The American Dilemma and How We Can Fix It

Archive for the ‘economics’ Category

THE TRUTH ABOUT “INCOME INEQUALITY”

Once upon a time my father received a notice that his tax return was being audited.  At the time he was a salesman and travelled the country extensively being on the road for forty or more weeks per year.  All of this was done by automobile – and one of the deductions which he correctly took was for expenses related to these trips.  Fortunately, my father was also a meticulous record keeper as well as being scrupulously honest.

Notwithstanding that he felt that unless he had made a mathematical error, which he thought was unlikely, he was confident that his return would survive anyone’s scrutiny, he was still nervous when he arrived at the IRS”s office for his audit.  But several hours later the auditor agreed that my father’s return had been honestly and accurately prepared and issued a “no change” determination.

But the next year he got another such audit demand and one the following year.  As was the case with his first experience these two audits resulted in the auditors’ accepting the original returns as filed.  But other than experiencing a nervous stomach and perhaps a little heart burn, my father learned and taught me a valuable lesson which Chief Justice John Marshall stated in writing a majority opinion in a tax case, “The power to tax is the power to destroy”.

There are several threats to achieving financial independence and even wealth.  They are inflation; lack of financial knowledge; bad management; and most importantly, taxes.  With the exception of taxes, the other three can be handled.  There are assets that increase in value even if inflation becomes rampant; a person can educate himself on how to invest his savings; if a manager who has been hired by an investor is not meeting expectations he or she can be replaced.  But no individual can control the amount of taxes that government extracts from his earnings.  That is a matter of policy and law, enacted by the Congress and signed by the President.

The left’s theory – or at least their major talking points – are that income inequality makes it impossible for people to compete on a level playing field and that in particular, women and minorities are disenfranchised from the same level of opportunity that, for example, white males, (and whites in general) enjoy.  Hence they push for a higher minimum Federal hourly wage – as though a person who has no financial knowledge will somehow break into the middle class and realize the American dream by earning a couple of extra dollars an hour.  People do not get wealthy or break the shackles of poverty by making ten, twelve or even fifteen dollars an hour.  People get wealthy because they have a unique talent or because they start their own business which grows and prospers – or, for the lucky few – because they inherited their money.

But one of the lessons that my father taught me is that, “It isn’t what you make – it’s what you keep” that determines a person’s financial situation.  No matter how much you make if you spend more than that amount, the conclusion will be financial disaster.  Just look at the Federal government’s balance sheet if you doubt that.  Or look at Curtis James Jackson III (better known as 50 Cent) who made several hundred million dollars and just declared bankruptcy.

But the left persists in making these arguments that we need to level the playing field so that everyone has equal opportunity to succeed and if they really believed in the hogwash with which they bombard us, it seems only logical that rather than a fifteen dollar per hour minimum wage we should simply decree it to be one hundred or one thousand dollars per hour.  Now that would have an impact.

So why stop at fifteen bucks when a higher number would be better?  The answer is that everyone realizes that having the skill set to be a burger flipper is simply not worth that amount of money in a free and open job marketplace.  And the reason that being a burger flipper makes the current minimum wage is that there are a lot of potential burger flippers out there who will take that job and do it in an equally competent manner as the present employee should he or she decide that his employer is engaged in “oppressing him”.

My first summer job was working for a company that wholesaled shirts.  I earned two dollars fifty cents per hour and worked a forty hour week.  Of my gross income I had to commit one dollar fifty cents for carfare to get to the job and get home.  And even then, Social Security and Federal and New York state taxes were deducted from my check.  (The City of New York had not yet implemented their own additional income tax on its residents).

Since I took my lunches to work with me, (provided courtesy of my parents) I was able to save most of my check for my college tuition.  And when I realized that it was only a three mile walk one way, I started getting up extra early to walk to my job rather than spend the fifteen cents on the subway.  Once a week on Wednesday I would, rather than bring lunch, treat myself to a slice of cheese pizza at the cost of fifty cents (sixty if I really splurged and ordered pepperoni on it).  I admit to feeling a little bit of guilt about indulging in the luxury of that hot and bubbly slice of pie – but, darn it was good.

The theory that those on the left (and those like Ms. Clinton who appear to be on the left to attract primary voters to her cause) espouse is that we can have the money to institute their social programs by merely getting it from those who have either a special talent or ability, have started a small business which might have grown and prospered or those who were fortunate enough to inherit their substantial wealth.

If we lived in a country in which the government, not the citizen, runs programs and determines who should have so much but not more than that, even confiscating all the accumulated wealth of those who have it in their possession currently and redistributing it to those who would like to have it, would “even the playing field” for a second – and then the same inequities would once again start reappearing.

Whether we like it or not, some people are more motivated, more talented, more intelligent and more creative than others.  And like the classic cream rising to the top, those whose wealth had been appropriated by the government would start over and within a short time would again become wealthy whereas those who had been the recipients of their former wealth would again sink back into poverty.

Well, that’s the scenario with a one time confiscation of the assets of the wealthy.  But even proposing that would take more brass than the left has in their admitted operational playbook.  So the reasonable way for them to proceed is to raise taxes on the rich – as a matter of “equity”.  After all, were it not for the government and the tears and sweat of the miserable masses, these people could never have achieved their success.  We all remember Obama’s famous, “You didn’t build that speech”.

