Questions and Observations

Free Markets, Free People

Observations: The QandO Podcast for 18 May 14

This week, Bruce, Michael, and Dale talk about Ukraine, the Bundy case in Nevada, and the increasing arbitrariness of the Federal government.

The podcast can be found on Stitcher here. Please remember the feed may take a couple of hours to update after this is first posted.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Stitcher. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.

Learning the laws of economics the hard way

Tis the season of minimum wage hike demands and fast food protests again. Frankly I don’t have a problem with wage hikes … if they’re voluntary. I do have a problem with coerced wage hikes, however. And that’s precisely what any rise in the federal minimum wage amounts too. It is feel good legislation that uses the force of government to coerce businesses into paying employees more for jobs the businesses don’t deem worth the cost imposed. It is feel good legislation that religiously and studiously avoids the laws of economics.

For instance, what is one of the effects of raising the minimum wage? Job loss. How so? Well, here’s a real world example:

President Obama recently signed an executive order that will increase the minimum wage for employees of companies with new federal contracts beginning Jan. 1. At that time, the minimum wage for all federal contract workers — not just those working for fast food concessions — will increase to $10.10 from the current $7.25. It is not yet known how far-reaching the effects will be for contracts on military installations.

[...]

…new Labor Department rules issued last fall for fast food workers on federal contracts under the Service Contract Act require an increase in the minimum wage for such employees, varying by region. The rules also require payment of new, additional “health and welfare” fringe benefits at a rate of $3.81 per hour to those employees.

Result?

Four restaurants, including three McDonald’s outlets, will close within the next three weeks on Navy installations, according to Navy Exchange Service Command officials.

And two other contractors — a name-brand sandwich eatery and a name-brand pizza parlor — have asked to be released from their Army and Air Force Exchange Service contracts to operate fast food restaurants at two other installations, according to AAFES officials.

A source with knowledge of military on-base resale operations said the issue likely has to do with two new government regulations — one implemented, one pending — that will affect wages for contract workers in such on-base concessions.

Action/reaction. Who loses? Well what’s zero times the new minimum wage? That’s what the former workers of those restaurants can look forward too in the near future. Will other fast food outlets take their place? Possibly – but then as another law of economics points out, businesses do what they do for profit, consequently costs incurred are usually passed on to the consumer in the form of price increases for the product. So who will get screwed then. In this case sailors making about 23K a year. Probable result – business will be down because fewer of their customers will be able to afford their prices with the frequency they once did.

As usual Obama has done this by executive fiat. And, it appears the minimum wage hike may or may not have any life in Congress (even with dopy old Mitt Romney coming out for it). But the debate and the protests roll on. For instance we have today’s fast food protests which are alleged to be happening world wide (backed by about $15 million SEIU dollars here in the US).

Here’s an example of what they’re saying:

Naquasia LeGrand, 22, of Brooklyn, says this was her sixth protest since 2012. She has worked for three years as a cashier at Kentucky Fried Chicken in Park Slope, an affluent neighborhood in Brooklyn. She says makes $8 an hour and pays $1,300 a month for her apartment. “We live in New York City — a multibillion dollar city,” she says. “These corporations … are making all this money. It’s only right that we (workers) come together.”

The sense of entitlement is overwhelming.

So let’s break down what she does for her $8 an hour.  She says “may I help you” to a customer, a customer gives her their order which she enters via a touchpad computer.  The computer computes and totals the order.  She enters the amount of cash tendered and it tells he how much change to give back. Or she swipes a credit card, waits for the receipt to print and hands both back to the customer.  At some point after that, she hands the customer a tray with food on it or a bag containing it.

Guess what else can do most of that?

And what can the employer know will never happen with this?  Well, it won’t be out in 6 protests in 3 years and won’t have an attitude every day it cranks up and goes to work.  And other than initial cost and maintenance costs, it will likely be more accurate than a human, faster than a human and cost less than a human in the long run.  The technology is already here and as it proliferates it will get cheaper and cheaper.  And it is proliferating.  Guess who just bought 7,000 of them?

The point of course is when costs go up businesses have to consider their options, especially if they’re in a very competitive industry – like fast food. They know that they can only pass on a certain percentage of higher costs to their customers. So they have to look for alternatives to doing that. One of the fastest and easiest ways to increase the bottom line is to reduce headcount. Another is to automate low skill jobs. What Ms. LeGrand is doing is inviting her employer to consider one of those options if higher wages are forced on them. And there are few jobs requiring less skill at a fast food joint than cashier/order taker. See picture above for confirmation.

