Comments on “Stop the Minimum Wage Hike”

You are right, that video is quite vapid. It tries to imbue support for raising the minimum wage with a “feel good” quality. However, as much as the video completely lacks any true logic, there are very good reasons to raise the minimum wage.

For starters if someone is working full time and that job is not paying him enough money to cover his basic needs (food, housing, healthcare), then the government has to step in to pay for them through welfare and other subsidies. If the owners and shareholders of that company are getting rich from the same company where the employees have to live off of handouts from taxpayers, then that company is actually surviving off of the government, because if the government were not stepping up and taking care of its employees, then the company would not have any workers.

I would rather that businesses just pay enough to their employees that I, as a taxpayer, do not have to subsidize their existence. I recognize that this will mean some people are going to lose a job, but I would rather give these people their time back to look for a different revenue stream, rather than spending 40 hours a week helping someone else get rich. I am not looking to create some kind of guarantee that employees will become wealthy for working any job, just that they can get by on their own. Also, I would much rather this be handled at the state level, so, while I do not necessarily support a rise in the national minimum wage, as a regional concept, I do support the measure.

US Issues

cropped-bob-shapiro.jpg   By Bob Shapiro

One Law that I see validated constantly is the Law of Unintended Consequences.

Sir Isaac Newton said that for every action, there is an equal and opposite reaction, but it seems like our government leaders are not aware of this basic Law of physics.

Frederick Bastiat said almost 200 years ago in his book, The Law, that we should consider not only the seen effects, but also the unseen effects of any action.

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One Thought on the Recent Police Shootings

The year is 2015 and cops shooting civilians is all over the news. Now, I was not a witness to any of these events, and the only facts I have are the less than accurate ones provided by the media, so I will stay away from passing judgement on any one event, but I do have some general thoughts about the incidents.

Basically, I believe one simple step that could be taken to curtail patterns like this would be if police were not trained to draw deadly arms against unarmed civilians, or even individuals who have a close quarters weapon like a knife. There are very few situations where escalating the potential for harm to deadly levels will help quell tensions. If the person on the other end of that gun gets incited to act even more irrationally, in an attempt to call the officer’s bluff, the only option left is to load him full of lead. However, if the cop had drawn a devise intended to incapacitate rather than kill, he could pepper spray or Taser away at the perpetrator. Sure, someone will likely end up requiring medical attention, but the fact that the target lives to get a chance to plead his case someday instead of being buried 6 feet under for eternity makes it kind of an easy decision in my book.

The perpetrator may end up suing the police force for wrongfully being Tased, but I feel that this is a much better option than being sued by a family member for wrongful death. If police officers feel they really need to carry lethal force in the event they need it to overcome some kind of obstacle, I will trust their judgement in the field, but it should be treated as a weapon of last resort when they have so many other tools at their disposal to accomplish their job while remaining safe.

This is the 21st century. We have the technology to stop a man cold in his tracks, without stopping him dead. If officers do not trust modern incapacitation tools, then let’s make them better. I know we have the capability to make it work; my concern is that we do not have the will.

Why We Need One World Language and How We Can Incorporate One

I would like for you to imagine two different scenarios. In the first one, you are born into a small but wonderful community. Your community is surrounded on all sides by five very different communities, each with a different history and culture. Over the years your community has differences of opinion with its neighbors, but concerns are generally resolved by airing out the problems in a public forum for all sides to discuss and eventually dissipate quietly over time. At times the other communities close their borders to travel, but you can always tell what is happening there by reading a newspaper or watching their TV programming, so you can feel comfortable knowing that they are not up to anything nefarious, and in this, you can feel comfortable with your neighbors. You frequently travel to these other communities for fun, to seek enlightenment, or to make new acquaintances.

