More Fed Nonsense from Janet Yellen

Yellen's statements yesterday were ridiculous.  She said that the decision as to whether or not to raise rates would depend upon "further improvements in the labor market."  What exactly does that mean?  Employment creation is anemic and has been since the Fall of 2008.  That's seven years.  So, what does she mean?

If given a healthy dose of truth serum, here's what I think she really means:  "I have no idea why rates haven't gone up.  We've been hoping and praying for years that rates would rise, but they never seem to.  We plan to keep hoping and praying.  Obviously, we have no ready mechanism to raise rates.  Just saying "go up rates" doesn't make it so and, as everyone knows, open market sales to reduce reserves could easily be destabilizing."  Okay, I got that.

The Fed has the power to add to and subtract from the monetary base.  Outside of that, the only other power the Fed has is to badger big banks to bend to their will when they feel in the mood to badger.  But, one power the Fed does not have is the power to precisely control interest rates.  That they cannot do.  The past five years is pretty demonstrative evidence.

Paul Volcker, the greatest Fed Chairman in history in my view, always said that "we are just following the market," at the time the Fed announced a new target range for the Federal Funds rate.  Volcker understood what was going on and, I suspect, Yellen does as well.

But, it is so much easier to believe that the Wizard behind the curtain controls all of this than to accept the reality that markets control rates, not the Wizard.  So, look for more Fed speak nonsense.  Rates will rise when markets make them rise....not before.

The Real Divide

Bureaucrats with protected job security don't worry about economic growth.   Why should they?  From their point of view, private sector job creation is a nuisance issue.  Bureaucrats and others who live off taxpayers are far more interested in social issues and climate change.  Mundane, routine issues like getting a job are not of much interest to someone basking under the "tenure" positions in public education and higher education.

The private sector is full of folks concerned about profits and about jobs.  How crass?  The bureaucrats, protected from the vagaries of free markets, are able to mull over the big issues of the day like creating safe spaces for transgenders and climate change.  These issues are very appealing discussion topics for people who don't have to worry about how to support their family.  Protected, as they are by taxpayer-provided funds, they are free to mock ordinary citizens who fend for their life in the private sector.

This is the real American divide -- between taxpayers funding all of this and those "five-percenters" sitting loftily in government, non-profit, or education industry luxury.  They can talk all they want about the issues they like, which are mostly irrelevant to poor folks and low income folks, who need jobs and hope.  These "five-percenters" are busy finding ways to impose higher and higher barriers to the hopes of those less fortunate.

So, if your living room is dominated by discussions of climate change, it is likely that the bread winners in your house are bureaucrats or taxpayer-funded clericals who don't face a market test - ever.  If your living room is dominated by discussions of how to find next month's rent or a job, you are likely a participant in the private sector.

This is the true American divide.  That's why the media and their friends in the bureaucracy are interested in climate change.  They don't need to worry about economic growth and the standard of living of the average family, as long their personal economics is unaffected by any of that.

The Taxpayers as Bad Guys

There is a remarkably block-headed article by Gretchen Morgenson in today's NY Times about the student loan crisis.  Morgenson, who sometimes makes sense, makes no sense in today's article.  Her article is about the repayment, or lack of it, process that takes place when it is time for the borrower to repay.

Wow!

You would think that these college students were totally incompetent to read a loan document.  You would probably be right.  It is highly likely that very few of these borrowers should have gone to college in the first place, much less had a convenient, taxpayer-backed, way of borrowing.

There was no discussion in the article about whether or not any of these students worked during their college years -- a phenomenon that is all too infrequent these days.

There is no concern in this article for the interest of the lenders, who are out the money.  They turn out to be the villains in Morgenson's article.  This is the usual NYTimes narrative -- those lending money are villains.  This theme was the usual tale of 2008, where mortgage lenders were villified while those who lived high on the hog -- way above what they themselves could reasonably support -- were portrayed as the victims.