Every time the minimum wage goes up, it prices some jobs out of the marketplace. Anyone – who usually fills those jobs that get eliminated? Low skill workers. The one’s who need jobs, any job, the worst. Instead of letting the market have the ability to set the worth of work, the government imposes a wage floor and essentially outlaws any wage below that floor.

Of course that doesn’t change the worth of the work to the potential employer. A $6 an hour job is still worth $6. Only a fool is going to pay $10.10 or $15 or whatever above that an hour. So the work goes undone and a person willing to do the work for that price goes unhired. Instead, other options and substitutes are considered, like automation or contracting it out overseas where labor costs are cheaper. Why do you think so much is “made in China?”

The do-gooders are our own worst enemies when it comes to this. Its all about them feeling good about helping the “little people”. They never look beyond that to the real consequences of their do-goodism. There are a couple of reasons they don’t: A) it is apparently beyond their understanding and B) it’s all about them feeling good about themselves, not what happens afterward.

The “market” is stuck with the consequences.  And when it all goes tango uniform and what people like me predicted comes true, we’re treated to claims that the cause was “market failure” (btw, read this great rant on “market failure”).  That’s about the time you see people like Ms. LeGrand, the SEIU, Harry Reid and the usual suspects start talking about hiking the minimum wage again.

And the cycle repeats.

~McQ

Economic Statistics for 15 May 14

Consumer prices rose 0.3% in April, with prices less food and energy–the “core” rate–rising 0.2%. On a year-over-year basis, the CPI is up 2.0%, while the core rate is up 1.8%.

Weekly initial jobless claims fell 24,000 to 297,000. The 4-week average fell 750 to 323,250. Continuing claims fell 9,000 to 2.667 million, a recovery low. Or what would be a recovery low had we ever had an actual recovery. But, I digress.

The General Business Conditions Index of the New York manufacturing survey made a rare jump of almost 18 points to 19.01 in May.

The General Conditions Index of the Philadelphia Fed Survey fell -1.2 points to 15.4 in May.

The Treasury Department reports that foreign demand for long-term U.S. securities was a net $4.0 billion in March.

The Fed reports that industrial production fell -0.6% in April, as capacity utilization in the nation’s factories fell to 78.6%. Manufacturing declined by -0.4%.

The National Association of Home Builders reports that the Housing Market Index fell -2 points to 45 in May.

E-Commerce retail sales in the 1st Quarter of 2014 rose 2.8%, versus 3.4% in the 4th Quarter of 2013.

The Fed’s balance sheet rose $33.5 billion last week, with total assets of $4.337 trillion. Total reserve bank credit rose by $18.0 billion.

The Fed reports that M2 money supply rose $22.6 billion in the latest week.


Dale’s social media profiles:
Twitter | Facebook | Google+

Economic Statistics for 14 May 14

The MBA reports that mortgage applications rose 3.6% last week. Purchases were down -1.0% but re-fis rose 7.0%.

Producer prices rose 0.6% overall in April, with both goods and services prices up 0.6%. Ex-food and -energy, prices rose 0.5%. Less food, energy, and trade services, prices rose 0.3% On a year-over-year basis, the overall PPI is up 2.1%, with goods prices up 2.5% and services prices up 2.0%.

The Atlanta Fed’s Business Inflation Expectations survey shows inflation expectations in May are unchanged at 1.9%.


Dale’s social media profiles:
Twitter | Facebook | Google+

Antarctic ice shelf “collapse” may have an effect on sea levels … in a 1,000 years

The cult of global warming, aka “alarmists”, have found a new drum on which to bang.  Scientists recently announced that the western ice shelf in Antarctica is “collapsing”.  Immediately the “Chicken Little” pronouncements of imminent doom were sounded by the usual suspects all implicitly tied to AGW.  The UK’s Guardian sounded the alarm in various headlines which read:

“Two separate studies confirm loss of ice sheet is inevitable, and will cause up to 4m of additional sea-level rise

‘Collapse will change the coastline of the whole world’

Reading on into the actual findings of the studies, however, one finds that the drama that is implicit in these headlines could have been tempered a bit with a very slight modification:

But the researchers said that even though such a rise could not be stopped, it is still several centuries off, and potentially up to 1,000 years away.

Oh.  So it isn’t a crisis that will impact the world today or anytime in the near future, correct?

This is not new stuff either. This story has been popping up since 2008. I wrote about it here and here. As noted in 2008, a fairly simple discovery, not mentioned in any of these articles, proffered an explanation of why the ocean water was warming and the ice shelf was melting.

