Voting

This is a response to my the post at
http://issuesthatmatter21.blogspot.com/
While I strongly agree that people should educate themselves and vote- the notion that bother's me is the whole idea that we have to vote for the lesser of two evils and want to add more to the post.
In reality there are more evils on the ballot than that- in the third party.
There is always the line that if I voted third party it would just get the major party candidate I like the least elected. This might be true but if the only real differences can be written down on a 3X5 card then does it really matter who you vote for? perhaps not if both major party candidates are horrible.
In this case vote third party as it show's you don't like either demopublican or republocrat and you like candidate X becuse they match your view better.
Next we have the system itself this is the reason I think we should have a couple reforms- first on an every election except for the presidential how about a requirement of 51% to win?
In the presidential election- how about a few rounds with some debates streaming over the internet and who ever else wants to broadcast the feed followed by an elimination round so that there are only two names on the ballot in November.
The lesser of two evil is not an excuse to vote as not voting shows you don't care while third party votes show where your heart really is gives the signal the major parties need to rethink their platforms.

inflation and the minimum wage

The reason I am opposed to even having a minimum wage can be seen in this article by Kevin Drum.
http://www.motherjones.com/kevin-drum/2012/04/why-high-inflation-good-recession
A brief summary of the article states that one of the problems that is keeping the economy from recovering from a crash is that wages are not falling across the board – and in order to get more job growth we need inflation to lower real wages by increasing prices.
Kevin Drum a lone voice screaming for inflation the current monetary US monitary policy has been inflationary for years- Ben Berneke who headed the federal reserve during both the Bush and Obama administrations infamously gave a speech called  “Deflation: Making Sure "It" Doesn't Happen Here” http://www.federalreserve.gov/BOARDDOCS/Speeches/2002/20021121/default.htm
to use Kevin Drum's logic the reason a junior college student can't get a part time job at the local burger joint is because the local electronics company refuses to cut the pay for their engineers.
Perhaps the problem is not employers are to stupid to realize they should cut wages but there is a law that says they can't pay anyone less than $7.25 an hour.
The main objection that people have to repealing the minimum wage is the notion that it is necessary to ensure people have a living wage however inflation destroys real wages so if a living wage is going to be the yardstick – we have to ask which does the least amount of damage to this goal.
If an employer does not think they can afford to keep X amount of people employed full time- they will  cut hours and fire people.  If an employer is reluctant to cut their payroll at all it is because they are making money and need people to run the business.  If an employer is reluctant to fire an individual it is because they believe it would be hard to replace them and the job is essential to the business.
If the minimum wage were repealed you will likely see pay fall- at least for entry level jobs.  I'm not sure how low it would fall in either nominal or real terms. All I can say is the following if a job currently pays $7.25 and  and someone were willing to do it for a $1 an hour it is because they are desperate for work and does not think they could get more and right now they are standing on the side of the road with a “Will work for food”  sign.
 I would also expect prices to decrease as well – In a bad economy businesses are not selling their goods ans services so they will lower prices  to increase sales and get higher profits and between the two real wages won't change that much but getting a job would be a lot easier.
This is economics 101 and is the reason the Austrian school of economics believes if it weren't for monetary policies falling prices would be the norm even in a good economy as companies would look at new technology and production methods to reduce their overhead.
In the short term- there would be two reasons prices would not decrease when the cost of labor decreases the first is good the second is not.
The good reason is the average business's payroll does not decrease by much if any at all.
In this case entry level jobs might start people at $5 but this translates to a lot of low skilled jobs being reshored to the US, and a massive hiring spike which wipes out a lot of unemployment and forces employers to get more generous with wages.
The other one which would be bad- is taxes, regulations , subsidies and other government imposed expenses distort the market more than the minimum wage does- this fear is the reason I support tax tort and regulatory reform and oppose corporate subsides.
The main argument against these reforms is the notion that all regulations on the books are vital and necessary and the only people these reforms would benefit is the top 1%.
A lot of times these arguments strike me like they believe the regulatory process is to climb Mount Sinai and wait for God to carve the new additions to the regulatory code and as divine God given commandments altering even 1 will cause the nation to fall apart.
In reality the regulatory process is as follows- congress vote on a new law to set guidelines on what they want to regulate.
Then either an existing or new government is created and tasked with both writing and enforcing new regulations which go into effect. There is a bill that cleared the house but has been held up in the senate called the REINS act which is aimed at requiring Congress to vote on any regulation that is expected to cost more than $100 million annually.
It was introduced on the senate by Dr. Rand Paul- http://www.paul.senate.gov/?p=REINS_act
and knowing his bend that means there is no oversight currently.  While I don't think the bill goes far enough I do believe the current system is flawed for two reasons.
First is that it is under the constitution congress supposed to make laws not unelected bureaucrats.
The second is that this is inherent conflict of interest- as adding more regulations gives the bureaucracy reason to expand which means promotions as someone has to supervise the new office.
 Even the reform and leaving the minimum wage alone to a lot of people on the left is unacceptable since they believe inflation is necessary for economic growth making the claim deflation is 1000 times worse than inflation. They claim that falling prices will lead to a deflationary death spiral as people will hoard money and put off purchases out of fear they might get something cheaper if they wait and the increasing real value of existing debt will destroy what ever is left of the nation's wealth.
As we can see by the fact people are willing to buy computers despite the fact they do get better every year and I doubt people who could afford to buy food would be willing to let themselves starve out of fear they could sell
 As for debt- as the recent crash shows inflation can rob a person of their ability to pay on debt as there is a chance their income won't keep up with inflation.
If people expected prices fell across the board people would choose to save money and buy things they wanted and not get into as much debt in the first place.
They will often point to  Japan's lost decade or great depression as proof that you shouldn't allow deflation to happen but in both cases the government was trying to fight deflation.
Considering that the ecconomy recovered from every other panic with out a major stimulus package the whole argument we need one should be suspect.