Why do you think students need so much loan money today?  Could it be that all of those administrators pulling down high six figure incomes, while working a six month year, are costly to support?  Take a look at the pay rate of deans, provosts, university presidents, sexual assault specialists, gender studies directors and on and on. These folks make a fortune and they have dramatically added to the cost of education.

Those who, unwisely, expanded student loan access to prop up the current over-bloated, wasteful colleges and universities, are the real villains.

Rather than blame lenders and innocent taxpayers, Ms. Morgenson should look into the root causes of the absurd costs involved in obtaining a college education today.  While she's at it, take a look at the absurd courses of study that these borrowers are pursuing.  No wonder they can't pay these loans off.

This problem results from an unholy alliance of university administrators and folks like Elizabeth Warren and Bernie Sanders who think that the average American should pony up for every cause that those motoring around in limousines and fancy jets can dream up.

America's Future - On Display in Venezuela

Take a look at the political program of Hugo Chavez, the late popularly elected leader of Venezuela.  Then compare that program to the political program of Obama/Clinton.  Both programs claim that the issue of the day is wealth and income inequality.  Both propose major taxes on "the rich."  Both demonize the business community.  Both argue that retail stores overcharge for their products and underpay their workers.  Both propose dramatic increases in the minimum wage.

Neither program ever references economic growth -- ever!  Both programs see capitalism as an essentially evil institution.  Both see American foreign policy history as essentially predatory.  Both see the Castro regime in Cuba as benign and see American history as a history of evil and exploitation.  Both have little or no respect for the rule of law and are prone to arbitrary "executive actions," put forward by unelected bureaucrats, ignoring the duly elected representatives of actual voters.

Similar programs tend to produce similar results.  So, now that the Chavez program has been thoroughly implemented in Venezuela and Chavez is dead and gone, how is Venezuela doing?

Check out today's NYTimes.  An article by William Neuman and Particia Torres describes the now-desperate plight of the average Venezuelan.  What few goods and services are left in Venezuela are funneled to government workers and political supporters of the regime, reminiscent of the old Soviet regime and the modern day economies of North Korea and Cuba.

Venezuelans now resort to black market activities to provide even the most basic goods and services while the political elite bask in luxury.  Credit cards are now being replaced with barter as the economy increasingly backs up toward stone-age economics.  Except for government employees and the political leadership of this disastrous country, everyone else is broke, starving, lacking health care and basic education and bereft of hope.

In that sense, inequality of wealth and income has been eliminated in today's Venezuela, but that is mainly because wealth and income have collapsed to poverty levels.  This is the end game of the "inequality" gambit.  Meanwhile, the political leaders of Venezuela live high off the hog in a style that even Obama and Clinton would envy.

The "inequality" cause is a political ploy promoted by folks, like the Clintons and Obamas, who possess extreme wealth, unearned by any free market activities.  The end game is political domination and reduced living standards for the masses.  Cuba and Venezuela are the icons for this "inequality" dream.

No country in the history of the world has improved living standards by adopting the Chavez-Obama-Clinton program.  Only free markets can deliver higher living standards.  Every time free markets have been abandoned for political sloganeering, the average citizen's life style collapses.  There are no exceptions throughout history.

Notice that in the recent nationally televised debate featuring Ms. Clinton and others, no one bothered to mention economic growth at all.  Growing the economy no longer matters to these folks. Instead the focus is on dividing a dwindling economic pie.  The average American should check out the NYTimes article on today's Venezuela to get a glimpse into their future, if the Obama-Clinton regimes get their programs fully implemented.

Tough Call on TPT, But "No" Is the Right Answer

The president received the authority to negotiate the Trans Pacific Trade agreement with several Asian countries -- the biggest is Japan -- from the Congress.  Now, the Obama-negotiated trade agreement is headed to Congress for approval.  For reasons apparently known to no one, some of the agreement details are "classified" and even Congressmen, expected to vote on the measure, are not permitted to read it in detail.  If that sounds absurd, it is.

