do in every other context: compromise. If they were to agree to some spending cuts in order to pay for the benefits, it’s likely that even the House GOP would go along with the idea. Yet since they won’t, it is evident that their purpose is not so much to alleviate the travails of the unemployed as it is to outmaneuver the Republicans. As such, any tactical advantage the Democrats may gain may be fleeting.

Conservatives who are urging GOP leaders to stand firm on both the unemployment issue and other “inequality” wedge issues are right. Endless extensions of benefits as well as hiking the federal minimum wage are both economic snake oil. As I wrote last month, such a measure is good for neither the nation’s fiscal health nor, as many serious economists have pointed out, for the long-term prospects of the unemployed since it irresponsibly produces two grim results: it discourages searches for work and transforms what was designed as a stopgap measure into something that is well on its way to becoming a permanent unfunded entitlement. But it is also true that opposing anything that can be portrayed as helping the unemployed is a certain political loser. The more Republicans take the Democrats’ bait and engage in debates about these issues, the more they are merely helping their opponents change the subject from the growing costs and dysfunction of ObamaCare as well as the fact that this administration is a lot better at politics than it is at governing.

But, as even the New York Times’s analysis of this argument noted, although Schumer claimed yesterday on ABC’s This Week that these inequality wedge issues would come back to haunt Republicans in theoretical swing seats in the midterms this coming November, there’s no evidence whatsoever that any of this will have a discernible impact on the results.

More importantly, Obama’s and Reid’s grandstanding on the unemployment issue highlights yet again the major difference between the current Democratic team and Bill Clinton’s far more successful presidency. Clinton was able to beat up Republicans on issues like this almost at will. But at the same time, his keen political instincts and natural governing ability enabled him to cut deals with his GOP opponents to get things done. This is exactly the kind of moment when Clinton would have compromised with his House Republican rivals in order to get something like an unemployment benefits extension and then taken all the credit for it even though the other side would have done as much if not more to make the deal. By contrast, though Obama may score a few points at the Republicans’ expense by refusing to move in their direction, it won’t change a wretched political narrative that is likely to be far more influenced by the more far-reaching impact of the rising costs of health care and insurance over the course of the year.

By acting in this manner, Obama and the Democrats are doing more than failing to achieve their stated objectives; they are also effectively sacrificing the unemployed as expendable pawns in a losing game of political chess. Like the vast population of middle class, younger voters, as well as the elderly all of whom stand to lose as ObamaCare continues its downward spiral, it’s unlikely that the unemployed will thank the Democrats for serving as cannon fodder in their war with the GOP. Taken as a whole, this strategy may turn out to be an even bigger political loser than a Republican decision to stick to conservative principles and to refuse to budge on unemployment or the minimum wage.

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Can Midnight Basketball Be Far Behind?

I wanted to add to Jonathan’s post on the story in the New York Times in which we’re told, “Democratic Party leaders, bruised by months of attacks on the new health care program, have found an issue they believe can lift their fortunes both locally and nationally in 2014: an increase in the minimum wage.” 

To put this in context: Barack Obama is coming off what the Democratic pollster Peter Hart calls “a terribly ragged year.” The president’s approval ratings are near historic lows for a fifth year in office. Public confidence in his honesty and trustworthiness is sinking. His second-term agenda is dead in the water. And his failures, particularly related to his signature domestic achievement, are multiplying. And in the face of this Democrats are turning to the minimum wage as a 2014 strategy?

Apparently so. Representative Steve Israel of New York, the chairman of the Democratic Congressional Campaign Committee, told the Times, “The more Republicans obsess on repealing the Affordable Care Act and the more we focus on rebuilding the middle class with a minimum-wage increase, the more voters will support our candidates.” Dan Pfeiffer, the president’s senior adviser, added, “You can make a very strong case that this will be a helpful issue for Democrats in 2014.”

No you can’t. 

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I wanted to add to Jonathan’s post on the story in the New York Times in which we’re told, “Democratic Party leaders, bruised by months of attacks on the new health care program, have found an issue they believe can lift their fortunes both locally and nationally in 2014: an increase in the minimum wage.” 