According to the economic theories of the left, trickle down economics doesn’t work nor does it improve anyone’s life except for those doing the trickling.  And more importantly, their firm belief is that just because the wealthy worked hard, been creative and took responsibility for their financial future, they have an obligation to those in society who sat back, got fired from a multitude of jobs for performance and who believe the way to wealth is sitting home collecting unemployment while watching the soaps and eating potato chips, taking only a break from this in order to get out with fellow economic failures and picket outside the business du jour demanding a higher minimum wage.

Now it’s an interesting phenomenon that while conservatives believe that lowering taxes increases the number of businesses that are created and because of this may actually result in higher amounts of taxes collected because of higher GDP, they have an interesting ally in the State of New York – headed by Governor Andrew Cuomo (D) who comes from the left’s own tradition.

There is an ad being run by the state of New York which begins, “New York is changing the way we’re doing business by lowering corporate and individual tax rates.”:  The ad goes on to say that manufacturers who relocate to the state will receive a ten year exemption from paying any income taxes.  If I didn’t know better this sounds remarkably like a plan that could have been authored by President Reagan’s economic adviser, Arthur Laffer.

But if the conservatives in this country need further validation of their economic policies, perhaps the strongest example may come from the Commonwealth of Puerto Rico which is asking that Congress pass a law granting them the same ability to file bankruptcy as Detroit, another Democrat controlled stronghold.  Otherwise they warn us that there will most certainly be default on the debt obligations the commonwealth has issued.  But while waiting for Congress to act on this desperate request, the Governor has, among other proposals, found an interesting way to combat Puerto Rico’s insolvency.  He has proposed lowering the minimum wage for hourly workers on the island.

Talk about mixed (and confusing) messages.  No wonder we’ll be at $20 Trillion in “official” debt by the time Obama leaves office.  Well, he promised “Hope and Change” in his drive that landed him in the White House.  And by the time he leaves office, we may all hope that he’ll leave us with some change – even if it’s small change.

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HOW LOWERING THE MINIMUM WAGE COULD SAVE AMERICA

We’ve been inundated with the events of Ferguson, MO.  It’s gotten more attention than the earlier death of Trayvon Martin.  For whatever reason, apparently Michael Brown’s death evoked more emotion than Martin’s.  There were no riots that accompanied George Zimmerman’s “Not Guilty” verdict.  But we’re more than making up for that, not only in Missouri but nationwide.  There have been “riots” which in some cases have turned violent and in all cases disruptive.

Both of these cases are portrayed in the media as murders resulting from racism.  The facts are that both of the deceased were black males.  In the Zimmerman case, his ethnicity was mixed.  The police officer who killed Brown was white.  In both cases, the behavior and events which led the deceased to their demise has been mostly glossed over by the press.  The liberal media are exceptionally selective in what facts they choose to report – and then only after applying a fair amount of spin to their curve ball reporting.

In Martin’s case, as you may recall, the reason that he was out was that he was on his second or third suspension from school.  I’ve forgotten the exact number.  And he was out getting the ingredients for one of today’s more popular do-it-yourself drugs.  Had he not been suspended and was home cracking the books instead of looking forward to cracking the pipe, he would never have been shot and we would never have heard his name.

In Brown’s case there appears to be ample evidence that he had just strong armed a store clerk and stolen some cigarillos so that he could roll a nice tight joint.  He had a significant quantity of marijuana on him and his toxicology report indicated that he had the same substance in his system.  He also ignored the orders of Officer Wilson and then assaulted him while he was in his police car.  After that skirmish which Brown initiated, he subsequently again ignored the officer’s order to stop.  Though there is conflicting testimony as to what happened, at least three witnesses confirmed completely Wilson’s statement that Brown charged him and four additional witnesses confirmed the portions of Wilson’s testimony that they saw.  All of these witnesses were black – and if they were concerned about racist police officers and attitudes as has been alleged, it seems strange that they would be so supportive of the officer’s version of events – unless that is what they saw actually happen.

Facts can sometimes be inconvenient things.  Particularly if they don’t blend with a narrative that is woven for self-serving reasons.  No amount of evidence, testimony or anything else will convince those who in the Brown case decided long before the Grand Jury concluded its investigation that he was a victim of the ultimate in police brutality.  If somehow a video recording of the incident suddenly surfaced, confirming Wilson’s testimony it would do little or nothing to change those peoples’ minds.  We would suddenly start hearing that the video was manufactured or edited to exculpate the cop.

The liberal camp takes great pains to point out that only “deniers” reject the “facts” of “climate change.”  They regard people who inveigh against their position as being ignorant.  And, if the “facts” were seen by everyone as being that, I suggest that they would be correct.  While that same theory ought to apply to these two cases as well, they do not.  It is fair to wonder why that is.

Certainly a part of that can be attributed to emotion.  We are all held hostage to our feelings and if we make decisions based solely on them we often not only misinterpret the evidence but draw faulty conclusions based on those rather than empirical evidence.  The other part is ignorance.  An uneducated person is far more likely to rely on his or her emotions than facts because we all are born with emotions but we have to acquire facts whether through schooling, good parenting or personal observation.  And if everyone around is similarly poorly educated, it is likely that the reliance on emotion is further entrenched through the observations of how others around us act and conduct their lives.  This is the fundamental problem with living in a ghetto – of whatever description.