So, do you vote yes or no?

The first question is: can you vote on something that you are barred from reading?

The second question is will approval of this deal further the expansion of free trade or make free trade more difficult to implement in the future.  Why?  The president has loaded this deal with concessions to big labor and to environmentalists that gut most of the "free" in "free trade." If this deal becomes a pattern for future deals, then it should be rejected for that reason alone.

If you can't read the details in the agreement, then it should be rejected for that reason alone.

Is there much left to say?  This deal should be rejected.

The Keystone Rejection is Ridiculous

By rejecting the Keystone pipeline, the Obama Administration has exposed North America to more environmental damage, not less.  The product that would have been shipped by an environmentally friendly pipeline will now be moved by rail, environmentally much more threatening.

Typical environmentalist policy -- destroy the environment while claiming to help the environment.  Even Heather Ross, an extreme environmental activist, made exactly this point in her book "Green Gone Wrong," in which she thoroughly documents how environmental activists have, on balance, damaged the environment by their activist policies.

Results don't matter to environmentalists.  The only thing that matters to these folks and to Obama is the narrative, even if that narrative is a false narrative.

The VA Should Not Be a Surprise

From public education to public health care, the results are terrible and getting worse.  So, why is anyone surprised that the Veterans Administration is letting veterans die waiting for care and then covering the facts up.  That is precisely the ultimate outcome of all government run operations.

Our public schools suffer from the same problem.  The teachers' unions try their best to cover up the pitiful jobs our public schools are doing as they campaign for more and more money.  But, the results are there for all to see.  We have the worst public education system in the developed world.  Our health care will soon arrive at a similar state.

So, the VA woes should come as no surprise.

The Pernicious Role of Government in Higher Ed

Higher Education is less and less about education these days and more and more about social protest.  This, in the wealthiest society in the world.  Poor people in America live by a standard that the vast majority of the people of the world have no hope to ever achieve.  But, it isn't the poor that are protesting.

The protests are coming from the wealthiest strata of society.   The wealthy and privileged, apparently, are the new victims of oppression, or, at the very least, the newly self-appointed spokesmen for the oppressed.  Colleges and universities all over America have turned into hotbeds of unhappiness.  Many college students seem unable to weather the slings and arrows of events both near and far away.  They are suffering, they say, leaving little time to pursue an education.

Instead, the demand is to convert the university itself, more and more, into an institution devoted to political agitation.  Those who might question such a move are no longer considered worthy of the right of free speech.  They need to move on or be run over.

This is the natural result of deep federal government involvement in education, mostly driven by using taxpayer money to fund political activities and politically-motivated research at America's universities.  The usual response when one questions why university administrators tolerate illegal, sometimes violent, activities by 19 and 20 year olds, is that government funding might be threatened if they took any action other than surrender.

Thus, universities are more and more devoted to "centers" that separate students into various categories, categories which are multiplying every year.  Integration has given way to enforced and institutionally encouraged separation, one race from another, one gender from another, one ethnic group from another, one nationality from another -- unending and confusing multiplicities of identities, most of whom feel victimized, they say,  by the universities and colleges they attend.

How to divide the university financial pie among all of these competing victim groups?  That is the modern question facing the modern university.  Education has become an after thought, no longer relevant to the modern higher ed establishment.  It's all about identity, not about building strength or character through education.

The folks that lead these institutions now make whopping salaries (seven figure salaries are rampant at the elite schools), typically with accompanying entourages that would make the ghost of Louis the XIV blush.  Faculty parking lots are full of mercedes, bmws and the occasional ferrari.  Times have changed.

The real victim is the education process itself, no longer of much concern to folks out raising money to perpetuate these institutions.  Taxpayers, either through direct government grants or tax deductions provided to wealthy donors, provide the funding for institutions that have long since lost their moorings and are constantly casting about for a new champion or cause that might stir up students, many of whom no longer see education of much value anyway.