To put this in context: Barack Obama is coming off what the Democratic pollster Peter Hart calls “a terribly ragged year.” The president’s approval ratings are near historic lows for a fifth year in office. Public confidence in his honesty and trustworthiness is sinking. His second-term agenda is dead in the water. And his failures, particularly related to his signature domestic achievement, are multiplying. And in the face of this Democrats are turning to the minimum wage as a 2014 strategy?

Apparently so. Representative Steve Israel of New York, the chairman of the Democratic Congressional Campaign Committee, told the Times, “The more Republicans obsess on repealing the Affordable Care Act and the more we focus on rebuilding the middle class with a minimum-wage increase, the more voters will support our candidates.” Dan Pfeiffer, the president’s senior adviser, added, “You can make a very strong case that this will be a helpful issue for Democrats in 2014.”

No you can’t. 

Here’s some free counsel to Messrs. Israel and Pfeiffer: When the history of the 2014 mid-term elections is written, the Affordable Care Act will be a dominant, and maybe the dominant, issue while the minimum wage will not merit even an asterisk. The latter is hardly a topic that is on the hearts and minds of the American people. You can find here and here recent polls from the Gallup organization listing the top concerns of the American people. The minimum wage doesn’t show up; and, in fact, more people are concerned with America becoming a socialist country than are concerned that the minimum wage is too low. 

In addition, the idea that increasing the minimum wage is the key to rebuilding the middle class borders on being comical.

What this is all about is a president and a party who see a “wave election” in the making–one triggered in large part by the politically catastrophic effects of ObamaCare. And so Mr. Obama and his aides and allies are trying to deflect attention away from their failures.

It’s kind of pathetic, really. It not only won’t work; looking to the minimum wage to be their political talisman simply underscores the fact that the modern Democratic Party is politically desperate and intellectually exhausted. 

Can a push for midnight basketball be far behind? 

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Minimum Wage Won’t Save Dems in 2014

Democrats have had a generally miserable 2013, but they think they have the answer to how to make 2014 end on a better note for them. Some on the left may still be holding onto the forlorn hope that ObamaCare will somehow magically be transformed from the millstone around their necks to a popular initiative like Social Security or Medicare. But they are thinking clearly about the political impact of the health-care fiasco. Rather than just bang their heads against that wall, Democrats are looking to change the subject. So rather than try to sell skeptical Americans on the dubious idea of increasing the government’s involvement in health care is a good idea, they appear to be set on convincing the electorate that the key issue facing the country isn’t the looming ObamaCare disaster but the notion of inequality.

As the New York Times reported in a front-page feature yesterday, Democrats seem to think provoking a debate about raising the minimum wage is the magic bullet that will slay Republican candidates in a year in which the GOP is generally favored to make midterm gains in Congress if not take back the Senate in November. The minimum wage proposal doesn’t stand alone, as it is part of an effort by the White House to pivot back to the start of 2013 when the president unveiled a laundry list of liberal ideas in his State of the Union speech. The minimum wage was part of a package that was supposed to be the core of the reelected Obama’s second-term program in which income inequality would, along with climate change, gun control, and an expansion of entitlements, herald a sharp left turn in American politics. But while the president is hoping for a mulligan on a 2013 which was marked by scandals at home and foreign-policy disasters like Egypt and Syria abroad, life is rarely that simple. Though the minimum wage seems like a political winner to his strategists, the problem is that while the bully pulpit of the presidency can help set the country’s political agenda, mere strategy can’t divert voters from the impact of problems that affect the lives of large numbers of citizens. Though a pivot left will please the president’s base, it is no match for the havoc that ObamaCare will have on the nation over the course of 2014.

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Democrats have had a generally miserable 2013, but they think they have the answer to how to make 2014 end on a better note for them. Some on the left may still be holding onto the forlorn hope that ObamaCare will somehow magically be transformed from the millstone around their necks to a popular initiative like Social Security or Medicare. But they are thinking clearly about the political impact of the health-care fiasco. Rather than just bang their heads against that wall, Democrats are looking to change the subject. So rather than try to sell skeptical Americans on the dubious idea of increasing the government’s involvement in health care is a good idea, they appear to be set on convincing the electorate that the key issue facing the country isn’t the looming ObamaCare disaster but the notion of inequality.