If you live in a community where a high percentage of your fellow residents don’t work and are receiving a monthly stipend and other government benefits, it becomes socially acceptable, perhaps even desirable, to fit in with what everyone else considers a normal way to go through life.  That is particularly true if you have limited skills and would at best be able to find a minimum wage job which offers little hope of advancement or upward social mobility.  And that is further underscored if you realize that the government benefits you are currently receiving are greater in value than that job and require no effort to receive.  The only American dream that you have to hold on to is that the benefits don’t go away and, in fact, increase.

There are fewer jobs that the undereducated can hope to hold.  Technology and automation have left little opportunity for work for residents of our inner cities.  Retail, fast food and cleaning are about the only venues that require unskilled labor.  The ditch diggers of old have been replaced by hydraulic equipment and the family farm with its labor intensive requirements have been replaced with corporate farming and robotics.  That there is little opportunity for those who do not attain at least a high school diploma can be seen in the extremely high unemployment rates among inner city black males – well more than twice the national average.

The riots in Ferguson are not about justice for Michael Brown or anyone else.  They are expressions of frustration over the realization that the participants’ future is bleak.  They are right in that perception.  In an economy in which college graduates are living at home in large numbers for lack of jobs, what hope does the high school dropout have?  Sadly, the answer is none.  Unfortunately, those they blame for their plight are not the responsible parties for it.

With fifty years of trying to socially engineer poverty out of existence under our belt, we are in worse shape as a nation than when we initiated the “War on Poverty.”  There is significantly more evidence to support that statement than there is to support the theory of global “Climate Change.”  Yet those who enthusiastically support the idea that our planet is in grave environmental danger are exactly the people who ignore a half century’s evidence and double down on failed policies by further escalating them.  Among those policies is increasing the minimum wage.

Adding further pressure to this equation is Obama’s recent granting five million illegal aliens the right to stay here, and more importantly, the right to work in the country legally.  These are people who come from countries where there are no social welfare programs and where the residents will take any job, no matter how difficult or physically dangerous at whatever wage is offered.  They have a work ethic which is lacking among those in our inner cities and find no job “beneath them.”

If there is any possibility of breaking the cycle of welfare dependency which is now generational in nature it is by getting those who are trapped in that system the opportunity to find work.  It is far more important to encourage the unemployed in Ferguson and throughout the country to find that first job than it is what that job will pay.  Sadly, the way our “welfare programs” are structured, finding employment translates into losing benefits.  This obviously discourages recipients from seeking any form of legal employment.  We perhaps could partially solve this by lowering the minimum wage for people who are in the marketplace for five years or less, during which time their welfare benefits would be unaffected by their earnings.

I remember receiving my first paycheck for a summer job.  When I came home with it and opened the envelope with my family at dinner I clearly recall the sense of pride I had looking at that nearly fifty dollar check (after a deduction for Social Security) which covered one week’s worth of work.  (The minimum wage was $1.25 per hour).  And I took a great deal of satisfaction in the fact  that the company had chosen me over the fifteen other kids who had applied for the job.  Perhaps it was the naiveté of adolescence but it helped me feel as though I had some worth as a person – and that was acknowledged both by my employer in hiring me and then further validated by their paying me for my effort.  That paycheck did great things for my self-esteem and it was with some sadness that I let go of it and deposited it in my savings account.

That is an experience that sadly I fear many kids in our inner cities will never share.  And the higher we generically increase the minimum wage, however well intentioned, the more likely we are  permanently to deny them the dignity of working for a living and perpetuate the cycle of hopelessness into which far too many in this country now have fallen  – and is the root cause of why Ferguson happened in the first place – and why the reaction to Michael Brown’s death was completely predictable.

Ferguson is a symptom of a disease – one which has been decades in the making.  Sadly, following our present path of providing “benefits” rather than real opportunity will only worsen the problem.  And one day the right mixture of ingredients will combine to spark an explosion that will make what happened in Missouri look like a Sunday School picnic.

That day may not be far off in coming.

THE MATHEMATICS OF POLITICS

I remember my first job as though it were yesterday.  I was probably ten or eleven years old when I got hired.  Now I have to admit that I had an “in” getting the position.  My father ran the company.

On many Saturdays my father would go in to his office and take me along with him.  I particularly enjoyed that on days when it was raining and the prospect of spending time in Central Park on the swings had little appeal.  (That was back in the day when a youngster like myself was freely allowed to swing on these wonderful contraptions, before we viewed this as a life threatening exercise and prior to the time when we considered parents who permitted this to be guilty of child abuse and neglect).  Incidentally, with the hundreds of times I played on the swings I never suffered any injury which exactly mirrored the experience of my friends and classmates who similarly played on them.

There we were at Dad’s office.  There was no hustle and bustle as on a normal workday.  At most there were four or five employees in the whole place.  Mr. Chen, who wired lamps, might come in if Dad had received an influx of orders resulting from one of the trade shows that occurred around the country on a monthly basis.  I adored Mr. Chen.  He taught me to count to ten in Cantonese and showed me how to wire a vase and turn it into a lamp.  Under his close supervision I probably made forty or fifty lamps over the years.

I also liked Carmine who was in charge of the shipping department.  He would let me follow him, watching him pick inventory from the metal shelves which housed it, placing each item on one of the carts used to transport the merchandise until the order was complete and ready to go to the packers.  After following him over the course of several Saturdays, it occurred to me that I could pull the inventory and asked him if he would let me fill a small order – just to prove that I could.  After a moment’s hesitation he agreed.