Ultimately, there will be no financing to support all of this, since no real product is created or even envisioned by the increasingly politicized modern education model.  Tuitions are continuing to escalate skyward and that process will not abate.  Eventually, however, the tide will turn and many, if not most of these no-longer-functional monstrosities will collapse of their own weight.

Education, as such, is, after all, pretty cheap and not in any way political.  That simple and obvious fact will spell doom for the higher education system that big government has spawned.

Economic Growth Is No Longer a Topic

Notice how economic growth no longer interests anyone.  Wonder why?  Maybe because growth is such a distant memory, we no longer really expect economic growth anymore. As we load on more and more regulations, we are way past the point point where regulations slow the economy. At this point, the economy barely has a pulse.  That pulse can get weaker, but most of the real damage is already done.

We are becoming a totally stratified society, where division of a stagnant pie is becoming the political debate, but growing the pie is no longer even a topic of discussion. If economic growth were a topic of discussion, it would become apparent that the US economy has undergone a fundamental change.

Good times used to be 4.6 percent economic growth (the average of the 1950s) or 4 percent economic growth (the average of the 1960s).  Today, economists and media pundits cheer 2 percent economic growth (when we are lucky enough to experience that number, which we didn't in the most recent quarter).

Given the pace of technological change, there is no reason why 8 to 10 percent growth is not feasible for the US economy, but the burden of regulation suggests that anything above zero is becoming increasingly less likely.  Moreover, no one seems to care.  There is no longer much discussion about increasing our economic growth rate.

Even with a slowdown, China is moving along at a 7 percent pace and will return to higher numbers in time, as the center of world economic power shifts to Asia and the US and Europe continue their decline into long run economic stagnation.

Once you lose interest in growing your economy, you enter a period of economic and political decline.  That's the trajectory of the US and Europe, but that is not the trajectory of many other parts of the world.  Asians want to grow their economies and they will do just that, while we watch and grumble.

Why So Much Regulation?

America is strangling under policies of excess regulation. These regulations are coming from several levels of federal, state and local government.  Is there any company without a large and growing "compliance" effort.  What consumer good is produced by the compliance department.

There are many ways to kill off the free market and stifle economic progress.  Excessive regulation is one of the more subtle.  An excess of regulation guarantees the power position of folks at the top of the pile and provides jobs for lawyers and clerks, who produce no products of value that any consumer would ever willingly consume.  These regulations kill off business formation and make criminals out of the poor who have the courage to step forward with their own entreprenurial efforts.

You don't need to deal with paperwork if you are a drug dealer, but if you do anything legitimate in our poorest communities, your are forced to endure an enormous amount of paperwork to satsify bureaucrats at all levels of government.  Otherwise you may be subject to civil and criminal penalties.

Selling lemonade at a lemonade stand would take more than 12 months to get the necessary approvals from various levels of government in most American cities.  So much for the lemonade stand.

No wonder, drug trafficking has such an appeal in the poorest communities.  If all forms of entrepreneurship are illegal (because as a practical matter compliance is impossible), then why not enter drug trafficking where the profits may be worth the risks.

But regulations serves the interest of rent-seekers.  A rent-seeker is someone who has no intention of providing a product or service that anyone would voluntarily purchase.  Instead a rent-seeker seeks to make their money by latching onto the regulatory world and punishing those who are trying to provide a product or service that folks would actually like to buy.  Rent-seeing activities are like leeches.  They suck out the blood of a vigorous economy and provide nothing in return.

America has become the land of the regulator.  In my state of Virginia, any home built with a single room that doesn't have electrical outlets cannot get an "occupancy" permit.  What conceivable reason can there be for this regulation?  If the homeowner wants to have a room without electrical outlets to protect small children, he/she cannot do it.  How did that become an issue to be determined by the state?  A family is forbidden to protect their children thanks to regulation.  There are so many examples where regulations make folks less safe and reduce their standard of living.

