Saturday, February 16, 2013

My Apologies to the Readers, Why the GOP is Failing, Worse Than Damn Lies on the Minimum Wage

Sorry I Missed You
There were many visitors to this space the night of the State of the Union.  Most years, I cover the State of the Union, as I do all major American political events.  It was simply personal circumstances beyond my control that caused me to miss the speech (which I was just finally able to watch, along with Marco Rubio's Republican response.)

I am continually humbled by the number of people that come here to learn a little bit more about our Republic and its politics.  I am sorry to have missed you this State of the Union.

Where is the Optimism?
The Republican Party has been out in the wilderness for a little while now.  They have been out of the White House for over 4 years now, have not controlled the Senate in over 6 years and have controlled the House for only 2 of the last 6 years.

This is hardly unprecedented in US politics.  The Democrats were cast from the White House for all but 4 of the 20 years from 1973-1993, when a young Governor from Arkansas named Bill Clinton revitalized the Democratic center coalition.

Republicans were completely out of power in both Houses of Congress all the way from 1955 until the Reagan revolution coattails swept them into power in the Senate in 1981.

The Republican Party certainly has the capability to return to power.  We are naturally a nation of economic conservatives (at least as compared to our first world allies) and while demographic shifts appear at the moment to be a huge headwind to the GOP, the growing Latino voter base is largely socially conservative and family-oriented, a seemingly natural constituency for the GOP.

But right now, the GOP isn't helping itself.

What Bill Clinton for the Democrats and Ronald Reagan for the Republicans had in common when they led their parties back from the wilderness was optimism.  They had powerful, positive visions for the country and sold them with a smile.

Voters are drawn to optimists.  They tell us about what is possible.  They propose solutions to seemingly overwhelming problems that sound reasonable.  They stoke our patriotism.

Pessimism doesn't sell.  It implies a lack of faith in our nation.  It promises a bleaker future.  It isn't a product anyone wants to buy.

And herein lies the core problem for the GOP - a lack of optimism.  From chattering heads to internet message boards to elected officials, the words coming out of the GOP imply that we are going to hell in a hand basket.  This is a natural extension of very overheated rhetoric in both the 2008 and 2012 campaigns.  The thinking goes - President Obama is a socialist or even a communist and we've been saying for years that if he got into office, he was going to wreck the country, so it must be true.  I think Francois Hollande is laughing somewhere at the notion that the President is a socialist.  We debate the difference between 35% and 39.6% marginal tax rates - the French impose top taxes of 75% when they get a "real" socialist in office.

The man or woman who can step forward and paint a truly optimistic vision for the country will emerge as the natural leader of the GOP.  Based on the State of the Union response from Marco Rubio, which was a drab and uninspiring affair, I do not believe that man will be Marco Rubio, at least not yet.  I'd look to the Governor's mansion, where you have people building that optimistic vision.  Think Bobby Jindal, Chris Christie and Mitch Daniels.  Pragmatic men who work hard to build better states.  Leave the Tea Party and the wingnut survivalists behind and you have a path back to leadership.

Is the Wall Street Journal Ignorant or Dishonest?
I like the Wall Street Journal.  While they have a clear conservative bent, they provide excellent reporting on the world of business and do strong investigative journalism into corporate wrongdoing.

So it is quite disappointing to me that they would publish a highly intellectually dishonest commentary on proposed minimum wage hikes entitled "The Minority Youth Unemployment Act".  In the piece, the Journal argues that hiking the minimum wage would lead to fewer available minimum wage jobs, which would disproportionately impact young minorities.

It was once said that in the order of significant lies, there are lies, damn lies and statistics.  Such is certainly the case with the Journal piece.

Firstly, they present a graph that shows minimum wage hikes and black youth unemployment and total you unemployment plotted on a timeline from 2007 to the present, with hikes in the minimum wage from 2007 to 2009 noted on the graph.  The point the author attempts to make is that youth unemployment spiked from 2007 to 2009, correlated with the rise of the minimum wage from 2007 to 2009.

The chart is factual but wildly deceiving.  Any first year statistics student knows that correlation does not imply causation.  Murders and ice cream consumption spike at the same time every year, but no fool things ice cream causes murder, the thoughtful realize that both spike in the summer for different reasons.  Certainly, the minimum wage went up during that time period (due to a bill supported and signed by President George W. Bush, incidentally), but there was also this little financial crisis that led to the Great Recession.  Does anybody with connected brain cells not think that the financial crisis led to the spike in unemployment?

To punctuate that point, note that the author singles out just one set of minimum wage hikes and does not chart the countless other minimum wage hikes and corresponding unemployment rates.  The hike from 3.80 to 4.25 in 1991?  Unemployment crashed after that one on the heels of an economic recovery.  The successive hikes from 4.25 to 4.75 and then 5.15 in 1996 and 1997?  The economy recorded some of the lowest unemployment rates in history following those hikes.

Bottom line, cherry-picking only the data that support your point of view is the type of deception that should be reserved for political spin doctors, not publications that are ostensibly paragons of journalism.

The premise of the article, that higher minimum wages lead to employers refusing to hire workers also defies logic.  As any first year business student knows, businesses exist to make money.  They don't generally employ workers that are unnecessary.  If a hotel needs 5 maids in order to clean all the rooms, they are going to hire 5 maids, whether the minimum wage is $7.15 or $9.00.  They aren't going to hire 5 extra maids that they don't need if the minimum wage is lower. Likewise, they aren't going to hire 3 maids and simply not clean some of the rooms if the minimum wage is higher.  They are going to hire the people that they need.

What is true is that if labor costs rise, those costs will be passed on to consumers in the form of higher prices for things that require minimum wage labor, such as hotel rooms and fast food meals.  Companies still want to make their profit, so they simply mark up their items to maintain their profit margins.  This essentially amounts to a tax on all of us to support slightly higher wages at the bottom rung.

This is a trade-off that we have been willing to make as a country since 1938, when the first minimum wage law went into effect.

The minimum wage is near historic lows at the moment.  In real dollar terms, the minimum wage was $7.33 in 1950, slightly higher than today.  In 1956, it was then hiked to the equivalent of $8.57 in today's dollars and continued to rise from there in real dollar terms, peaking at a real-dollar rate of $10.74 in 1968.  It remained above $9/hour in real terms until 1981, when Ronald Reagan essentially put a freeze on minimum wage hikes, allowing it to fall in real terms (thanks to inflation) to under $6/hour in real terms before President George H.W. Bush signed a hike.

If higher minimum wages lead to higher unemployment and lower minimum wages lead to lower unemployment, unemployment should be near historic lows.

The Wall Street Journal article is dishonest and wrong.  I would like to hope this was out of ignorance, but given the depth of experience on the Journal editorial board, I suspect it was deliberately deceptive.

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