And so off I went with my order and my cart.  By this time I knew in which rows various of the items could be found.  My biggest challenge was reading the handwriting of some of Dad’s salespeople – who would have gotten extra attention from my grammar school teachers who still believed that “neatness counts.”  The other challenge was that the inventory racks were quite high – and one of the items was on the top shelf – way too high for me to reach safely – either for me or the vase.  So I filled the rest of the order and told Carmine that I had left the cart in front of the remaining item but couldn’t get it down.  He smiled at me, I think recognizing that I had been prudent, walked over to the rack and finished the order.  After that he allowed me to help him whenever I asked to do so.

But my favorite department was billing.  Generally, the department was quiet on Saturdays.  But I had gotten an education in how to use the billing machines during a school break from the woman who was in charge of the department.  Her name was Rachael.  She had gorgeous black hair and a beautiful smile and was one of the most warm and friendly people I had ever met.  I asked my father why she was never there on Saturdays.

Dad explained that she was a Sabra, born in what was then Palestine and was an Orthodox Jew.  My father explained that Saturday was the end of her weekly Sabbath and that she was not permitted to do any work on the Sabbath.  My father also explained that he let her go home earlier than usual on Fridays, particularly during the winter, so she could get home before the Sabbath began.

Rachael had fought in the Arab-Israeli War of 1948.  That explained the ugly scar that extended down from the left side of her neck to below her very conservative dress.  That wound had happened as a result of her being in the wrong place when one of the Palestinians used a flame thrower against her.  In that same attack her brother had been burned so badly that he died as a result of his wounds.  So I only got to see Rachael occasionally.  But when my father knew that he would be bringing me to the office, she always gathered a number of orders that were ready for billing so that I could keep myself occupied.

Saturdays at Dad’s office usually started at around eight in the morning and by noon he had caught up with his paperwork and was ready to call it a day.  That meant I was going to get paid for my efforts.  That compensation took the form of lunch at Vito’s, two doors down from our office.  Since I’m pretty sure that my father would have fed me anyway, I guessed that I was really working for free.  But that was okay with me since I felt that I was getting on the job training and was, in some indirect way, helping out and making the business more successful.

Vito’s was – well, it was a dump – but the food was terrific.  Vito had figured out that the truck drivers and office workers who worked in the neighborhood and patronized his restaurant were more interested in getting a good meal at a good price than they were in ambiance.  And there was no better food than one of Vito’s meatball sandwiches served in a crusty Italian roll and slathered with a generous helping of his homemade marinara sauce.  This was not food for the chic because there was no way to consume it without getting sauce on your chin and fingers.   Notwithstanding, I think even Emily Post would have approved of a meal at Vito’s.

I hadn’t really thought much about my first job experience until yesterday when I read that San Francisco had voted to phase in a minimum wage of $15.00 per hour over the next few years.  As I thought about it, my father probably violated Federal and NY state child labor laws not to mention the minimum wage laws which were in effect at the time.  While I was unaware of these back then, I am glad to report that despite this parental “abuse” I didn’t suffer any permanent psychological or other damage as a result.  I didn’t realize that my father was taking advantage of me.  I actually looked at the experience as providing me with an education in how business worked.  As it turned out, those Saturdays at my father’s office helped me in my own business many years later.

Now I realize there are divergent views on whether raising the minimum wage is a good or a bad thing.  Those who support increasing the minimum wage make arguments that include “paying a livable wage is a fundamental matter of equity” and often characterize those with a different view as being “cold, heartless people who put profits over people.”  Together with that assessment is the implied or stated view that these same people would be perfectly happy if all these minimum wage workers just died.  Of course, that  takes the issue beyond the boundaries of having a real debate on the merits or demerits of such a raise and turns it into a name-calling event.

Let’s set aside the counter-argument that any raise in the minimum wage will result in further automation of some of those positions, meaning that there will be fewer workers earning more – or, in fact, anything – and focus on the purported cupidity of businesses – interested in maximizing profits – even at the expense of personnel.  If we accept the credo that businesses are simply motivated by profit, we need to consider what the net cost of a wage increase does to the bottom line.

Wages are a fully deductible expense to a business – so any increase in the minimum wage would, to some extent, be offset by a reduction in state and federal income taxes that would be collected.  Perhaps more importantly, we hear anecdotal stories about minimum wage workers who are unable to make it on the income from their employment and who qualify for various welfare programs.  Wouldn’t raising their hourly rate potentially exclude some of them from being the continuing beneficiaries of these programs – thus saving not only their employing companies but all taxpayers from providing these benefits?  If that’s the case, the intelligent business person should eagerly embrace such a wage increase.

Perhaps the greatest flaw in the minimum wage argument is that it suggests by the mere act of guaranteeing a higher minimum wage, whatever that number might be, it will impel the country into a new age of prosperity.  If that were the case, we could eliminate world poverty by suggesting to the governments of Mexico, Sri Lanka and Liberia among others,  that they adopt an American style minimum wage for all their citizens.

The citizens of San Francisco voted in this minimum wage increase overwhelmingly.  They also returned Minority Leader Nancy Pelosi, a staunch advocate of the measure, to the House with 82.4% of the vote.  I wonder why she never thought of my simple solution to world poverty herself.