Who wins?  Lawyers and folks at the top of the pyramid.  These regulations don't bother them.  In some cases, Senators like Elizabeth Warren, exempt themselves from regulations that terrorize the average citizen.  After all, Elizabeth Warren, perched on top of the stage coach, need not bother to play by the same rules that she foists on every other American.

So, regulatory overkill continues to punish those at the bottom of the economic pile with little or no benefit to anyone but the bureaucrats (and their ever-present media fan club).

The Export-Import Bank Gets New Life

John Boehner seems to be a very nice man, but a uniquely unproductive Speaker of the House.  Rather than risk another bruising fight with conservatives, Boehner chose to step down as Speaker of the US House of Representatives last week.

Boehner has long been a supporter of crony capitalism.  The poster child for crony capitalism is the Export-Import, which provides subsidies to a handful of big businesses to promote their export activities.  Using government to line your pockets is supposed to be something that small-government Republicans oppose.  But, generally they don't.  Republicans, just like their Democratic brethren, are only too eager to find ways to use taxpayer money to enrich their wealthy patrons.  And so, the Export-Import Bank is back on the table as one of several initiatives that Boehner has been prevented from putting forward by the conservatives in the Republican caucus.

The plan is that Boehner in his final days, free from the normal obligations of Speaker, will use his lame-duck power as Speaker to pursue the various items on Harry Reid's wishlist.  The Export-Import is the symbolic crown prince of the Harry Reid-Nancy Pelosi wish list and Boehner is determined to deliver for his friends in the Democratic party and his buddies in the crony capitalism wing of the Republican party.

So, the tears that should be shed are tears for free market capitalism.  Boehner may be a nice man, but he is no friend of free market capitalism.

Another Completely Irrelevant Topic -- The Fed

Who cares what the Fed is doing?  Does it really matter?  Can the Fed push up rates even if wants to (which seems to be the case)?

Global economic growth is collapsing.  That is the reality.  The Fed watch is a total waste of everyone's time.

Why is the global economy collapsing?

The answer: politics.

Why has Europe had no growth for a decade?  Why is the US economic performance the worst post-recession performance in the country's history?  Why are Brazil, India, and Russia imploding?
The answer to these questions is the same answer in every case.  Too much government; too little free markets.

China is the only country that seems to be headed in the right direction.  Over time, China continues to loosen government control and learn from its policy mistakes.  The US and Europe double down on bad policies, blinding themselves to an unpleasant future reality.

China will, no doubt, suffer a downturn -- a very natural downturn correcting excesses of explosive economic growth.  But, China will come surging back and it will happen quickly.  In one of history's great ironies, the Chinese communist government has more respect for free markets than can be found in the capitals of the US and Europe.

So, why all the attention to the Fed?  Mostly an unwillingness to confront reality.  The western economies are unlikely to ever really have significant economic growth again -- ever.  The dramatic lack of support for free markets in western politics has changed the landscape.  Unless there is some major political reversal in western politics, such as occurred in the Reagan-Thatcher days, the western economies have entered a state of permanent economic stagnation.

Talking about the Fed makes it seem as if the wizard behind the curtain can make things chug along once more.  But, the wizard is out of bullets and has lost its way in a sea of political and economic confusion.

Until individuals are free to make economic decisions based upon what is in their best interest, the incentives that lie behind economic growth aren't there any more.  The western economies are going to learn, painfully, what the Chinese government seems to know-- when you enact a legislative regime that eliminates incentives, you eliminate economic growth.

Almost all of the economic policies advocated by western politicians (including their spiritual bedfellow -- the Pope) would serve to reduce economic growth and plunge the poorest people in the world into a dungeon from which they cannot escape.  Good intentions often work this way.

So, the attention to the Fed is mainly a useful way to change the subject and avoid reality.

