Category Archives: Class Mobility

The Old-Fashioned Regulatory State Has Failed

Today, in pitching the Democrats’ new economic plan, Sen. Charles Schumer (D-NY) claimed that “old-fashioned capitalism has failed“. In discussing the plan further, it became clear that corporate concentration was a key concern to Democrats. This should be a concern for all Americans. The question is, can the Democrats own up to the fact that they are responsible for the problem?

Capitalism and competition do not create monopolies. Far from it. Capitalism kills companies that fail to adapt. Blockbuster? Gone. Kodak? A shadow of its former self. Sears? Hemorrhaging money and shedding valuable assets in a death spiral. Motorola? Sony? Borders? Blackberry? Sun? Circuit City? Radio Shack? The list goes Here's lookin' at you, Comcast!on.

Then there are companies that are so awful to their customers that they deserve to be run out of business. Comcast. AT&T. Wells Fargo. Charter. Sprint. Bank of America. Look at the most reviled companies in America and you’ll notice the visible hands of government shielding them from competition.

Wonder why cable companies are so routinely hated? They’re literally the only game in town. In most parts, localities have granted cable companies monopolies. Even when there is competition, new entrants have to negotiate for access utility pole by utility pole due to Federal regulations, though this latter may be changing.

Even when regulators aren’t directly handicapping new entrants, regulations still favor the incumbents. To put it very simply, the bigger the company, the more lawyers it can afford. A startup has to run very lean, focusing all its money and energy into pulling market share away from an established name. Every time they have to spend energy filing paperwork, every time they have to consult a lawyer, the incumbents win a round.

Nobody likes this state of affairs more than progressives. Comcast is exactly the sort of company progressives want: big, stable, and focused on keeping the regulators and politicians happy. It doesn’t matter that their customers hate them with a passion and are desperate for alternatives.

By putting more power in the hands of progressives and regulators Democrats are promising more Comcast, AT&T, and Wells Fargo. A better deal indeed.

Want To Bring Jobs Back To America? Cut Taxes And Regulations

Originally published at The New Minutemen.

Demagogues like Donald Trump and Bernie Sanders are campaigning based on the promise to bring jobs back to America. Both blame others (Trump blames foreigners and Sanders blames the rich) for the plight of the middle class. Like many demagogues before them, both men are drawing much support.

However, neither demagogue points out the real reason why companies won’t bring jobs back to America. The country’s tax and regulatory structure is internationally uncompetitive and strangling of small businesses.

The U.S. income tax code is complicated and is harming economic growth. It is in dire need of reform, especially since it is what most small businesses pay. We need to move away from using it to punish financial success or for social engineering and simply use it to collect revenue. It needs to be easy to understand, with few deductions, and fair.

The corporate tax code is even more of a disaster. The U.S. has the second highest rate in the world at 40% (35% Federal rate + average of states.) Our economic competitors have corporate rates that are much lower. If given a choice, corporations are going to head overseas because the tax costs are much lower.

What America needs is tax and regulatory reform, not cheap demagoguery. What I propose is simple, reduce corporate and income tax rates down to 17% and make it flat. The first $5,000 is taxed 17% so that everyone will have the skin in the game. After that, the next $5,001-$55,000 is tax-free. Then every penny over $55,000 is taxed 17%.

Not just taxes need to be addressed, but also regulations. Thankfully, there’s already a piece of legislation already designed to help on that front. The REINS Act needs to be passed into law. This would require Congress to vote on each proposed regulation that has an economic impact of $100 million or more.

If we fix America’s tax and regulatory code, the jobs will come back because it will be less expensive for companies to do business in America. That goes for both big and small businesses.

But you won’t hear this from the demagogues Trump and Sanders because both men are big government statists. To get America moving, let’s stop listening to these two and shrink the size of government. Only then will companies bring jobs back to America.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at The Hayride.com and Rare. You can also find me over at the R Street Institute.

The Minimum Wage Lie

When “progressives” say “the minimum wage hasn’t kept up with inflation”, they’re lying.

Not shading, the truth, exaggerating, or interpreting things differently… they are flat out lying.