LESSONS FROM A CELEBRITY

“I’ve been rich and I’ve been poor.  Rich is better.”

– Sophie Tucker

 

Sophie Tucker had a tough life.  Born to a Ukrainian Jewish immigrant family she began singing in her parents’ restaurant in Connecticut for tips.  She appeared in The Ziegfeld Follies but her talent threatened some of her co-performers and they got her fired.  She went on to overcome these obstacles and became successful and famous.  And she earned the title, “The Last of the Red Hot Mamas.”

In 1927 when this recording of “Some of These Days” was made, there was no such thing as the minimum wage.  It would be eleven years until Franklin Delano Roosevelt pushed that proposal through Congress and it became illegal for any employer to pay an employee less than the magnanimous amount of twenty-five cents per hour.  A person working a full forty hour work week, fifty-two weeks a year could earn $512 per year.  Even by 1938 standards those were wages that insured a life of poverty or at the very best meager subsistence.

In 1964, two years before Tucker’s death, the Congress passed ‘The Civil Rights Act which officially prohibited discrimination based on race, color, religion, sex, or national origin.  Fortunately, Tucker had found a career in the one industry which had, at least, marginally, followed those principles before they became the law of the land – entertainment.  As prevalent and blatant as discrimination against blacks was in varying states and jurisdictions, Jews were frequently the subject of anti-Semitism – although it might have been more subtle than the hatred preached by the KKK and other groups.

This discrimination took the form of having “unofficial policies” in which Jews were regularly excluded from membership in private clubs and prevented them from living in certain areas which preferred an all-Gentile population, not unlike the redlining phenomenon that precluded blacks from home ownership in many communities.  And as with black Americans, there were any number of pejorative words and phrases coined to describe and demean Jews – although our more sensitive citizens usually waited until the person being so described left the room and then whispered it to his listener “sotto voce.”

Sonya Kalish which was Sophie Tucker’s birth name had obstacles to overcome.  So did everyone else in early 20th century America.  There were no governmentally inspired “safety nets” to which a person could look should they get in financial difficulty.  All that a person had was family, friends and their own drive, ability and ambition.  Fortunately, Tucker had a desire to succeed – and she did – enough to make her a national icon and a person who was well off financially.

I doubt that at any time, Sophie Tucker aspired to do just enough to make it through and get by.  She was someone who saw herself as a person whose aspirations were only as great as she believed them to be.  And perhaps it was exactly because we had no safety nets that she was impelled to succeed.  How much inspiration to do better do we have if we are given a minimal level which is assured if we do little or nothing?

Which brings us to the question of the minimum wage – an invitation to a life filled with need and poverty.

“If you’re against raising the minimum wage you’re a Tea Party Republican who hates people, wants them to starve, abhors the middle class and is only concerned about corporate profits.”  Perhaps you’ve heard that meme.  If not you don’t own a television or a computer which has access to current events.  If you believe that statement, you need to enroll in a remedial class in basic math.

We’ve had a Federal minimum wage law on the books for seventy-six years.  During that time, the percentage of Americans who are officially classified as living in poverty has increased as a percentage of the overall population.  Why should this be if a guaranteed minimum wage is intended to combat this phenomenon effectively and has been raised periodically during that time span?  Is there even the most ardent among those pushing for a forty percent increase who truly believes that should that be enacted it will lift those minimum wage earners out of their dire financial circumstances and suddenly move them into the middle class?  If you accept the government’s definition of what a middle class person earns you will find that the math simply doesn’t work.

Well let’s turn to the issue of greedy corporations looking to maximize their profits, all on the backs of their underpaid workers.  Most business owners would agree with the statement that the reason for going into business is to earn profits and to grow the business in order to increase the size of the profits.  The real disagreement with those on the left who would agree with that statement is that they then add on the final clause, “without regard to the working conditions or financial well-being of their employees.”   That statement can only be made by someone who is inexperienced in running their own business.

We all know that there are costs associated with hiring employees.  Those that are obvious include various taxes which are imposed and include FICA, FUTA, state unemployment contributions, paying state worker’s compensation premiums and providing health insurance.  Those are the legal, mandated additional costs that every employer incurs.  But there are indirect, less obvious costs that also impact an employer’s profitability.  One of the most important of those is productivity.

Most of us would agree that if two mechanics who were equally competent were available to repair our car and one charged twice the amount of the other, we would probably select the less expensive mechanic to do the job.  If we had two employees on our payroll and one was able to produce fifty widgets an hour and the other consistently only made twenty-five in an hour, wouldn’t that second employee only have half the value of his co-worker to our company and wouldn’t he be contributing only fifty percent the amount to our profitability?

This leads us to a simple question.  Is it fair to pay the more productive employee the same amount as his less efficient counterpart?  Or, more to the argument of those who believe everyone should get a guaranteed wage, would it be unfair to the less productive employee to pay him less than our second, more productive worker – even if that lesser amount conformed to the then prevalent minimum wage?

I suspect those with a “fairness” mindset would object to rewarding our more valuable employee because somehow they view that as an employer “demeaning” the other worker by paying him less, irrespective of the fact that he actually is less valuable to the company.  Unfortunately, the mantra, “Equal pay for equal work” disregards the fact that not all workers offer an equivalent amount of productivity for the time they spend in our offices or factories.