As the New York Times reported in a front-page feature yesterday, Democrats seem to think provoking a debate about raising the minimum wage is the magic bullet that will slay Republican candidates in a year in which the GOP is generally favored to make midterm gains in Congress if not take back the Senate in November. The minimum wage proposal doesn’t stand alone, as it is part of an effort by the White House to pivot back to the start of 2013 when the president unveiled a laundry list of liberal ideas in his State of the Union speech. The minimum wage was part of a package that was supposed to be the core of the reelected Obama’s second-term program in which income inequality would, along with climate change, gun control, and an expansion of entitlements, herald a sharp left turn in American politics. But while the president is hoping for a mulligan on a 2013 which was marked by scandals at home and foreign-policy disasters like Egypt and Syria abroad, life is rarely that simple. Though the minimum wage seems like a political winner to his strategists, the problem is that while the bully pulpit of the presidency can help set the country’s political agenda, mere strategy can’t divert voters from the impact of problems that affect the lives of large numbers of citizens. Though a pivot left will please the president’s base, it is no match for the havoc that ObamaCare will have on the nation over the course of 2014.

Republicans, however, should not underestimate the appeal of inequality rhetoric. Though raising the minimum wage is economic snake oil that will do far more harm to business and employment than it will help poor workers, such efforts do speak directly to values that most Americans support. Voters like such laws because they sound as if they speak to fairness and the idea of soaking the wealthy even if the impact will hurt those seeking work at the bottom of the pay scale. As the Times rightly notes, polls consistently show broad support for minimum wage increases and the GOP must be wary of being drawn into a fight over the issue.

But a genuine pivot left requires more than the transitory rhetorical advantages that might be gained from the discussion of minimum wages. Americans like giving the poor a break, but they are far more concerned with the impact of higher taxes, out-of-control government spending, and, most of all, the impact of government interference on the cost and quality of their health care.

The Democrats aren’t mistaken to think they can trick the Republicans to force them to defend economic positions that are fiscally wise but unpopular, such as opposing the minimum wage increase or not extending unemployment benefits. Their mistake lies in misunderstanding the far-reaching impact of the president’s signature health-care plan will have on vast numbers of voters.

At its heart, the talk about income inequality is rooted in a belief that the fuss about ObamaCare is only temporary and more about website glitches and embarrassing presidential sound bites (“If you like your health insurance, you can keep it”) than about the law itself. Liberal strategists are in denial not only about what has already happened on the issue but also what is about to unfold in the coming year. As Lanhee Chen wrote yesterday for Bloomberg News, Democrats are going to like the feedback about the Affordable Care Act in 2014 even less than they did in 2013. The president and his team front-loaded the measure to allow its more popular elements to go into effect before the 2012 election with the less savory elements held back until he was safely reelected. But as bad as things look now in terms of approval for a law that has always been opposed by most Americans, it’s about to get worse:

First, some of ObamaCare’s least popular provisions go into effect in 2014. This includes a new $60 billion tax on health insurers, which will be levied relative to premiums collected and directly passed on to consumers. And, of course, ObamaCare’s requirement that individuals secure health insurance coverage (or pay a tax penalty) kicks in during the coming year as well.

Second, millions of Americans who buy their coverage on the individual market or get it through small employers will be shocked by just how much their premiums go up in 2014. The young and healthy will be especially susceptible to this rate shock, and this in turn will further drive them away from purchasing coverage in future years. Given skyrocketing premiums, the economic incentives for many of these “young invincibles” are aligned against buying coverage in the coming years. But these are also the people that the ACA most needs to be enrolled through its health insurance exchanges to offset the comparatively higher risk and costs associated with insuring the sick and old. These dynamics may lead to even higher premiums in the coming years.

Third, not only will millions of Americans on the individual and small group markets who like their plans be unable to keep them in 2014, but many will experience what it’s like to be unable to continue seeing the doctors they know and trust. As health insurers face pressure to keep costs down while providing the richer package of benefits that ObamaCare mandates, many are limiting their networks of doctors and other health-care providers. A cancer survivor’s opinion article in the Wall Street Journal illustrated the horrible situation that ObamaCare will place some Americans in: Being forced to choose between doctors that have been critical to their care or, in some cases, not having access to any of their existing health-care providers.