… And what’s more, the ones who made up the lie in the first place, know they’re lying (the rest mostly just parrot what they’ve been told).

What exactly would “keeping up with inflation” mean?

The minimum wage has been $7.25 an hour since 2009.

In 1938, when the federal minimum wage was established, it was $0.25 an hour. In constant dollars (adjusted for inflation) that’s $4.19 as of 2014.

So, not only has the minimum wage kept up with inflation, it’s nearly doubled it.

Ok.. well what about more recently?

Minimum wage 15 years ago in 2000: $5.15, or $7.06 in constant dollars

Minimum wage 20 years ago in 1995: $4.25, or $6.59 in constant dollars.

Minimum wage 25 years ago in 1990: $3.80, or $6.87 in constant dollars.

Minimum wage 30 years ago in 1985: $3.30, or $7.25 in constant dollars.

Funny… that’s exactly what it is today… How shocking.

So, for 30 years, the minimum wage has not only kept up with inflation, for most of that time it’s been ahead of it.

So, how are they lying?

The way “progressives” claim minimum wage hasn’t been “keeping up with inflation”, is by comparing today, with the highest level it has ever been; almost 50 years ago, in 1968, when the minimum wage went to $1.60 an hour ($10.86 in constant dollars).

This was a statistical anomaly.

There’s a long and loathsome tradition of lying with statistical anomalies.

At $1.60 an hour, the minimum wage in 1968 was a huge 20% spike from what it had been just 3 years before in ’65, more than 40% above what it had been in 1960, and nearly double what it had been 12 years before in 1956 when politicians started throwing minimum wage increases faster and bigger (again, all in constant dollar terms. The minimum wage at the beginning of 1956 was about $6.30 in constant dollars)

In constant dollar terms, the minimum wage today, is about the same as it was in 1962 (and as I showed above, 1985).

It just so happens that from 1948 to 1968 we had the single largest wealth expansion over 20 years, seen in the history of the nation (about 5-8% annual growth)… Which then crashed hard starting at the end of ’68.

From 1968 to 1984, the U.S. had 16 years of the worst inflation we ever saw, and the purchasing power of ALL wages fell significantly, as wages failed to come even close to keeping up with inflation (we saw 13.5% inflation in 1980 alone, which is about what we see every 4 years today).

It took until 1988 for real wages to climb back to their 1968 constant dollar level, because we were in a 20 year long inflationary recession, complicated by two oil shocks and a stock market crash (actually a couple, but ’87 was the biggest one since ’29).

However, the minimum wage was boosted significantly in that time period, far more than other wages rose, and stayed above the 1962 water mark until the end of that high inflationary period in 1984, declining slightly until 1992, then spiking and declining again until 1997 etc… etc…

By the by… household income in 1968? appx. $7,700, which is about the same as today in constant dollar terms… About $51,0000 (about 8% more than it was in 1967, at $47k). Which is almost exactly what it was in 1988 as well. Household income peaked in 1999 and 2007 at around $55,000, and troughed in 1975 at around $45,000

Of course, income was on a massive upswing from 1948 to 1968 (and in fact had been on a massive upswing overall since 1896 with the exception of 1929 through 1936). In 1941 household income was about $1500 ($24,000 constant), in 1948 $3,800 ($37,000 constant).

Like I said, it was the single greatest expansion in real income and wealth over a 20 year period, in American history.

1968 was a ridiculous historical anomaly… Not a baseline expectation.

So, From 1964 to 1984, the minimum wage was jacked artificially high (proportionally far above median wage levels), and “progressives” chose to cherry pick the absolute peak in 1968 from that part of the dataset, in order to sell the lie.

A living wage?

As to the minimum wage not being a living wage… No, of course its not. It never was, its not supposed to be, and it never should be.

The minimum wage is intended to be for part time, seasonal workers, entry level workers, and working students.

Only about 4% of all workers earn the minimum wage, and less than 2% of full time workers earn the minimum wage.

Minimum wage is what you pay people whose labor isn’t worth more than that. Otherwise everyone would make minimum wage. But since 98% of full time workers can get more than minimum wage, they do so.

What should the minimum wage be?

Zero.

Wait, won’t everyone become poor suddenly?