Those lobbying for an increased minimum wage believe that paying “less than a livable wage” is barbaric.  I would suggest that probably is true – and the individual who is willing to accept that wage and live under those conditions is not exhibiting the best judgment or acting in his own best self-interest.  Why then do people accept those sorts of positions?

The possible answers are that they are lazy and unwilling to work at a better paying, more demanding position; do not have the skills to qualify for a better paying position; or find that the particular minimum wage job satisfies their personal goals.  What other answer can there be to that question?  Despite the acrimonious debate over this subject, I have yet to hear that minimum wage-paying employers go out with shotguns, round up people and force them to work in their businesses, threatening them and their families with bodily harm if they fail to comply.

“Don’t let anybody tell you that it’s corporations and businesses that create jobs.”  That statement from no one other than non-Nobel prize winning economist, Hillary Clinton.  If we accept that statement, then it is government which is solely responsible for job creation – or lack of it.  In part I would agree with that concept – particularly the latter part because while insightful regulation is a positive thing, overregulation is a burden and a job destroyer.  If there is a dearth of jobs in this country and it is government who is the job creator, then obviously government is not doing very well in this regard.  Or are they?

We now have more people than in the country’s existence on some form of Federal dole, ranging from food stamps to telephones.  These are people whom the government has created and endowed with a job – to continue to vote for those who concocted these programs with promises that even better, more lucrative programs are in the works.  And people who are naïve and uneducated solidly endorse their own enslavement in election day after election day.  This Tuesday is unlikely to suggest that many of them have yet seen the light.

In 2008, half the country voted for “Hope and Change.”  We’ve gotten more than our fair share of the second part of the slogan.  I’m still optimistic that we will get a peek at the first part.  At least, I hope so.

 

HILLARY CLINTON AND THE MOB

It would be dishonest if I didn’t admit that I’ve never been a fan of Hillary Clinton’s.  In fact, I wrote a piece elsewhere about twenty years ago in which I spoke of her as “The most dangerous woman in America.”  If my feelings on that have softened over the years it is for several reasons.  The first is that Mrs. Clinton seems to be embarked on a course of self-destruction which may well minimize her ability to attain a position of serious power.  The second is that a substantial number of challengers to that title have emerged, Sen. Elizabeth Warren being in the vanguard of those.

Despite the fact that I’ve never signed on to the Hillary Fan Club, I wish her nor anyone else any harm.  And I fear for her safety because of some statements that she recently made, specifically her remarks this week that, “Trickle down economics doesn’t work – we’ve seen that fail rather spectacularly.”

The economic theory to which Mrs. Clinton referred in that speech suggests that by lowering tax rates on those who are the wealthiest, that saves them money which they will in turn invest in creating jobs and that those jobs will create more jobs and that everyone in the economy will benefit because there will be more people employed and the taxes that they pay on their earnings will more than overcome the amount of the tax reduction which was originally given.

Of course, those like Mrs. Clinton on the left will naturally acknowledge a corollary that is the reverse of the trickle down theory.  If you believe that cutting tax rates on the wealthiest does nothing to stimulate job creation, then you naturally must believe that increasing them will have no negative impact on job creation, the consumer or the economy overall – other than to raise additional tax revenues which can then funnel into the national Treasury to be misspent by those in positions of power in Washington.

That is a statement that might involve some personal peril for the former First Lady.

In Nevada we have three propositions on the ballot.  The third of these, (cleverly named Proposition 3), wants the voters to decide whether to allow Nevada to collect a 2% tax on the revenues of companies if those companies’ revenues exceed $1 million per year.  Incidentally, it doesn’t matter whether the company is profitable or if it loses money.  That’s Govthink at it’s finest.  The purported beneficiary of these funds to be collected will be our schools.  As one might expect, the NEA has endorsed this proposal.  And the AFL-CIO which initially supported the idea has, perhaps because of their experience in sponsoring Obamacare, have now changed their view and opposes its passage.

Without discussing the arguments pro and con, (I voted “NO”), this is yet another tax which purportedly will benefit a specific cause – and which will, almost as soon as it is passed, wind up being something that goes into the General Fund and will be used for whatever purposes those in Carson City choose.  I saw this same scenario when Illinois authorized the creation of the state lottery – which was to benefit education.  I gave it three years before those proceeds were swept into the General Fund – and, as I recall, it only took two.

Among the plethora of political ads that one would expect the week before an election, there have been a substantial number which have urged Nevadans to vote “NO” on Prop 3.  I have yet to see one that advocates its passage – which suggests to me that the “NO” side has a lot of money backing it.  Considering the fact that casinos are the principal source of revenue to the state and that they clearly would be subject to this proposed tax, it doesn’t require an Einstein to guess that they are among the funders for these ads.  And if you questioned that, one of the spokespeople advocating the defeat of the measure is none other than His Honor, the much beloved former Mayor of Las Vegas, Oscar Goodman.

Before becoming Las Vegas’ mayor, Goodman spent most of his career as an attorney – more specifically as a defense attorney.  He handled many high profile clients and represented them with vigor and very positive results.  Among those he defended were people associated with “the Mob” including Meyer Lansky, Frank “Lefty” Rosenthal, “Fat Herbie” Blitzstein (whose grandson owns a maintenance company that services my pool), Nicky Scarfo and Anthony “Tony the Ant” Spilotro.  It would be fair that many in the underworld viewed Mayor Goodman as their “go to” guy when it came to defending them from prosecution.  And it’s hardly a secret that before Nevada’s casinos became corporate entities, they were controlled and run by “The Mob.”