Finally, ObamaCare’s Medicare cuts will continue to hurt senior citizens. For the 14 million people enrolled in the Medicare Advantage program, the ACA’s $200 billion in cuts over the next 10 years will accelerate in 2014 and have tangible impacts on beneficiaries. Insurers predict that seniors in Medicare Advantage plans will see higher premiums, increased cost-sharing for primary and specialist visits, and limits on the doctors they can see. Although the ACA is not solely responsible for the headwinds the Medicare Advantage program faces, it will (and should) shoulder most of the blame.

When combined, these four elements set the stage for a political tsunami that will drown any effort to distract the public with talk about inequality. Democrats have assumed that once it was implemented, ObamaCare would be as popular as Social Security and Medicare. But they are only just starting to grasp the fact that unlike those programs that spread the wealth with few, if any, voters being worse off for their passage, the misnamed Affordable Care Act creates a vast population of Americans who are going to be hurt by the law. In 2014, their number will grow, not shrink. The first year of the president’s second term ended with ObamaCare as the top political story of the year. The likelihood that it will remain so in 2014 spells big political trouble for Democrats whose fate will be determined more by this fiasco than any fights they can pick about the minimum wage.

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Obama’s Inequality Prescription: Cronyism, Generational Theft, and Massive Debt

President Obama’s speech yesterday on inequality was a combination of the cynicism and panic that have governed his actions lately. Panic, because the speech was an obvious populist pep rally to distract from the massive economic disruptions his failing and flailing policies–at the moment, chiefly ObamaCare–are causing. And cynicism, because his opinion of his audience is low enough that he thinks the transparent ploy will work on them.

The pointlessness of the speech was clear when he said this:

Now, you’ll be pleased to know this is not a State of the Union Address.  (Laughter.)  And many of the ideas that can make the biggest difference in expanding opportunity I’ve presented before.  But let me offer a few key principles, just a roadmap that I believe should guide us in both our legislative agenda and our administrative efforts.

He’s giving them fair warning that he’s got nothing new to offer and his prescriptions will mostly consist of sloganeering–another chapter, in other words, of the bumper-sticker presidency. And that is indeed what followed. But there was also a noteworthy element to the speech: after five years of running the country, the president has developed no creative ideas and shown no willingness to think outside the conventional liberal box, even when those ideas are clearly failing.

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President Obama’s speech yesterday on inequality was a combination of the cynicism and panic that have governed his actions lately. Panic, because the speech was an obvious populist pep rally to distract from the massive economic disruptions his failing and flailing policies–at the moment, chiefly ObamaCare–are causing. And cynicism, because his opinion of his audience is low enough that he thinks the transparent ploy will work on them.

The pointlessness of the speech was clear when he said this:

Now, you’ll be pleased to know this is not a State of the Union Address.  (Laughter.)  And many of the ideas that can make the biggest difference in expanding opportunity I’ve presented before.  But let me offer a few key principles, just a roadmap that I believe should guide us in both our legislative agenda and our administrative efforts.

He’s giving them fair warning that he’s got nothing new to offer and his prescriptions will mostly consist of sloganeering–another chapter, in other words, of the bumper-sticker presidency. And that is indeed what followed. But there was also a noteworthy element to the speech: after five years of running the country, the president has developed no creative ideas and shown no willingness to think outside the conventional liberal box, even when those ideas are clearly failing.

For example, the president noted the importance of education, which is true, and then said this: “We know it’s harder to find a job today without some higher education, so we’ve helped more students go to college with grants and loans that go farther than before.” What the federal government’s loan program has done, as we know, is raise tuition prices even more and further inflate a bubble that puts the economy in more danger:

Federal Reserve Chairman Ben Bernanke dismissed these concerns by saying that most of the money in the student-loan sector is federal money, which just means taxpayers – rather than lending institutions – will take the initial hit. But the board of governors makes a salient point as student loan debt soars to $1 trillion and exceeds the nation’s level of credit-card debt.

“The bankers said student lending shares features of the housing crisis including ‘significant growth of subsidized lending in pursuit of a social good,’ in this case higher education instead of expanded home ownership,” according to that Bloomberg report. “The lending has put upward pressure on tuition, just as the mortgage lending boom led to rising home prices, they said, calling both examples of a ‘lack of underwriting discipline.’”

For my entire life, I’ve heard policy makers insist that there is insufficient funding for education and that getting a college degree is the pathway to a better life. But as the bankers noted, the sea of student-loan money artificially boosts the cost of tuition, which creates a new cycle of indebtedness by students. Higher tuition makes “pay-as-you-go” a less-likely option.