No, of course not. Literally 98% of full time workers already get more than minimum wage. If we abolished the minimum wage, most of them wouldn’t suddenly be paid nothing.

Wages should be whatever someone is willing to work for. If you’re willing to work for $1, and someone else isn’t, you get the job. On the other hand, if an employer is offering $10 and no-one is willing to take the job for that, they need to offer $11, or $12, or whatever minimum wage someone is willing to take.

If you don’t want to work for $7.25 an hour, don’t take the job. If nobody offers you more than that, too bad, but that’s all your labor is worth.

If you are willing to work for someone for $7.00, and they’re willing to pay you $7.00, what right does some “progressive” have to tell either of you, that you can’t work for that much?

No-one is “exploiting the workers”, if those workers took the jobs voluntarily, and show up for work voluntarily… If all you can find is a job for less than what you want to work for, you’re not being exploited, THAT’S ALL YOUR LABOR IS WORTH TO THOSE EMPLOYERS.

You may think your labor worth more, but things aren’t worth what you want them to be worth, they’re only worth what someone else is willing to pay for them.

But let’s be generous…

All that said, I don’t think we’ll be able to eliminate the minimum wage any time soon.

So, to those “progressives” who would say “let’s make the minimum wage keep up with inflation”, I agree wholeheartedly… Let’s make it $4.19.

Oh and if you don’t believe me on these numbers, they come from the department of labor, the department of commerce, and the census. If I’m lying to you, it’s with the governments own numbers… the same ones “progressives” are lying to you with. 

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Do Rich High School Dropouts Do “As Well” As Poor College Grads?

Poor Grads & Rich Dropouts

That’s the claim of Matt O’Brien at Washington Post’s Wonkblog, in a post titled (unsurprisingly), “Poor kids who do everything right don’t do better than rich kids who do everything wrong.” His main point:

Even poor kids who do everything right don’t do much better than rich kids who do everything wrong. Advantages and disadvantages, in other words, tend to perpetuate themselves. You can see that in the above chart, based on a new paper from Richard Reeves and Isabel Sawhill, presented at the Federal Reserve Bank of Boston’s annual conference, which is underway.

Specifically, rich high school dropouts remain in the top about as much as poor college grads stay stuck in the bottom — 14 versus 16 percent, respectively. Not only that, but these low-income strivers are just as likely to end up in the bottom as these wealthy ne’er-do-wells. Some meritocracy.

So the anger is that some rich dropouts still succeed and make it to the top, and some poor college grads remain on the bottom. Or, to annotate a graph as O’Brien did:

Poor Grads & Rich Dropouts

This, however, is a terrible analysis.

First and foremost, it doesn’t live up to his title. Poor kids who do everything right do quite a bit better than rich kids who do “everything” wrong. Only 20% of rich kids who don’t graduate high school make it into the top 40% of income earners. 41% of poor college grads make it into those upper quintiles. Almost 70% of poor college grads make it into the top 60% of income earners. Only 49% of rich HS dropouts do so. The other half of rich high school dropouts end up in the bottom two quintiles, as you’d expect from high school dropouts.

Now, nobody will argue that poor kids don’t have an uphill battle from day 1. And nobody will argue that rich kids have a multitude of advantages in front of them. Their path to success is easier. There are many reasons for this, and I’m not going to go into them here, but suffice to say that I agree with the simple premise that it’s harder to succeed when you start out poor.

But what the graph that O’Brien uses to prove his point is actually proving that putting your nose to the grindstone, pushing yourself to enter and complete college, is important whether you’re rich or you’re poor. If rich HS dropouts were successful at a higher rate than poor college grads, I might agree with this analysis. But they’re not. Poor college grads do measurably better than rich HS dropouts.

Yes, some poor college grads still end up on the bottom, and some rich HS dropouts still succeed. But how many, and why? Compare the above chart with the below (also from the Reeves/Sawhill paper):

Overall mobility

Social Mobility Matrix, US Overall

In this chart, you can see that the bottom quintile–60% of them, in fact–stayed in the bottom two quintiles. Only 23% made it to the top two quintiles. And the top quintile–56% of them–remained in the top two quintiles. Only 25% fell to the bottom two quintiles. So overall, completely outside of any educational data whatsoever, the bottom remained on the bottom and the top remained on the top.

