Sunday, July 30, 2006

Voting Largess

It’s one of my favorite quotes and I always bring it to classes where economic policy will be discussed:

"A democracy cannot exist as a permanent form of government. It can exist only until the voters discover they can vote themselves largess out of the public treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy, always to be followed by a dictatorship."

There is debate about who first said it. Some attribute it to Adam Tyler while others spell his name as Tytler. Still others suggest it might have been de Tocqueville. It matters less who said it then what truth it brings to mind. Consider the elemental truth of America today. Fully 40% of Americans, euphemistically referred to as “the working poor,” pay no federal income taxes. None! Then at the other end of the scale, the “obscenely rich” who get all those tax breaks, where we find that the top 15% of earners pay more than 40% of total federal tax revenue.

Now, this leads inevitably to the sordid conclusion that if one wants to get elected to public office it would be wise, if not just, to appeal to the biggest demographic slice. That would be the ones who pay no taxes rather than the ones who pay a lot. The appeal for the socialist policy of redistribution of wealth is tremendous. The slight tempering of a policy of total pandering comes from the fact that campaigns cost money and in order to finance them, one must also appeal at least a little bit to the folks that can contribute.

But, it gets worse. We’re in an election year and hence the temptation looms large to get on with the voting of largess from the treasury. Give the masses more bread and circuses if you want to get elected. This week, however, the largess being distributed isn’t from the treasury, but according to the House of Representatives comes from private industry. It’s that perennial favorite of the economically unenlightened, the magic and mirrors of the minimum wage. In booming stentorian tones, the Democrats mount the podium and appeal to the emotions of “living wages”, “family of four”, “poverty level” and justice. It makes you want to stand and salute before you turn and barf.

Yet, when I ask college classes to explain to me what should be the basis for establishing a minimum wage, I always get the emotional response that has been inculcated in their mushy minds. They banter about costs of living and housing and children and justice. But they don’t relate cost of labor to value produced. They don’t make a connection between ability to add productivity to an organization and then be appropriately compensated for your labor. Adam Smith is conspicuously absent from the equation.

The suggestion that government should not be involved in setting costs of any commodity boggles the American twenty-first century mind. The idea that a willing buyer and a willing seller can set an agreeable price is amazing. Certainly there was the oppression of the dirty birth of the Industrial Revolution. But that is long ago and the justification for government interference is long gone. Does no one notice that simple burger flipping requires little skill or training and hence there is an army of potential flippers waiting for recruitment? Conversely does no one note that brain surgeons get a huge amount of compensation because there aren’t many of them and when you really need one, a plumber or carpenter won’t substitute very well?

Well, this fall the House of Mis-Representatives seeks to get re-elected as they do every two years. The largess available from the public treasury is not adequate to buy the necessary votes, so they turn to business owners’ pockets and vote to increase the minimum wage to more than $7 an hour. Will this solve poverty? Will this allow support of a family of four? Do most minimum wage earners belong to a family of four? Well, no they don’t. Most minimum wage earners are young people on their first job. Most are unskilled but, hopefully, learning to prepare themselves for greater responsibility. If they are wise, most will refrain from creating a family of four until they can earn more than a minimum wage.

There is a lot of evidence that artificial imposition of a minimum wage will do more economic harm than good. Unskilled labor intensive businesses may fail if faced with a requirement for higher labor costs. Many businesses which continue may reduce staff to hold labor cost constant resulting in harder work conditions for those remaining. Almost all businesses will shortly reflect the increased labor costs in increased costs to consumers. The outcome of those increased prices will be inflation which will, in fairly short order render any economic gain of that minimum wage increase to be erased. So, inflation devalues dollars, workers get laid off, prices rise and businesses fail. That, of course, means lower governmental tax revenues. Taken to extremes, it ain’t a pretty picture.

The Founding Fathers are regularly credited with establishing the bi-cameral legislature’s upper house with its smaller number and longer term as a brake against the emotional impetuousness of the lower chamber. Let us steadfastly hope that in the coming weeks before the November election that economic reality and a bit of common sense prevail with regard to minimum wage legislation. If they truly want to do some good for working Americans, they might consider repealing any and all wage legislation. Give the free market with its inherent balances a chance to function and let the rewards of education, preparation and dedication stimulate young workers to succeed. It might be worth a try, particularly if failure to vote some largess from business pockets results in some fresh new faces in Congress at the same time.

Tuesday, July 25, 2006

Nobel Nobility

We all know the story. Alfred Nobel invented dynamite. Then he suffered inventor’s remorse when he realized that his creation was employed in weapons destined to advance the efficiency of man’s inhumanity to man. To assuage his conscience he established a foundation that would use his fortune to reward the greatest advances in a wide range of fields each year with a Nobel Prize and a significant stipend. Great and truly noble of Nobel.