I am joining a number of voices to comment on the minimum wage. I am opposed to raising the minimum wage- on the simple grounds that all I expect to happen will be a decrease in employment over the short term and increased prices over the long term and all the arguments in my view point to other problems.

First lets take the notion that the minimum wage should be enough to live on.

First there is the argument it has not kept up with inflation- the people using this argument might point to the claim that the 1968 minimum wage when adjusted for inflation would be about $11.

Depending on how you do the math- the value might even be higher than $11.

This fact shows me two problems and neither of them are an artificially low minimum wage.

The first problem is the fact the buying power of the dollar has dropped about 90% since 1968.

So the first question that needs to be asked – is what causes inflation.

In the Austrian and Chicago schools of economics inflation is viewed as a monetary phenomenon caused by an increased money supply. In fact in the Austrian school- inflation is not defined as rising prices but an increase in the money supply and will refer to the rising prices that would result as rising prices.

So in both of these schools the cause of inflation is a mixture of government overspending and federal reserve policies- like those advocated by the likes of Ben Bernanke which have been designed to keep prices from falling.(http://www.federalreserve.gov/BOARDDOCS/Speeches/2002/20021121/default.htm)

I've seen a lot of arguments that state falling prices are a bad thing- because they indicate a decline in demand and are an indication of the start of a death spiral as people stop spending money and start hording.

In the Austrian school they expect to see falling prices. Falling prices are an indication that supply has increased relative to demand and can be caused by companies finding new and better ways to provide their products and will in turn lead to higher sales. while there might be occational spikes in prices bassed on an economic shock- rising prices are expected to be temporary as consumers will either leave the market or look for cheaper alternatives. If you are expecting gradually increasing standard of living and are seeing the opposite then you need to examine the reasons which is why I yell for tax, tort and regulatory reform.

For example if we take a look at the Big Mac index- when it started September 1986

http://bigmacindex.org/1986/09 The price of a big mac was $1.60 which would be about $3.45 in today's money according to the inflation stats at http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.6&year1=1986&year2=2014. At that point in time the minimum wage was $3.35 according to http://www.dol.gov/whd/minwage/chart.htm which would be worth $7.20 in today's money according to the same inflation page

The price of a big mac according to the big mac index as of Janurary 2014 was $4.62

so the minimum wage is about 5 cents less while the price of a bic mac is $1.17 more.

Either the world has reached peak beef or we are looking at the price of more regulations.

Since a lot of the advocates would make the claim the Australian minimum wage was $15

let's look at the price there. At http://www.economist.com/content/big-mac-index the price of a big mac is $4.57 the Australian price is $4.47.