But if you’re poor, and you graduate college, you flip the script. Your odds are very good to go from the bottom quintile to middle class or better. And if you’re rich but don’t graduate college, your odds are better that you’re going to end up in lower middle class or worse. It won’t hold true for everyone, as there are strong cultural factors in play. But those cultural factors are not overwhelming. Demography DOES NOT equal destiny.

That’s meritocracy.

Community Conservatism – Reviving the Middle Class Economy

median_income

Governing for a Healthy Middle Class Economy

Conservatives do not believe that the government can “create” jobs directly. This canard of the left does nothing but destroy market-driven, sustainable jobs at the expense of increasing the national debt and attaching an anchor to GDP growth in exchange for short term government employment and expanded private sector government influence. That doesn’t mean that a conservative Congress can’t stand for job creation. The way we get there is by providing the modern infrastructure, economic freedom, and competitive tax code that attract, rather than repel the world’s wealth. We want to decrease the cost of doing business here at home and focus government resources on business-supportive roles, rather than coercive ‘partnerships’. It begins with a smarter tax code.

A) Pass Corporate Tax Reform (dare Obama to veto)

I don’t recommend settling for half-measures here and I recommend putting this near the top of the agenda for 2015. Obama has, on multiple occasions, put Corporate tax reform in his state of the union address in his 6 years in office (five addresses, 4 mentions). Corporate tax reform that accomplishes the closing of certain loopholes, the ending of certain forms of corporate welfare, and the reduction of rates to something that competes with the rest of the developed world has broad, bipartisan support among the voting middle class. In Washington, such measures have met with stiff resistance from corporate lobbies who do not want to see the corporate tax base broadened to include them, specifically (through the removal of loopholes). Let the GOP stand for the voters, not for special interests, and pass comprehensive corporate tax reform that does the following:

• Cuts the corporate tax rate to 25% at most
• Creates a two-tiered capital gains tax bracket, where all capital gains are taxed at a much lower rate below $250,000 each year
• Excises many of the tax-sheltering loopholes used by the biggest corporations to avoid paying; in particular, the shelters to profits earned overseas by American companies
• Gives corporations a ‘tax holiday’ to repatriate foreign capital until January of 2021
• Creates a lower corporate tax rate for wealth generated by manufacturing concerns – 15%, perhaps

There are, I’m certain, other great ideas that could be included in a sweeping change like this, and we’re all ears. This is just a start. The goal is to create an environment that encourages businesses to take risks and expand their workforce here at home without taking the punitive approach championed by Obama (penalize companies that keep their money overseas, rather than improve the economic climate at home).

B) Pass the REINS Act (obtain Obama’s veto)

REINS is a relatively simple piece of legislation passed in the GOP-controlled house and left to gather dust in Harry Reid’s file cabinet. It requires congress to approve all regulations in excess of $100M as scored by the Congressional Budget Office each year. If said regulations cannot be approved, they are immediately stricken. This is good policy on so many levels, not the least of which is that it maintains the separation of the non-political government agencies from the political process in the drafting of public policy regulations but forces Congress to exercise some oversight on those regulations that are particularly costly. We recognize that regulatory science should not be trapped by the political process, but we also believe that unelected agencies should not have carte blanche to pass regulatory rules without oversight that serve as a huge burden to economic growth. It will give the voters some ability to hold their representatives responsible for the regulatory state and encourage those who draft said regulations to minimize their costs or garner broad public support for their necessity. It will also make public the CBO scoring of the cost of every major regulation, helping the public to get a sense for the true costs and benefits of each.

C) Return the Full-Time Workweek to 40 Hours

We’ll talk more about the Affordable Care Act when we get to healthcare, but one of the most pernicious things the ACA accomplished was to effectively reduce the American workweek to 30 hours in the eyes of the law. Democrats supported this concept to avoid the tendency of corporations to get 39 hours of work per week out of employees to avoid having them counted as full time and thus be forced to offer benefits. The problem, of course, is that reducing the workweek to 30 hours meant a lot of people just got cut down to 29 hours. If you’re a struggling poor or working class American, this tends to drive you to take two part time jobs and you end up working more and still not getting benefits, or working drastically less and not making enough money to survive. If all else fails, regarding the ACA, increasing the workweek back to 40 hours at least offers some relief for people in this situation (and the CBO projects a big surge in part time labor under the ACA as it currently stands).