As I write this, one of Mayor Goodman’s ads appeared on FOX News.  The text of the ad (slightly paraphrased because I don’t type as fast as he can speak) is:

“If Prop 3 passes it will have an impact on everyone in Nevada.  Do you know what happens when a corporation gets a tax increase?  They pass it on to all of us.  They fire their own employees.  This will cost us more in what we pay at the grocery store, what we pay for health care, it’s going to smack all of us right in the jaw.”

Wait a minute.  That’s trickle down economics.  The only difference is that in this case the former mayor discusses the impact of an increase in tax rates rather than a decrease.

While I don’t recall reading any stories that Hillary Clinton plays polo or enjoys horseback riding, I would suggest that before she snuggles up for a good night’s rest, it might behoove her to check for any equine body parts that might have unexpectedly been placed under the covers.

THE POLITICS OF POVERTY

It is certainly a tribute to my parents that neither Mom nor Dad ever encouraged me to choose, as my life’s goal, finding the lowest paying job that was on the market.  In their view, low-paying jobs were the rightful province of the uneducated.  Mom could speak to this from personal experience as her father was one of those poorly educated men who dug ditches in New York for a dollar a day – that is, when the work was available.

Because my parents recognized that education was the gateway for a child to achieve the American dream, they made sacrifices in order to send me to private schools.  Mom got a job at a time when most mothers stayed at home and ultimately she owned her own business.  Dad was in sales and traveled forty weeks a year.  I think it’s fair to say that I didn’t fully understand what they gave up in order to give me the best opportunity to do something productive with my life.

I grew up at a time in America when people generally understood that opportunity was limited only by a person’s initiative, optimism and perhaps a little bit of extra insight that others might not have discovered in themselves.  It was a time that while each of us worked to get a little bigger piece of the pie, we also knew that there were many pies that had yet to be baked in which all of us could share.  It was a time of personal accountability and a time when we recognized and applauded each other and were recognized and applauded by others for personal achievement.  It was a pre-socialist, pre-Obama America.

Obama and his party of the left will spend much of this year talking about social inequity and financial injustice.  The centerpiece of this conversation will revolve around increasing the minimum wage.  The argument being made is that it is inhumane and certainly un-American to pay people less for their labor than what is necessary for their survival.  It’s hard for me or for anyone with an ounce of compassion to refute that – unless we scratch the veneer of that concept.

Let’s consider a basic principle.  Why would any rational person accept a position at a level which forced him to struggle for mere survival if he could work at a better, higher paying position?  Despite my best efforts I have been unable to come up with an answer to that question other than that the person holding what we used to refer to as an “entry level” position does not have the skills to hold a better paying job.

Let’s look at the person who is, as an adult, trying to survive, holding one of these minimum wage positions.  He or she is in a job that has little or no opportunity for growth either in responsibility or in earnings.  This person’s only prospect for making more is finding a second job, probably at the same low wage, the beneficence of his employer increasing his hourly rate or the intervention of some governmental jurisdiction passing a unilateral increase in the wages of him and all others in his earnings class – in other words, an increase in the minimum wage.

Whether or not we pass an increase in the minimum wage which will do little to alleviate the plight of wage earners who are cheering for such an outcome,  this debate does raise several important issues.

The first is that we are not preparing a significant segment of our population through our educational system to do anything other than the most menial, unskilled work and are consigning them to a life of impoverishment and envy of those who are more successful – which by definition – is everyone who is earning anything more than they are.

The second is that they have no future and no American dream – at least not one in which they can have a hope of participating through the old principles of self-sacrifice and hard work.  What incredible psychological damage that must cause.  And as a result we should not be surprised that those who have no hope of succeeding through traditional, legal means turn to violence to seize what they envy in others.

Sadly, astute political manipulators – and we have far more than our fair share of them – recognize that an uneducated mob can easily be swayed with small sops and shallow promises.  If we wonder why our educational levels have slipped so dramatically we have only to turn to the lessons we learned from the slave owners in the pre-Civil War South who made it illegal to educate their human chattel.  There really is no incentive for the new slave owners to improve the educational quality they offer their human livestock, their public outcries about the shocking state of education notwithstanding.  Their real goal is to keep their constituents ignorant – and they have done well in achieving that goal.

Many of those minimum wage, uneducated workers live in our inner cities.  That is if they are not part of our vast minority population whose unemployment rate is nearly twice that of the general population.  We have designed massive programs which bleed the productivity of those who work to “assist” these poor souls in their impoverished condition – a status which has now become generational in nature.  Meanwhile those who purportedly champion the underclass that they have created can be assured that they will continue to be re-elected to political office by their barely literate electorate.

So now these good liberals, portraying themselves as the benefactors of the poor and downtrodden are offering up an increase in the minimum wage.  And those who need opportunity and education far more than a few extra dollars which government will ultimately suck out of their pockets by encouraging them to play the lottery as the path to salvation will wave their handwritten signs as they picket the only businesses who will hire them.

Perhaps, if they have even thought about it, they believe that if their employers fire them or they are replaced by automation, their “friends” in high places will develop even newer and better programs to allow them to live at the subsistence level which they and their parents have endured and to which they condemn their children.