Now, for the second scenario. It begins much like the first where you are born into one of five different communities, but in this version, each community speaks in a completely different language. You see the benefit to learning one or two secondary languages, but it would just not be reasonable to learn all five, after all, you can get by just fine on one, since your community has everything that it really needs to survive. As there is no way for all of the communities to understand one another easily, it is no longer possible for the communities to air out their differences in a public forum where everyone can hear every argument and voice an opinion for everyone else to hear. There will be a small number of people who will act as interpreters, but it will greatly limit the number of people who can be involved in the conversations and will slow down the speed of any dialog. How often will people tire of trying to explain complicated issues in a foreign language and simply resort to violence? Will the few people who have the means to communicate in multiple languages use that advantage for personal gain to the detriment of others? If you have no way to comprehend what leaders in the other community are saying, how do you know they are not saying something disparaging about you or your community, and if they cannot understand you, how can you set the record straight when there are differences of opinion? Are you more or less likely to make a long term friendship with someone who does not speak your language? If you do not have any friends in the other communities, why would you put forward much effort to support them in a time of need? What is the likeliness that you will make much effort to understand a culture that is different from yours if you cannot understand what they say?

So, what am I getting at? When people speak the same language, problems can be solved and friendships can be built. When people do not speak the same language, it creates an environment of distrust and societies can be manipulated into acting against one another more easily. In the history of the world, more wars have been fought between civilizations that spoke different languages than ones that spoke the same language. Looking at the current list of armed conflicts in the world, the worst and longest lasting outbreaks of violence are in regions where more than one language is spoken. Syria, Iraq, and Afghanistan each have multiple languages spoken by different sectors of the population, and the people of the Israeli-Palestinian conflict have been involved in protracted conflicts for decades, while not understanding each other’s language.

I do not want to sound like I am suggesting that speaking the same language automatically inoculates a society from war. The United States and Canada even went at it over 100 years ago. Nor, do I believe that speaking different languages dooms societies to be engulfed in perpetual war. The Western European countries have had good relations for the past 60 years, but that is coming off of the War to End All Wars. I am merely implying that when all parties involved can speak and understand each other clearly, people have a much easier time finding a way to solve problems peaceably rather than resorting to violence.

Why am I bothering to bring all of this up, you might ask? Everyone knows that the world is set in its ways and we could never hope to change the primary language used by any country, right? Well, I say we can, and it could be done within one or two generations and without any bother to all of the people living today who are not interested in learning a second language. Here is the plan.

Step one. Pick the unified language. It really does not matter what it is, as long as everyone agrees to it. There are many different factors that would have to go into such a decision, which I am not going to get into, though I do have my opinions on the matter. So, once the decision is made on which language to use, we can move on.

Step two. Starting with Kindergarten, all children will be taught school primarily in the agreed upon language. This means that all subjects, math, art, history, social studies, whatever, will be taught by a teacher speaking the unified language. All Kindergarten children will use the unified language for the entire school day and will complete homework assignments solely in this language. After a year, these Kindergarteners will graduate to 1st grade and a new batch of youngsters will start school for the first time. At that point, you will have all children from both of these grades being taught in the unified language, while the rest of society marches on as it always has. This process continues year after year, until the country finally reaches a tipping point where more people are proficient in the unified language than the old one.

This process will take a solid 40 years or so, long enough for the original set of Kindergarteners to have grown up take their place in adult society and raised children of their own. In the meantime, the older generations will age out of the workforce, or simply pass away, as happens naturally with time. They can live comfortably in a society that continues to speak two languages, the one that kids learned at school and the one that they spoke at home, until the time comes that there is no one left who relies on the original language. That is when real change will start to take place around the world as countries that traditionally had to rely on interpreters to haggle out deals can simply have open dialogs.

If you are thinking there is no way that a 5 year old can handle two languages at the same time, I offer my own personal experience in this matter. My children attend something that is known as a foreign language immersion school. This is not some kind of school for the gifted, but simply a standard public school that is run by the county that I live in and is offered to all residents regardless of income or intellect. Starting in Kindergarten, they are instructed entirely in the foreign language, and when they come home, we speak only English. Homework time can be a little challenging, but it is nothing that we have not worked through. Once they get to the higher grades, school will include some courses dedicated to English, just to make sure they know the proper grammar and are familiar with the most appropriate works of literature, but it is relatively minor compared to their work in the foreign language. Most children are considered fluent in the other language by the time they finish 1st or 2nd grade, and they are definitely fluent in the language that we speak at home. Also consider that this program does not cost any more than a standard education otherwise would. You still need to supply a school, a teacher, and books. Now, all of these will just be in a different language than before. Plus, if we select the unified language to be one that is already widely used in some part of the word, there will already be ample supplies that would not have to be devised, as surely there are already children learning in that language today.