Avoiding a Shutdown

Mitch McConnell, Senate Majority Leader, is holding extensive discussions to avoid a government shutdown over the upcoming "continuing resolution" to fund the government.  The issue -- funding planned parenthood. McConnell's plan is to force Obama to veto the bill which contains defunding planned parenthood.  Then, after the veto, the President wins as the "continuing resolution" provides the funding to continue on.  Net effect -- zero.

Somehow this constitutes a legislative priority for McConnell -- a totally empty gesture.  Obama will be delighted to provide the veto.  Obama certainly has made no effort to hide his support for planned parenthood, so the veto would provide voters with absolutely no new information.

So, what is the point?

The point is to appease Republican voters who would like a Republican dominated Congress to show some backbone.  That's obviously not going to happen.

Instead, more taxpayer money will be wasted by McConnell and the Republican leadership trying to convince their base that empty gestures have meaning.

But, empty gestures have no meaning.  Obama has made complete fools of the Republican leadership.  McConnell has no more belief in free markets than the President.

Empty gestures are not worthy of anyone's time.   A Senate majority is no different than a Senate minority.  That is all that McConnell is proving.

Inequality and Economic Growth

Only economic growth reduces inequality.  All efforts to legislate equality with arbitrary rules and income transfers simply preserves the position of the powerful at the expense of the weak.

A primer for how to increase inequality would include the following recommendations:

1. Enact a minimum wage and increase it regularly
2. Have an extremely progressive income tax and consider a wealth tax
3. Enact employer mandates that provide workers with health care, old age benefits, etc.
4. Encourage constant litigation between employees and employers
5. Mandate price controls on drugs and other essentials
6. Discourage the formation of new business by excessive rules on licensing and massive regulation.  Continue to add to these licensing and regulatory mandates so that new business are effectively precuded from any hope of success

If you pursue the above agenda faithfully, inequality of income, wealth, and power will be the inevitable result and the inequality gaps will grow over time.  Those in power use the policies cited above to maintain their position, regardless of merit or effort, because each of the above penalize merit and effort and reward political and social influence. (The last thirty years in the US provide important anecdotal evidence of the effects of 1-6 on the level of inequality).

So, to preserve the position of the rich, you should join forces with those who advocate the policies listed above and you will get your wish -- a society with dramatic inequality of income and wealth (the old Soviet Union, modern day Cuba, North Korea, Venezuela are excellent contemporary examples of income and wealth extremes.  In each of these societies, extreme versions of policies 1 through 6 were/are enforced at the point of a gun and were successful at implanting extreme inequality in their societies).

Volkswagen and German Politics

Holman Jenkins of the Wall Street Journal tells the tale of Volkswagen and their disastrous business and ethical decisions over the past decade.  This sleazy story of corruption, deception and duplicity is a natural outgrowth of the "stakeholder" theory of corporate governance.

When you no longer use maximizing shareholder value and move off to fuzzy thinking justified as doing social good, inevitably, you end up doing social bad.  Volkswagen is just the latest example.

Shareholders and the public are always the losers when corporate boards muddy their mission with "feelgood" policies that undermine their commitment to maximizing shareholder value.  Shareholders, who provide the capital, that fuels capitalism deserve to have their interests represented in the boardroom.  That's not what happened at Volkswagen, a firm that professed to be a friend of labor and an adopter of "green" policies.

Just saying that you are environmentally friendly, as Volkswagen did, seems to justify the most egregious policies of environmental damage and harm to consumers.  No shareholder maximizing firm can long afford absurd and dangerous corporate policies such as those in place at Volkswagen justified as "social justice" policies.

Corporate boards should stick to their knitting -- maximize shareholder value and stop pretending to represent stakeholders.  No one wins with the stakeholder approach -- least of all the shareholders or any legitimate "stakeholders," whatever that might mean.

DeBlasio's Plan to Waste $ 186 Million

Mayor DeBlasio of New York City has found another way to funnel money to his political allies, while doing nothing for the people of New York.