What they don’t realize is that what little they have comes from those who have been productive and who are becoming increasingly resistant to contributing even more than they have been conscripted to donate.  And when the tipping point comes, and it is near, even those who are most generous will hold up their banners with the phrase, “Enough Is Enough” inscribed on them, the spigot to the Fountain of Freebies will run dry and all of us will be expected to be productive to survive.  And that will include those who are in the pulpit preaching their dialectic on the Politics of Poverty.

WEBSITE DESIGN 101(01010101)

Health and Human Services Secretary Kathleen Sebelius might have been more gracious recently when a local council member handed her a copy of “Websites for Dummies,” while she was pitching the virtues of Obamacare at a community meeting.   Perhaps his gesture was too little too late – as the “enrollment numbers” for www.healthcare.gov have been released for its first month of operation.  Even to the supporters of this legislation they were “bad.”

Let me be the first to say that I am not a computer programmer.  But I do have a solid educational background in logic and an affinity for math – which are the bases for any program.  As an end user, I have commissioned and paid to have two separate programs written.  And while I believe that I might have, with the aid of “Websites for Dummies” and other reference guides, been able to write those programs myself, I recognized that contracting this work out to people who made a living doing just that would be both time and cost effective.

In my case, unlike the government website administrator, I had accountability – to the bank that held my mortgage, to my dry cleaner, to my dogs to provide food for them and to myself.  In the second of these efforts I made a terrible mistake.

I hired a programmer who talked a great game and delivered virtually nothing.  After looking at what he had developed after three weeks (the whole project was only supposed to require six), I realized that I had spent five thousand dollars on a retainer on which I would see no return.  (The fact that he accepted the retainer and immediately took off for ten days in Tahiti – where he could “think about the project” was my first clue).  So I fired him and replaced him with someone who was able to accomplish the task.

You would think that if a person were in charge of a major project such as the Obamacare website rollout, that individual would be getting very little sleep and spend all her time checking to make sure that the project was on schedule and was working properly.  Apparently, that is not the tack that HHS Secretary Sebelius employed.  There is no other reason to believe that it has been such a dismal failure.  And that despite the fact that hundreds of millions of dollars have been spent.

What should be disturbing to anyone who is being pressed into the Obamacare system is that developing a website is by far the most simple of the tasks that government will be expected to perform regarding the nation’s healthcare system.  If this is such a disaster, what are we to expect down the road when we might actually need to use the much touted “superior health insurance” for which they want us to sign on the dotted line?

One of the issues that I think was missed in the website development but which is borne out by the initial low enrollment numbers, notwithstanding the federal website’s problems, is the fact that “selling insurance” is not the same as “selling a tangible product.”

If you go to Amazon you can look at that beautiful four piece toaster or the warm and snuggly down comforter.  These are items that you can touch, feel and envision in your home.  Insurance, whether it is for your house, auto, health or life are intangibles – and they are products, while they have a potential value, are ones that you hope never to use.

Most consumers view paying for any kind of insurance as a monetary outlay and paying the premiums does not provide the psychic reward that purchasing a tangible product offers.  They view this as an expense rather than a benefit.  Therefore, this is a hard sell – and one that is best effected with the interaction of another person.

A website, even the best designed one, does not provide that personal dialogue and discussion.  And when you have a website that simply does not function in a user-friendly manner, that provides a discouragement that the already unwilling potential buyer might find to be the final reason not to bother with it.

With only slightly more than 100,000 people “enrolled” in Obamacare during the first month of operation, the administration is only twenty per cent to the goal they have set for the law to work.  By “enrolled” we do not know how many of those people are purchasers – and how many are merely browsers who are considering making a purchase.  And it is significant that three quarters of the people who have so enrolled came through websites that the states, rather than the Federal government constructed.  So apparently, building a working website is not  all that tough as 36 states have accomplished it.

But imperative in Obamacare’s succeeding is the demographics of who is actually signing up for health insurance.  It is imperative if this law is to work that 2.4 Million people who are 18-34 years old participate because they will be overcharged for the insurance that they receive in order to make up for the deficits that older and sicker people will drain from the insurance companies.  We have no word as to the makeup of those enrollees although that is promised for next month.

As I write this I am listening to President Obama give a press conference in which he is offering a “fix” for those whose health insurance contracts have been cancelled by their carriers.  His solution is to “allow” those insurance companies who cancelled their contracts which did not comply with Obamacare’s mandated coverage to extend those through 2014.  There is only one problem with this solution – as well intended as it might be.

The states regulate insurance companies who offer product within their boundaries and the Federal government does not have the power nor the authority to issue this “fix.”  And therein lies the fundamental flawed premise which underpins Obamacare and every other over-reaching intrusion that those of “the Federal government can do it best and should do it” mindset subscribe.

Not surprisingly, even if we accept the statement that 100,000 have actually enrolled and will confirm that with premium payments to Obamacare in the first month, almost four times as many people have signed up for Medicaid – which is free to them and will result in increasing medical costs paid by all American taxpayers.  The explosion in Medicaid in and of itself will certainly sabotage the financial assumptions that President Obama made and touted that this law would actually provide savings to our skyrocketing healthcare costs.

But if the President wants to attract those 18-34 year olds who under the most rosy scenario have to enroll in order for this scheme to work, I would like to offer a suggestion that may attract them.  Simply offer them a new free iPhone every time one is released.  Giving away “free stuff” is something that this administration does very well.

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