Over the years there have been many just awards of his prize to great scientists, doctors, researchers and even writers. There has also been one category of the award that has increasingly come to be viewed as more political than scientific, the “Peace Prize.” Who can forget the beautiful image of Anwar Sadat and Menachem Begin gracing the cover of Time Magazine after receiving their award in 1978. Two terrorists, reconstituted as national leaders of two nations staunchly dedicated to the destruction of each other, paired in glory as peacemakers. Brings a tear to the eye even today.

But is the Peace Prize of ’78 simply an aberration in a sequence of otherwise significant advancements made by individuals in the quest for world peace? Not if this article in Australia is any indication: Peace Through Murder?

Betty Williams won the prize in 1976. Why? Well, according to the news article she was appalled when British soldiers shot an IRA terrorist and his vehicle then crashed and killed two innocent children nearby. She then circulated a petition urging peace in Northern Ireland. Significant achievement? Did it solve the crisis? Well, arguably not. But she got the prize anyway. And, more than her deserved fifteen minutes of fame.

So, this great peacemaker now stands before an audience of young people in Brisbane and suggests she is so appalled at the world’s state that she would murder the US President! That’s a great suggestion from a Nobel Laureate for Peace. Would we call that “role modeling” for the youth of the 21st Century? Assassination of world leaders as a solution. Not dictators, but democratically elected leaders as well!

But, read on and marvel at the intellectual capacity of this activist. Read about the visit to the children’s cancer ward in Iraq. Note the emphasis on “children”. I always warn students that when someone suggests a policy must be enacted “for the children” that they better take a firm grip on their wallet and their Constitution because their money or their rights are about to be purloined.

“Will they live,” she asks breathlessly. I flash momentarily on Scrooge and Tiny Tim. The doctor is harsher than the Christmas Spirit. “No, they will all die.” Of course, you twit…we will all die.

But, in a magnificent simplification and generalization of modern oncology, these children need five drugs to be cured. All of them? Isn’t that unusual? Yes, they need five. But they only get three because of the mean ol’ USA. Oh, and would they have gotten five under Saddam? It’s George Bush’s fault. And so, good old peacemaker Betty feels justified in suggesting assassination.

Well, just to make sure we’ve got our villains lined up properly, she also notes that the cancers themselves are the result of the US. Yes, it was in utero that the first Gulf War damaged these children and their mothers. Had the world only sat back and allowed Saddam his way with Kuwait and maybe a chunk of Saudi Arabia, these children would have been normal and live forever.

Finally, we need to note her solution. End world poverty. How? Well, like Nike says, just do it. Oh yeah, also stop global climate change, whatever that means. And, while you’re at it, cut military spending and divert all that money toward “human development”. Great ideas, Betty. Maybe disburse Nobel Peace Prizes to every poor child in the world so they can have a pot of gold and live cancer free, if only Betty can get close enough to our President to make it happen.

I think I’ve concluded that in the unlikely event that I was to be nominated for a Nobel Peace Prize I would decline it. I wouldn’t want to be associated with the likes of Betty Williams.

Wednesday, July 12, 2006

Déjà vu Again!

I’m continually astonished at the circuitous logic of the elite universities of this country. Take a look at this emerging brouhaha at the University of Wisonsin:

Ward Churchill Clone in Wisconsin?

When I saw Brit Hume comment on it, I was initially outraged that a school would intentionally allow someone to place such an absurd thesis before an undergraduate university class. But, we should all be aware that tenured professors have a lot of latitude and some of them espouse decidedly controversial views. I’ve personally professed views in class that I don’t hold, simply to promote discussion and foster student thinking on the topic. But, I don’t make those views the core concept of the course.

Then I went to the link above and read the University Provost comments. They seemed logical and reasonable as a defense of freedom of educational inquiry. Until, that is, I read between the lines. I’ve got enough experience in front of undergraduate students to know that what the prof says is what the students believe and will mouth back at the drop of a blue book. If Professor Barrett suggests some extreme revision of the events we’ve all seen so many times on TV, the mushy minds will internalize it and deny their own recall.

Teaching most assuredly should foster thinking, reasoning and independent judgment of observations. But, there also is an obligation for both the teacher and the institution which that teacher represents to place fact before the students. Creating a rational argument that the Holocaust didn’t happen, that genocide was inflicted upon Native-Americans through distribution of smallpox infected blankets, or that al-Qaeda doesn’t really exist is possible, but decidedly disingenuous. It should not be allowed in a responsible institution. That is NOT denial of academic freedom. It is common sense.

Then I got to the last paragraph of the Univ. of Wisconsin statement. This twit isn’t a tenured professor! Apparently they actually went out and hired the idiot to spout this drivel for a single semester! Disgusting.