So, now that I have explained why a one world language would be so important, as well as how to achieving it. What is stopping us from making the world a better place? If an end, or at least slowing, of war is not a good enough reason, let me slide one more thought your way. Imagine the world is faced with a new problem unlike anything it has ever seen before. It is a known problem where we have time to act, but not infinite time, say, we see an asteroid headed straight for Earth, and we know it will take five years to get here before wiping out all known life forms, except for the cockroach. In such a scenario there would really only be a handful of individuals qualified to work on a solution to this problem. A few in America, a few more in Europe, some in Asia, and so on. Now, if all of these people could get together in a room and openly discuss the problem using one language, there is a much higher likelihood that they would come up with a solution in time to implement it before the asteroid hits. If, on the other hand, we had to deal with such a situation as today’s circumstances, where each pocket speaks a different language, it would make cooperation much harder between these groups, and it would decrease the chances that a solution could be devised in time. In which one of these scenarios would you rather have an asteroid hurtling toward you?

Why Does Amtrak Still Exist?

Once upon a time the height of transportation technology was the train. Trains could shuttle massive numbers of passengers great distances much faster than the old standby of horse and buggy. However, much like that technology was replaced by the train, eventually, cars, buses, and airplanes became accessible, affordable, and much more convenient that the old modes of transportation. But, yet, we still have passenger trains. How is this possible? Of course, there is a pretty simple answer of government subsidies, but then why does the government subsidize passenger rail?

On that one, I am completely perplexed. If you have the answer, I would love to hear it. It is not as if the previous investments in rail lines would go to waste; freight rail is the backbone of America, and I doubt there will be a technology advancement that will out date it in my lifetime for shipping cargo across the country. Plus, if someone has the money to blow, there is no reason to prevent him from plopping a passenger car on these same tracks for fun, but you can travel faster and cheaper by plane or car, so what is the point of spending the tax dollars of some guy in South Dakota to bring down the train fair for someone in Utah?

I understand that the North East corridor of Amtrak actually turns a profit, so let it keep running, but the whole rest of the endeavor really should be liquidated. Let the rails concentrate on carrying goods across the country and stop throwing tax payer dollars at an unnecessary transportation system.

Why Do I Think That Taxes on Stocks Are a Bad Idea?

Bottom line, when the government taxes capital gains or dividends from stocks, it is unfair. Forget about any arguments that would explain how taxing stocks removes incentives for people to invest in small, struggling businesses to help them become the corporate giants that fuel our economy. No, this is all about the practice of taxing money that has already been taxed, or, what I like to call “double dipping” by the government.

Let’s imagine a scenario where you are the sole owner of a business. After you have paid all of your vendors and employees, you have $100,000 left over in profit. You could decide to give yourself that $100,000 as a salary, pay personal income tax on it, and leave the company with no profits, meaning that it owes no corporate income tax. This seems fair to me. Even though the business did not have any profits to tax, the government still ended up with a cut of all of that money that was paid out as personal income to you and your employees, meaning that the government probably took somewhere around 20% of the company’s total revenue.

Now, what if you had not taken that money as salary, but, instead, spent it as if it were the business’ money? If that were the case, then the company would have had to declare the $100,000 as profit, which meant that you had to pay somewhere in the neighborhood of 35% of it to the government as corporate income tax. This, too, seems like a fair enough scenario. Obviously, you would want to choose the method that limits your tax burden, but either way, you walk away with most of the money for your hard work effort to run an efficient business, and the government takes a portion to do with it whatever it is that government does.

What if, however, after forking over that chunk of your business’ profits, the government said that you must also pay a special extra tax, roughly equivalent to the personal income tax rate, before you could actually use those profits for anything other than allowing them to sit in a bank account, untouched? This would mean that the government would take income tax from every employee that you paid, plus directly tax any profits left over to the business, plus throw in another tax before those profits could be spent on anything. This is what I consider an unfair tax, and it is exactly what happens when the government taxes profits on stocks.