D) Expand the Earned-Income Tax Credit

Right now, if you earn less than $11,000 for an individual or $88,000 for a family filing jointly, and are legally eligible for that work, you can claim an earned-income tax credit (variable by family size and earnings). The EITC is good policy for the poor and working classes and should be expanded with increased credit sizes (perhaps another 30-40% proportionally) and availability (up to incomes of less than $125,000 for a family filing jointly). Make this revenue neutral by creating a “super-wealthy” tax bracket (>$1,000,000) that is taxed at a slightly higher rate and by eliminating eligibility for certain tax credits for people in this new upper tax bracket. Normally, the GOP is not associated with eve the smallest of tax increases for the wealthy, but if we reduce corporate taxes as previously outlined, this sort of minor compromise will come out in the wash while selling as good, fair tax policy to middle class voters.

E) Exempt Small and Moderate-sized Businesses from Burdensome Regulation

Small business start-ups are responsible for the majority of new jobs that pay above the media household income. They’re also in sharp decline here in the US. One of the major reasons for this is that, when Congress enacts legislation to regulate business, it does so with larger businesses in mind. We recognize that it is indeed necessary to regulate larger corporations, because they can have disproportional impacts on the environment, the free market, and the welfare of the people. We also recognize that big business can absorb the cost of our most aggressive regulations, but small business cannot. We also believe it is unreasonable for small businesses, frequently run by citizens without the resources to educate themselves on the full extent of the regulatory state cannot be expected to comply to the same degree as larger corporations, and that their likely impact on people, the market or the economy is greatly reduced. We, therefore, must pass a law stating that regulations determined to be of great impact by the CBO as in the REINS act, should be applied only to corporations with greater than 250 employees or more than a negotiable amount of total assets.

F) Repeal Sarbanes-Oxley and Replace with Common Sense Reporting

Again on the subject of over-regulation, this panic-move following Enron’s collapse is among the worst offenders for needless corporate regulatory burden, annually costing billions in the private sector for compliance and producing no change in accounting transparency. It reminds us of the mindless and often pointless busywork we used to get in school, and compliance requires companies to hire a fleet of folks who are specifically experts in the labyrinthine letter of this law. It must go and be replaced by much simpler-to-follow guidelines for financial reporting.

G) Greenlight Keystone XL and Other Energy Infrastructure Projects on Federal Lands

The latest estimate by industry sources is that Keystone XL pipeline would create in excess of 20,000 good paying jobs immediately and have extensive multiply impacts on the job market, not to mention making it cheaper to move oil to high-demand parts of the country where oil prices are currently far too high. Our best environmental impact studies conclude that the XL pipeline would be a net positive for the environment if you assume that the alternative is transport by rail, rather than non-use. This is a no-brainer.

H) Abolish the Nuclear Regulatory Commission and Allow Nuclear Energy Expansion – Complete Yucca Mountain Facility for Waste Management

As the science improves to reduce waste products from nuclear fission power, and as the EU and Japan continue to move ahead of us on safe, clean nuclear energy, our ability to innovate and, perhaps, solve the problem of excessive fossil fuel emission is stymied by the anti-science left’s crusade against Nuclear Energy. It’s time to stop being parochial and superstitious in the face of overwhelming evidence that nuclear energy is, by far, our best source of affordable, clean energy.

I) Abolish the Export/Import Bank

It may not be immediately apparent how ending this brand of corporate welfare can help create jobs, but it becomes clearer when you realize that many of the businesses that benefit from Ex/Im assistance are the non-dynamic, struggling corporations not likely to hire a large labor force, and it always seems to come at the expense of healthy competition. Again, the key to job creation is a competitive, free market that rewards well-run companies, not the ones out begging for federal dollars to stay afloat and squash upstarts.

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