Realizing that the school system is failing to teach students to read -- yes, you read that right -- NYC schools fail in the most fundamental responsibility a school system can have.  Of course, these failures are concentrated upon the poorest families in New York.  The rich do fine.  Typical of the outcomes of big government advocates.

Instead of offering these problems up to the free market with a voucher system and letting human ingenuity figure out how to teach these students to read, DeBlasio's solution is to waste $ 186 million pouring more money into solutions thought up by politicians, whose motives are obviously less than pure.  DeBlasio's solution is basically to funnel this money to his political allies, who haven't had a new or original thought about childhood education since the early 19th century.

Too bad for the kids who won't be able to read thanks to Mayor DeBlasio.

Keynes Would Be Embarrassed

The media conversation about the global economic weakness would make a serious economist blush.  Perhaps the greatest economist of the twentieth century, John Maynard Keynes, argued that what drives an economy to prosperity are the "animal spirits" of entrepreneurs.  When does the media reference "animal spirits?"

In the name of Lord Keynes, today's pundits push ridiculous policies that waste resources, incentivize rent-seeking behavior, and stifle "animal spirits."  The so-called "stimulus plan" enacted in 2009 is a perfect example of such policies. Nearly $ 1 trillion was washed down the government rat-hole in the "stimulus plan."  The supporters of the "stimulus plan" argued that they were making "investments" for the public good, but virtually no roads or public facilities were built or even improved.

Instead, the 2009 stimulus plan redirected resources away from the private sector and down the government-corruption spigot.  Result: slowest economic recovery in US history.  All of these absurd policies cite Keynes as their inspiration.  Were Keynes alive today, he would be embarrassed by this nonsense.

"Animal spirits" require the rule of law, official encouragement of free markets, and respect for the capitalist process, all of which are in retreat in modern America.  Meanwhile, charlatans pushing government favors for special interests are praised by the media -- examples abound.

Free markets reward imagination, hard work and thrift.  Modern American (and European) economic policies increasingly penalize all three.  Only Asia is moving in the right direction as the Western world moves in the opposite direction.

NYTimes and the Minimum Wage

The NY Times is often proclaiming that Americans who do not share their "opinion" on climate change are ignorant and refuse to accept "established science."  Meanwhile, today the Times editorialized on the minimum wage, praising advocates who argue that the minimum wage should be raised to $ 15 per hour.

Talk about ignorance!  In essence, the logical argument by the NY Times in today's editorial is that increasing a price has no impact on demand.  All demand curves, according to the NY times are independent of price.  Give that view, why not raise the minimum wage to $ 100 per hour, since that action, by the logic of the NY Times' editorial, would have no effect on the demand for workers, nor would it affect the profitably of businesses.

To reiterate the obvious: (i) a minimum wage law reduces the demand for labor, thereby causing unemployment; (ii) a minimum wage makes it a criminal offense for workers to trade their labor for training in job skills.  Trading labor for job skills is something that is absolutely indispensable for the future of the poorest Americans; (iii) increasing the minimum wage alters who gets hired as employers will no longer consider workers with a lower skill set; workers who would have been hired at the lower wage.

The conclusion: the minimum wage is a dagger in the back of poor people and helps entrap the poor in an endless cycle of poverty and hopelessness.  Raising the minimum wage just exacerbates the problem and plunges ever more Americans into this government-created poverty trap.

Those writing editorials for the NY Times never had to compete for a minimum wage job as they cruised through their prep schools and elite colleges and now move back and forth in their limousines to their NY Times editorial offices.  Increasing the minimum wage, even to $ 100 per hour, won't have any impact on the lives of the editorial staff of the NY Times.  But it will affect those who have no hope of ever reaching the plush lives of an editorial writer for the NY Times.  The lives of poor people are permanently diminished by minimum wage laws, while the rich and affluent bask in their arrogant view that they are somehow helping humanity by keeping a boot-heel on the hopes of the poor.

Return of the Luddites

Today's article in the business section of the NY Times by economist Eduardo Porter shows that some bad ideas never really fade away.