See, when you hold stock in a company, you are simply holding partial ownership in that business. Very few people have the resources to own and run a business entirely by themselves, but just about anyone can own part of Apple or Amazon. When you are paid a dividend from the stock or sell it, you are simply exercising your control over the profits of that company that you own part of. The government is already taxing the profits of the company before any dividends are paid out, so, when you decide to cash out your ownership and the government taxes that money again for the sale of that stock, they are double dipping.

Almost every American owns stocks, though typically those stocks are tied up in retirement plans, which you will not see a penny from for decades, but this is a policy that affects all of us, not just Warren Buffett. When people claim to be targeting “the rich” by raising capital gains taxes, they are really affecting every one of us with a special bonus tax on top of the profits in our companies that has already been taxed.

The argument I often hear is that folks who are so wealthy that they earn a majority of their income through stocks (I’m thinking of Mitt Romney here) are avoiding taxes because, depending on the year and the state of the politicians in office, personal income gleaned through stocks is typically taxed at a lower rate than regular income. My point is that any income gained through stocks has already been taxed at a rate far higher than regular income tax when it was treated like corporate income, so taxing it again, even if it is at a lower rate, translates to taxing that money twice, and at a much higher rate than standard income.

Now, if anyone wanted to discuss doing away with the corporate income tax, that would totally alter my argument. If the government did not tax the profits that a business makes to begin with, then it would be completely reasonable for them to tax the money that is paid out to the company’s shareholders. Not that I am pushing for that kind of reform here, but don’t be surprised if, someday, I make a case for doing away with corporate income taxes completely, in favor of shifting all taxes to either personal income or just a national retail sales tax.

What Is My Stance on Minimum Wage Laws?

The city of Los Angeles has put minimum wages back in the news. Here I will explain why I believe that government needs to intervene in wage controls, but why simply forcing employers to pay more without any other restrictions is probably not the right approach. Before I even get into it, though, I will throw out a disclaimer that it was only very recently in my adult life that I came around on understanding why wage control laws are important. For most of my life, I was one of those folks, maybe like you, who believed that the uncontrolled free market was the answer to everything. If you feel that way, let me know if this does anything to alter your perception of economics in the real world.

Simply put, if your neighbor, who has a full time job, does not earn enough money to eat, are you willing to just watch him literally starve to death, or would you prefer it if the government stopped his demise with a program like welfare that ensures Americans can at least feed and house themselves at the most bare bones of levels? Now, I may be making an incorrect assumption about you, but I am guessing that you would vote in favor of a welfare program over having your neighborhood littered with emaciated corpses, even if it means your taxes go up a little. Since you clearly care so much about your fellow human beings, you really should be in favor of government controlled minimum wages, because they prevent your neighbor from ever needing welfare, as he will be guaranteed to earn enough money from his employer to survive by working. Because really, if you cannot earn enough money from your job to eat and cover housing, then why waste time bothering with a job in the first place.

Think about it this way, Americans buy enough $2 hamburgers at McDonald’s for the CEO to earn nearly $10 million in compensation a year, but many of their full time employees do not earn enough money to pay for food, housing, and medical expenses, let alone set aside money for retirement. By allowing this to continue, you have to give up more of your hard earned money to the government, so that they can reapportion that money to McDonald’s employees through welfare programs, just so that they can survive. If, on the other hand, McDonald’s just paid the CEO less and used some of its $1 billion profits for the year, so that everyone could earn a living wage, then you would get to keep more of your own money. Why should shareholders be allowed to take a dime of the company’s profits if the rest of America has to pay living expenses to McDonald’s 440,000 employees who need government assistance?

You might be saying that the CEO deserves all of that extra money for being the leader of such a large organization, and I partially agree, he should be paid more than the front line burger flippers, but if he is not smart enough to figure out how to pay every employee enough to meet their basic needs in return for 40 hours of work a week, then that CEO really does not deserve that much more than the rest of the employees.

If you believe that market forces will automatically adjust the price of labor to be more reasonable, then I am going to take wild stab in the dark and guess that you have not lived long enough to see that when the pool of laborers grows unnaturally, as ours has been allowed to do with open borders policies, employers have deity level control over wages. Refer to my commentary on trickledown economics for more on that. (https://mythoughtsonhowtomakethisplacebetter.wordpress.com/2015/05/06/can-trickledown-economics-actually-work/)

Unfortunately, the only way to ensure that working does not devolve into a process that sees well-meaning people spend all of their time toiling away at a job that bankrolls a handful executives and shareholders without ever earning enough money to take care of themselves is with government intervention. Now, really, these minimums should be set by local governments, as a nationwide policy would not be able to fully acknowledge the regional differences in living expenses.