While the Australian minimum wage is a bit complex and not a flat $15 (http://www.minimum-wage.org/international/en/Australia) the minimum wage in New Zealnd is a little simpler http://www.dol.govt.nz/er/pay/minimumwage/ and starts at around $9 US.

The heritage foundation rank Australia and New Zealand rate 3 and 5 on the heritage foundation's list of nations by economic freedom http://www.heritage.org/index/ranking their official unemployment stats are lower than ours

(http://www.nasdaq.com/article/australian-april-unemployment-rate-steady-at-58-20140507-01790) (https://sg.news.yahoo.com/zealand-unemployment-rate-steady-021756904--finance.html) .

At first glance this would indicate that in both cases a better regulatory code combined with a loser pays legal system allows Australians and New Zealanders to enjoy a better standard of living and if we simply did tort and regulatory reform while leaving the minimum wage alone the economy would finally turn around from the most recent crash.

I have seen people make the argument that doing such reform would only benefit wealthy ceo's.

The basic problem with this notion- is two fold first it assumes there is nothing in the tax or regulatory code that favors and helps big business. That can be blown out of the water- with the fact Warren Buffet claims to pay a lower tax rate than his secretary (http://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/) and Mitt Romney allegedly pays around 14% http://money.cnn.com/2012/09/21/pf/taxes/romney-tax-return/

A lot on the left will talk about the need of the rich to pay their fair share in taxes – I would agree with that notion which is one the reasons I support tax reform.

If we were to have an income tax it should be a flat tax, with few if any deductions. The only deductions I could accept over the current would be the following-

1. The first $20 K or so might be tax free.
2. $5K or so per dependent.
3. 3% deduction on capitol gains for every year the asset is held.
4. Charitable deductions

Another option would be the fair tax which is a sales tax that would be applied only to new goods, the purchase of services and be combined with a monthly prebate indexed to the poverty level.

http://www.fairtax.org/images/content/pagebuilder/Prebate_2013_FAQ.png.

Then there is the issue of regulations the argument against regulatory reform tends to be based on the notion that there are no negative side effects that could result in a regulation causing more harm than good. While I have not examined the regulatory code line by line that is still no reason not to do so.

Regulations that kick in after a company hires X amount of people are the most suspicious in my view.

If a practice should be outlawed then it should be outlawed across the board not just for bigger companies.

The supporters of a minimum wage hike will often state that if the minimum wage were higher there would be no need for programs like food stamps.

This would actually be an argument for eliminating the department of agriculture not raising the minimum wage.

The only way a store could afford to double their starting wages with out increasing prices or cutting hours would be if they had a high profit margin and a clear reason not increase their prices.

One of the stated goals of food stamps is to help poor people to buy food, one of the unintended consequences of a program with this goal, could be grocery stores jacking up their prices because they believe the government would pick up the tab.

Raising the minimum wage to $15 today would have been the same as raising the minimum wage to $7.25 in 1987. So why wouldn't lowering the income requirements for food stamps and leaving the minimum wage as is result in lower food prices?

There are also government programs that were designed to increase the price of food- like the renewable food standard. https://www.youtube.com/watch?v=zyNRl-YzX4Q

In this video we see a lobbyist state that the renewable fuel standard keeps corn prices above $2 a bushel. This is a horrible argument for bio-fuel. He tries to justify it by saying it isn't sweet corn.

The type of corn is irrelevant as the only real argument for bio-fuel or any green energy would be it decreased the average person's standard of living by offering a cheaper alternative to fossil fuels.

If that technology existed- the companies paying the lobbyist in the video would be calling oil companies to schedule deliveries. I don't know enough about the science to state if bio-fuel will be the next fuel source- so I am only opposed to subsidies and not bio-fuel.

The basic arguments for increasing the minimum wage are built on the notion that it can be done with out decreasing available hours or increasing prices. The yells for reform are based on the notion that increasing the cost of business will lead to higher unemployment and prices and lowering the cost of business will lead to lower prices and increased sales. As stated- judging from the 1986 Big mac price and minimum wage and adjusting them for inflation and comparing them to modern prices and the modern minimum wage something has changed to increase the price.

So you need to ask which would help the poor the most- reversing those changes and potentially watching prices drop by a little over 25% then conducting other reforms to insure the dollar keeps at least it's current value or do what has been done quite often in the past- increase the minimum wage, continue to add regulations and create more money and watch real incomes fall.