The president also returned to a recent hobbyhorse, the minimum wage. Here, he unintentionally hurts two of his main targets of relief, students and workers, in one shot. Obama said:

And as we empower our young people for future success, the third part of this middle-class economics is empowering our workers.  It’s time to ensure our collective bargaining laws function as they’re supposed to — (applause) — so unions have a level playing field to organize for a better deal for workers and better wages for the middle class. …

And even though we’re bringing manufacturing jobs back to America, we’re creating more good-paying jobs in education and health care and business services; we know that we’re going to have a greater and greater portion of our people in the service sector.  And we know that there are airport workers, and fast-food workers, and nurse assistants, and retail salespeople who work their tails off and are still living at or barely above poverty.  (Applause.)  And that’s why it’s well past the time to raise a minimum wage that in real terms right now is below where it was when Harry Truman was in office.

But empowering union members isn’t the same as empowering workers. In many cases, it’s the opposite. Raising the minimum wage prices certain workers out of some industries, further cementing employed union workers’ job security at the expense of those on the lower rungs of the workforce. In other words, the president will reduce employment to reward his campaign allies. This is cronyism dressed up as moral governance, and it’s both shameful and par for the course for elected Democrats.

And it gets worse. Unions whose workers don’t make minimum wage support the president’s minimum wage hike for another reason. As Richard Berman explained in the Wall Street Journal when Obama last floated a push for a minimum wage hike: “The labor contracts that we examined used a variety of methods to trigger the increases. The two most popular formulas were setting baseline union wages as a percentage above the state or federal minimum wage or mandating a flat wage premium above the minimum wage.”

So hiking the minimum wage can automatically reward Obama’s union allies in a number of ways. And of course empowering unions, especially through some of the prevailing collective bargaining frameworks, can also harm students. State-negotiated union education contracts aim for a degree of wage and benefit parity, which can be affordable (though often still unnecessary) for some school districts but plainly outrageous for others. The wages and benefits can’t be cut when budgets fail, so students lose out on books, computers, after-school activities, tutors–anything that doesn’t impact the unions but quite obviously detracts from the students.

Cronyism, generational theft, and massive debt are what the president has to offer on the economic front. He should be glad the speech flew under the radar.

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Other People’s Money: The Minimum Wage

Steve Coll has a comment in this week’s New Yorker calling for a higher federal minimum wage. He points out that it’s awfully hard for a family of four to live on the current minimum wage, which would produce a family income of about $15,000 a year. That is certainly true, but Mr. Coll leaves out a few things. A family of four with an annual income of $15,000 would be eligible for food stamps amounting to $7,584 and an earned income tax credit of $5,372. That raises the family income to $27,911, which is quite an improvement. The family would also be eligible for Medicaid, school lunch and breakfast programs, perhaps housing assistance and other forms of help. He also leaves out the fact that very, very few people earning the minimum wage are the sole breadwinners of a family of four. Most are entry-level employees, often teenagers, with no developed skills.  Most people who take a job at the minimum wage are earning above that level within a year, having learned marketable skills.

To be polite, Mr. Coll is being tendentious. To be less polite he is being grossly intellectually dishonest.

The minimum wage is a favorite liberal hobbyhorse, heavily promoted by labor unions. It is typical progressivism: a liberal politician (or journalist) says, in effect, “See that man over there? He needs help.” Then he points to an employer and says, “You, help him.” Finally, he points to himself and, addressing the man needing help, says, “Don’t forget where the help came from.”

But is the minimum wage a good idea?

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Steve Coll has a comment in this week’s New Yorker calling for a higher federal minimum wage. He points out that it’s awfully hard for a family of four to live on the current minimum wage, which would produce a family income of about $15,000 a year. That is certainly true, but Mr. Coll leaves out a few things. A family of four with an annual income of $15,000 would be eligible for food stamps amounting to $7,584 and an earned income tax credit of $5,372. That raises the family income to $27,911, which is quite an improvement. The family would also be eligible for Medicaid, school lunch and breakfast programs, perhaps housing assistance and other forms of help. He also leaves out the fact that very, very few people earning the minimum wage are the sole breadwinners of a family of four. Most are entry-level employees, often teenagers, with no developed skills.  Most people who take a job at the minimum wage are earning above that level within a year, having learned marketable skills.