Porter notices that workers at the bottom end of the market are not sharing in the gains of prosperity.  Instead of noting that the plight of low income workers is mainly the result of government interference in the labor market, Porter wanders back to the absurd idea that we are becoming too mechanized -- robots replacing humans.

In fact, markets work.  If you tack on numerous costs to employers for having employees, employees will make much less.  You don't improve the productivity of workers by mandating additional costs to employers.   You can expect workers at the bottom to continue to lose ground as the left comes up daily with additional employer mandates.

It's too bad that workers can't receive the fruits of their own labor.  If that were permitted, low income workers would have become higher income workers and all the fuss about inequality would be absent.  But, instead, government mandates, functioning exactly in the same manner as a tax on workers, rob workers of the income that would otherwise accrue to them.

Meanwhile, extremely wealthy folks like Elizabeth Warren, Hillary Clinton, Barrack Obama and others are completely unaffected by the damaging policies that they inflict on other people.  Instead they cite the damaging outcomes of their policies as an argument to impose even more damaging policies.  Low income workers deserve better.

Global "Policy Makers" Concerned About Low Growth

Ian Talley of the Wall Street Journal has penned an article today with the concerns of "policy makers"  about low global economic growth.

Almost daily, in one publication or another, we get opinions from "global policy makers" about our economic future.  These policy makers have the stage and they use it. Virtually none of their comments have much, if anything, to do with economics.  Instead, they mostly opine about political matters.  The few references to economics -- such as the reasons for very low interest rates on US treasuries and German public debt -- are almost invariably complete nonsense.

The reason for low economic growth is that these very same policy makers have managed to get policies in place that stifle economic growth.

These bad policies come from two directions: (i) one is the Elizabeth Warren approach:  despite the fact that there are virtually no losers in the stock market, assuming investors bought a diversified set of stocks at any date in the past and still own them, and that stocks have earned the average American over 10 percent annually, Ms. Warren and her ilk have decided that stocks are rigged and that Wall Street is unfair.  So, Ms. Warren is on a path to extend regulation to the point that only the one-percenters like Ms. Warren, Ms. Clinton, Warren Buffett, and the Barrack Obama crowd can make money in equities.  The returns to the average guy are being regulated out of existence, as we shall see over the next few years.  No doubt, the one-percenters will follow Al Gore's lead and make their fortunes through influence peddling and "political" private equity funds feeding off the largesse of government.

The Dodd-Frank legislation, inspired by Ms. Warren and her colleagues, have made it virtually impossible for small businesses and middle income Americans to access the commercial bank lending market.  The one-percenters have unfettered access, but small businesses, who historically drive employment and economic growth are shut out by over-zealous regulators.  This doesn't trouble wealthy folks like Ms. Warren, who don't need economic growth to maintain their  own personal status as one-percenters.

(ii) is the destruction of opportunity for low and middle income families brought about by concerns for "fairness."  The essence of these "policies" is to destroy the ladder up that has traditionally been available to folks who work hard and follow the rules.  Minimum wage legislation typifies the type of arrogant policies that cut poor people off at the knees, denying them any avenue to learn the skill sets necessary to compete in the modern world.  And, of course, these destructive policies are promoted on the grounds of "fairness."  Similarly, laws designed to promote fairness in the work place, serve mainly to reduce opportunities for minorities and others who struggle to gain access to the fruits of prosperity.  But, results don't matter to those arguing for "fairness," because invariably such advocates are never personally affected by these destructive laws.  Quite the contrary.  Their careers are only advanced, when the welfare of disadvantaged groups are trashed by these policies.  The advocates then argue that the damage done by their advocacy has other causes, as they retire to their mansions.

As these global policy makers and their fellow one-percenters like Ms. Warren and Ms. Clinton fly about the world in their private jets and chauffered limousines, extolling their personal concern for the poor and the middle class, the poor and the middle class are left to languish in the destructive path of their policies.