“Government is the great fiction through which everyone endeavors to live at the expense of everyone else,” wrote the celebrated French legislator, economist, and political theorist Frederic Bastiat 165 years ago. With recent reports out of the Census Bureau indicating nearly half of all Americans are receiving some form of direct government subsidy – Social Security, Medicare, Medicaid, food stamps, unemployment benefits, housing assistance, veterans’ benefits, etc. – can there be any doubt he was right?
The United States lost jobs between 2000 and 2010, the first loss between census years that has been recorded in the nation’s history. The decline was attributable to two economic shocks, the contraction following the 9/11 attacks and the Great Recession, the worst financial crisis since the Great Depression. Yet, even in this moribund job market, employment continued to disperse in the nation’s major metropolitan areas.
Thanks mainly to the shale revolution, oil production in the U.S. hit a 28-year high last month while imports were at their lowest levels since 1995. Consequently, prices have fallen 15% since June, and Saudi Arabia has cut production by 400,000 barrels a day — providing further evidence that OPEC no longer has the power to set prices.
Timothy Noah of MSNBC recently informed us, “In theory, raising the minimum wage ought to increase unemployment, but in practice, economists (including a few at the not-exactly-left-leaning Goldman Sachs) have lately struggled to find any real-world evidence of that happening. Job creation is actually faster in the states that have raised the minimum wage.”
Today’s economy is driven by Washington in more than just determining the location of Maserati dealerships. We see the ramifications of current government policies in numerous obvious ways. Make full-time employment more expensive with required benefits, and suddenly there are more part-time jobs; provide ample benefits and low eligibility standards for defining disabled workers, and suddenly there are more long-term unemployed going on SSDI; keep interest rates at zero, and suddenly there are more elderly workers; end unemployment insurance, and suddenly you see people accepting jobs they were reluctant to take; and as we’ve seen at the state and local level, raise the minimum wage, and suddenly teens are struggling to find work.
It’s June, a month famed for marriages, but it is likely to be remembered for the high rate of teen unemployment which has been soaring for a long time. By February, the national unemployment rate for youth, age 16 to 19, had reached 20.7%. By November 2013 it was three times higher than the national average of 6.6% according to the Bureau of Labor Statistics.
President Obama seems committed to forcing the minimum wage up through federal intervention. If he succeeds, it will only damage the economy further, resulting in higher unemployment and less growth. Here are four reasons a minimum wage is a bad idea.
In campaigning for the presidency, Barrack Obama inspired popular support of millions of voters by eloquently promising to “transform” America with “fundamental” change. Now his popularity is at its all-time low, his signature legislation, Obamacare, has been a disaster, his highly touted—and extremely expensive—stimulus program has failed. He has done nothing to lower the federal debt or tackle the future insolvency of Social Security, Medicare or Medicaid.And the economy continues to stumble 58 months after the recession officially ended.
Instead of deregulation to reduce unnecessary, stifling regulatory burdens and barriers, as both Carter and Reagan did to such fully documented success, Obama regulates mercilessly as if regulation is cost free to the economy, as the most interventionist President in American history.
In 2013 the price of gold bullion lost 28 percent and closed near its low for the year. It was the first annual decline since 2000 and the worst since 1981. Gold ETFs experienced record redemptions, shrinking the funds 33 percent by year end, but they were the exception. Marcus Grubb, Managing Director of the World Gold Council, reported, “2013 has been a strong year for gold demand across sectors and geographies, with the exception of western ETF markets.” While investors were leaving ETFs, demand for gold jewelry, bars and coins was increasing, as were purchases by central banks. Globally, consumer demand increased 17 percent for gold jewelry and 28 percent for bars and coins.
The editorial board of the New York Times had it right 27 years ago when it wrote, “The Right Minimum Wage: $0.00.” There’s a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the legal minimum price of labor will result in an increase in unemployment and it will be the least skilled workers, those most in need of work, who will be the first to lose jobs and the last to be hired. That would be the tragic unintended consequences if government forces the new law upon businesses.
Minimum wage has become a contentious political issue, even though it has nothing to do with a living wage. Workers are paid for the worth of the job they are paid to do. Nevertheless, Democrats plan to tap into what they perceive as income inequality by using minimum wage as a plank in their populist economic platform heading into the November elections.
Obama and his administration is so detached from reality that it is afflicting millions of Americans who want to work while at the same time its policies are reducing the number of new jobs being created.
Heartland Senior Fellow Benjamin Domenech was a guest Wednesday night on “All In with Chris Hayes” on MSNBC. Ben is rare among people who go on TV to talk: He actually endeavors to answer the questions he’s asked.