To be polite, Mr. Coll is being tendentious. To be less polite he is being grossly intellectually dishonest.

The minimum wage is a favorite liberal hobbyhorse, heavily promoted by labor unions. It is typical progressivism: a liberal politician (or journalist) says, in effect, “See that man over there? He needs help.” Then he points to an employer and says, “You, help him.” Finally, he points to himself and, addressing the man needing help, says, “Don’t forget where the help came from.”

But is the minimum wage a good idea?

Labor unions love it for a very simple reason, even though few unionized workers earn the minimum wage: labor contracts are often predicated on the minimum wage, with the bottom tier of workers earning 1.5 or 2 or 3 times the minimum wage. So if the minimum wage goes up, so do the wages of all the workers covered by such a contract. Labor leaders may shed crocodile tears for the poor and downtrodden, but what they care about—because that’s what they’re paid to care about—are their often well-paid workers.

Steve Coll points out that a higher minimum wage polls well, even among Republicans. But this sort of polling is junk polling, good only for producing rhetorical ammunition for the chattering classes, not judging real public opinion. The overwhelming majority of people don’t think deeply about matters of public policy, so asking the right question will always produce the desired answer. Even if the poll is honest it will elicit, at best, an algorithmic response not a considered judgment.

But marshaling the opinions of the self-interested and the ill informed is not much of a test for public policy. Does the minimum wage make economic sense? The answer is no. It’s price fixing (fixing the minimum price of labor) and price fixing is always economically pernicious. Set the price too low, and instant scarcity results, such as affordable housing in cities with rent controls. Set it too high and instant glut happens, such as with, well, the minimum wage. In economics, a transaction is, by definition, “an exchange of commodities between two parties, to the economic benefit of both parties.” If an employer has to pay $8 an hour in wages, he must get $8 an hour in work from the employee or he won’t hire him. Could that be a reason teenage unemployment right now is 22.7 percent and unemployment among black teenagers is 36 percent?

Is there a better solution for the few people who are working full-time, trying to support a family, on the minimum wage? Yes, and it’s been in place for the last forty years, the earned income tax credit mentioned above. It is a refundable tax credit for people earning less than a “living wage.” (A refundable tax credit is one that is paid to the tax filer even if his tax liability is zero.) If the wages produced by a free market are not sufficient to produce a living wage, the EITC supplements those wages until, as skill levels improve and wages thus increase, the wages paid produce a living wage. It incentivizes the unskilled to develop the skills needed to make a living on their own without distorting the free market and producing untoward results, such as horrendous teenage unemployment.

Of course, from the politician’s viewpoint, the EITC would have to come out of tax revenue, requiring either skimping on other types of spending, raising taxes or worsening the deficit. Any of those choices might imperil the politician’s reelection. Or, of course, the politician could find ways to operate the government more efficiently, freeing up the needed revenue.

But that last option would take hard political work. It’s a lot easier to be generous with someone else’s money, secure in the certainty that liberal journalists will carry the necessary water.

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Fast Food Protests Divorced From Reality

If you were in the mood for a fast-food meal yesterday or today in several parts of the country, you were in for a surprise: loud protests outside the doors of some major chain restaurants. Several chains in metropolitan areas were affected by protests demanding higher wages at establishments like McDonald’s and Burger King. A local free daily newspaper in New York City, amNewYork, interviewed one of the workers leading the charge:

“When you have a family and work in the fast food industry, you just have to forget about it,” said Greg Reynoso, 27, a former Dominos Pizza employee who now organizes his peers.

The question that comes to mind first is this: Who said anyone could or should support an entire family on the salary of a fast-food employee? Has anyone ever reasonably made that promise? 

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If you were in the mood for a fast-food meal yesterday or today in several parts of the country, you were in for a surprise: loud protests outside the doors of some major chain restaurants. Several chains in metropolitan areas were affected by protests demanding higher wages at establishments like McDonald’s and Burger King. A local free daily newspaper in New York City, amNewYork, interviewed one of the workers leading the charge:

“When you have a family and work in the fast food industry, you just have to forget about it,” said Greg Reynoso, 27, a former Dominos Pizza employee who now organizes his peers.