So, if you are on board this far, and agree that minimum wages are a necessity for society to function properly, why might I have indicated at the top of this piece that just raising wages alone is not really the best way to tackle this problems? I believe that when a person is living check to check, he can be left alone to decide how best to feed, house, and clothe himself, but there are a couple of things which every person needs that are not that easy to manage the expenses of. The two I think of are medical expenses and retirement income. Both of these are expenses that are inevitable, but are not spread out evenly across one’s lifetime, so someone might be tempted to ignore these factors when planning his finances. That is why I would propose that while requiring an employer to pay a wage that fairly compensates an employee’s time to also cover medical and retirement, that money should not go directly into the employee’s pocket. If you believe that social security can act as a long term retirement plan for all Americans, then those payroll taxes cover the retirement portion. As for medical, I propose funneling a reasonable percentage of income into a health savings account. This way the employee still retains full ownership of the money, with the stipulation that it is spent on healthcare. The money can go to an insurance plan to spread the price of medical expenses out or it can just be built up until a rainy day.

Ultimately, minimum wage laws help provide a little protection for employees to prevent them from being taken advantage of by employers who have access to an unnaturally large labor market. If you think you are immune from having your wages slashed, you do not have a very good imagination. What uncontrolled immigration does not do today, smarter computer algorithms will accomplish in the future. The day is coming where humans are just not needed for any form of labor, skilled or not. It may not happen in our lifetimes, but we need to lay a groundwork for wage laws that will work for all Americans, now and centuries in the future.

Can Trickledown Economics Actually Work?

Trickledown economics was professed to be the savior of the American dream in the 1980’s. Did it work? I think you can find evidence to support both sides of that argument for decades past, but I am certain that with today’s political policies of open borders, it absolutely will not work to do anything except forcing more people to live below the poverty line.

The first policy that can render trickledown economics completely useless is free trade. If an employer feels that the existing pool of workers is demanding too much of his profits, he will just move his operations to another country where laborers have a substantially lower cost of living and import the goods back into the country. This causes revenues to flow out of the borders, completely bypassing the individuals in this country that the money could be trickling down to. In effect, you end up with trickle out economics. Sure, this benefits the economy of the other country, but it leaves an awful lot of people in this country on food stamps. The cheaper transportation costs become, and the lower tariff rates are (which happen to be nothing when tree trade agreements are in play) the more incentive there is for the head of the company to relocate operations. The American sector that seems to have suffered this most is manufacturing. I cannot name an item that is manufactured in this country anymore, and according to Apple, the expertise does not even exist in the USA to manufacture an iPhone, as there has been a complete brain drain of evolutionary manufacturing processes, due to the scale of outsourcing we have seen.

The next policy that destroys the intention of trickledown economics is uncontrolled immigration. Much like free trade, if employers feel that the labor market is demanding too much pay, they can import workers from other regions who are willing to work for less. When there are a limited number of jobs and an unlimited number of workers who can fill these positions, wages drop with each new round of immigrants, until they hit rock bottom. Meanwhile, we end up with more and more people who have no job at all, stressing our social safety net beyond what it was intended to hold. Importing workers does not just affect stereotypical gardeners and housing contractors, either. The software and nursing industries are continually pressing the government to offer more visas to foreign workers. Typically, this is done in the guise of overcoming a lack of educated individuals in this country, but the reality is that our schools are pumping out qualified people at a higher rate than ever, but companies know that non-Americans are willing to work for less money.

In my belief trickledown economics completely can work, if the government were willing to take a stand against employers in favor of employees. Simply applying common sense tariffs to prevent flooding American markets with foreign manufactured products and only allowing workers into the country when there are true labor shortages would provide a platform for domestic workers to regain some of their power over wage negotiations. When a majority of the population has to rely on government subsidies to make ends meet, those employers are going to have to fork over ever increasing percentages of their profits to cover the benefits, so in the end, these open border policies will eventually ruin them, as well.