The question that comes to mind first is this: Who said anyone could or should support an entire family on the salary of a fast-food employee? Has anyone ever reasonably made that promise? 

Traditionally, one envisions a fast food employee as a teenager working their first job. The marketing strategy of these chains is that they are an inexpensive quick stop for lower and middle-income Americans to feed themselves and their families. Menu options are made affordable in many ways, not least of which is by keeping labor costs at a minimum. Any added costs, including labor, would then be passed down to the customer via increased prices, making these cheap meals unaffordable to those who need to watch every dime and dollar. If restaurants are unable to attract customers with their new, higher, price points the jobs of those striking as well as those who are not would disappear. 

The group behind the latest protests, Fast Food Forward, calling for the minimum wage increase from $7.25 an hour to the laughable amount of $15 an hour in New York City, are no strangers to organized protest. The director of Fast Food Forward, Jonathan Westin, also runs New York Communities for Change (NYCC), the renamed and reorganized descendent of the now defunct ACORN, which was disgraced and brought down by an expose that made the activist James O’Keefe famous. In late 2011 NYCC was rocked by a Fox News report linking the group with paid protesters at Occupy Wall Street. At the time Fox News reported:

“They reminded us that we can get fired, sued, arrested for talking to the press,” the source said. “Then they went through the article point-by-point and said that the allegation that we pay people to protest isn’t true.”

 “‘That’s the story that we’re sticking to,’” Westin said, according to the source.

The source said staffers at the meeting contested Westin’s denial:

“It was pretty funny. Jonathan told staff they don’t pay for protesters, but the people in the meeting  who work there objected and said, ‘Wait, you pay us to go to the protests every day?’ Then Jonathan said  ‘No, but that’s your job,’ and staffers were like, ‘Yeah, our job is to protest,’ and Westin said, ‘No your job is to fight for economic and social justice. We just send you to protest.’

“Staff said, ‘Yes, you pay us to carry signs.’ Then Jonathan says, ‘That’s your job.’ It went on like that back and forth for a while.”

Late last year and in April of this year the same kind of protests were held by Fast Food Forward, even sporting the exact same signs, with overt references to unionization in addition to $15/hour wages. In last year’s protest the Service Employees International Union (SEIU) was involved and in this year’s protests, their Facebook page has posted several times about the protests as well as lending their public support.

Is this a grassroots effort sweeping through the kitchens of fast-food restaurants across New York City and nationwide? Despite the full-page treatment in newspapers and stories on cable news to a movement with a large number of petition signatures and loud protests, it doesn’t appear to be. If it was, perhaps we would have heard about fast-food chains shutting down due to understaffing yesterday. Instead, we were treated to images of dozens of familiar prefabricated placards outside restaurants, carried through the city by a group linked to paying protesters in the recent past.

What’s in it for the groups organizing and perhaps even paying for these protests? If even a fraction of these restaurants were able to unionize, the payout for SEIU would be enormous. How would the workers who are supposedly leading this movement fare? Many of these employees, who were already facing reduced hours thanks to the union-supported ObamaCare, would likely see at least part of any raise going toward union dues. Restaurants, already operating on tight profit margins, would be forced to either close or raise prices in order to make up for increased labor costs, making meals unaffordable for many.

If restaurants were forced to close under the increased weight not only of increased labor costs, but also new ObamaCare regulation requirements, employees wouldn’t be asking for raises, they’d be asking for any job at all. Employees and other individuals in their income bracket would not only be left unemployed, but also without inexpensive meal options for their families. With all of this in mind one has to wonder: Who are these protest groups really advocating for? 

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The Minimum Wage Folly

There are few policy prescriptions dearer to the hearts of liberals than the minimum wage. In theory it provides a “living wage” to those at the bottom of the economic pyramid and what could be wrong with that? Indeed, argue against it and the average liberal will look at you as though you were Mr. Bumble dismissing Oliver Twist’s request for some more porridge.

The concept dates back to the 1890’s when it was first used in Australia and New Zealand. American states first set minimum wage requirements in 1912, although the Supreme Court ruled them unconstitutional as an impairment of contract. The federal minimum wage appeared in 1938 and has been raised erratically ever since to keep pace with inflation. The New York Times on Sunday had a lead editorial calling for a raise in the minimum wage from $7.25 to $9.00 an hour, a whopping 24 percent increase. Paul Krugman chimed in the same day with a theoretical justification. He admits that it runs contrary to economic theory:

The question we need to ask is: Would this be good policy? And the answer, perhaps surprisingly, is a clear yes. Why “surprisingly”? Well, Economics 101 tells us to be very cautious about attempts to legislate market outcomes. Every textbook — mine included — lays out the unintended consequences that flow from policies like rent controls or agricultural price supports. And even most liberal economists would, I suspect, agree that setting a minimum wage of, say, $20 an hour would create a lot of problems. But that’s not what’s on the table. And there are strong reasons to believe that the kind of minimum wage increase the president is proposing would have overwhelmingly positive effects.

In other words, Professor Krugman is at odds with columnist Krugman, hardly for the first time.

But is it good public policy? I side with Professor Krugman.

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There are few policy prescriptions dearer to the hearts of liberals than the minimum wage. In theory it provides a “living wage” to those at the bottom of the economic pyramid and what could be wrong with that? Indeed, argue against it and the average liberal will look at you as though you were Mr. Bumble dismissing Oliver Twist’s request for some more porridge.

The concept dates back to the 1890’s when it was first used in Australia and New Zealand. American states first set minimum wage requirements in 1912, although the Supreme Court ruled them unconstitutional as an impairment of contract. The federal minimum wage appeared in 1938 and has been raised erratically ever since to keep pace with inflation. The New York Times on Sunday had a lead editorial calling for a raise in the minimum wage from $7.25 to $9.00 an hour, a whopping 24 percent increase. Paul Krugman chimed in the same day with a theoretical justification. He admits that it runs contrary to economic theory:

The question we need to ask is: Would this be good policy? And the answer, perhaps surprisingly, is a clear yes. Why “surprisingly”? Well, Economics 101 tells us to be very cautious about attempts to legislate market outcomes. Every textbook — mine included — lays out the unintended consequences that flow from policies like rent controls or agricultural price supports. And even most liberal economists would, I suspect, agree that setting a minimum wage of, say, $20 an hour would create a lot of problems. But that’s not what’s on the table. And there are strong reasons to believe that the kind of minimum wage increase the president is proposing would have overwhelmingly positive effects.

In other words, Professor Krugman is at odds with columnist Krugman, hardly for the first time.

But is it good public policy? I side with Professor Krugman.

Like rent control, the minimum wage is price fixing, setting the minimum price at which labor can be hired, just as rent control sets the maximum price at which living space can be rented. Both of these ideas are rooted in a pernicious medieval notion called the just price, the idea that everything has a proper price, one at harmony with the universe. But there is no more any such thing as a just price than there is a just temperature for a Sunday afternoon in April. Both result from the interaction of natural forces, with a result that we can like or dislike but have to accept.

Labor is a commodity, just like anything else bought and sold in the marketplace, from legal services to pork bellies. And economies consist of the exchange of commodities to the benefit of both parties. So if the employer cannot receive from an unskilled employee work worth what he is required to be paid, the employer will not hire him. No one, after all, willingly trades a ten-dollar bill for a five. 

Very few minimum-wage workers are heads of household. Most are teenagers just entering the jobs market or earning extra money after school. And teenage unemployment right now is horrendous, 23.4 percent. To raise the minimum wage by 24 percent is to guarantee that that rate will rise.

So why do liberal politicians like the minimum wage concept so much? There are two basic reasons. One is that many labor union contracts specify wage rates that are multiples of the minimum wage. Raise the latter, and you raise the former, much to the benefit of the unions that so generously fund Democratic candidates. The other is that the minimum wage is a benefit that politicians don’t have to pay for. Essentially, the politician gets to say, “See A over here? He needs help. You, B, pay him more money.” He then points to himself and says, “And you, A, don’t forget where the money came from on Election Day.”

Is there a better solution? Sure, there’s one already in place, the Earned Income Tax Credit. It is a refundable tax credit that is paid to low wage individual workers (principally those with qualifying children), raising their living standard by multiplying their earned income. Employers get to pay the market wage for labor, workers get to learn skills and experience the dignity of work. The problem, of course, is that the EITC adds to total federal outlays and thus the deficit.

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