“Scientists have just now discovered an active volcano under the Antarctic ice that “creates melt-water that lubricates the base of the ice sheet and increases the flow towards the sea”. That could include the Wilkins Ice Sheet as well (the article cited talks about the Larson A and B sheets.

But, say the alarmists, we’re not talking about Wilkins or the Larson sheets. We’re talking about the Thwaites glacier.

The study honed in on the Thwaites glacier – a broad glacier that is part of the Amundsen Sea. Scientists have known for years that the Thwaites glacier is the soft underbelly of the Antarctic ice sheet, and first found that it was unstable decades ago.

The University of Washington researchers said that the fast-moving Thwaites glacier could be lost in a matter of centuries. The loss of that glacier alone would raise global sea level by nearly 2ft.

Thwaites also acts as a dam that holds back the rest of the ice sheet. Once Thwaites goes, researchers said, the remaining ice in the sheet could cause another 10 to 13ft (3-4m) of global sea-level rise.

Ok. Well, let’s look at a couple of pictures then. The first is from the 2008 post I did on the volcano:

volcano

The second picture, from the Guardian article, shows the area of the study.  The red dot is the glacier in question:

glacier

Does anyone notice anything interesting?  Yes, that’s right, the glacier in question is in the vicinity of the volcano in question.  And I don’t think anyone would argue that a undersea volcano can’t heat up the sea in the vicinity to a little higher temperature than it would be normally (it was certainly successful with Wilkins).  Has it had an effect?  Who knows … it doesn’t seem to have been mentioned at all in the study.  But, if you go to the Guardian article you’ll see an embedded 17 second video that attempts to explain the effect of the warmer water on the glacier.  It shows less dense (and therefore lighter) warm water somehow flowing under much denser and therefore heavier cold water to destabilize the glacier.  The only reasonable explanation for such a flow would be if the heat source were somewhere near the bottom of the ocean, no?  Otherwise its hard to explain how that warm water got below the cold water and stayed there.

But if you question things like this, you’re an ignorant nincompoop.  A “denier”, which, by the way is akin to being a member of the KKK and a Holocaust denier all in one.  However, I’m certainly not denying that something is happening in Antarctica.  I am questioning the purported cause though.  It isn’t at all unimaginable that the side of Antarctica most exposed to warmer South Pacific sea currents and experiencing volcanic activity might see some melting due to causes unrelated to CO2 put in the atmosphere by man.

That, of course, won’t stop the cultist from declaring themselves to be the ones with science on their side and deniers to be the fact-challenged among us.  Here’s a perfect example from today’s NYT:

But the unfortunate fact about uncertainty is that the error bars always go in both directions. While it is possible that the problem could turn out to be less serious than the consensus forecast, it is equally likely to turn out to be more serious. In fact, it increasingly appears that, if there is any systemic bias in the climate models, it’s that they understate the gravity of the situation. In an interesting paper that appeared in the journal Global Environmental Change, a group of scholars, including Naomi Oreskes, a historian of science at Harvard, and Michael Oppenheimer, a geoscientist at Princeton, note that so-called climate skeptics frequently accuse climate scientists of “alarmism” and “overreacting to evidence of human impacts on the climate system.” But, when you actually measure the predictions that climate scientists have made against observations of how the climate has already changed, you find the exact opposite: a pattern “of under- rather than over-prediction” emerges.

Really?  If that’s the case, that should be pretty easy to demonstrate, shouldn’t it? Since pictures are worth 1,000 words, here’s a little picture I picked up over at The Federalist that does exactly that – it demonstrates that the pattern of the climate models is exactly as the “deniers” have claimed they are:

Climate-Model-Comparison-1024x921

Somehow, the claimant from the NYT couldn’t be bothered to actually fact check.  Instead she swallowed whole the alarmist line and regurgitated it with the usual ignorant literary smirk found in most of their fact free writing.  Sean Davis sums up the argument for most “deniers” very well:

I have a simple rule when it comes to people who want me to invest obscene sums of money in their forecasts of discrete future events: just be accurate. If you come to me and tell me you can predict future stock market performance based on these five factors, then you had better predict future stock market performance based on those five factors. All you have to do is be correct, over and over again. But if your predictive model is wrong, I’m not going to give you any money, and I’m certainly not going to pretend that what you just did is science. Any idiot can make incorrect guesses about the future.

Science, properly practiced, is the search for truth. Science, properly practiced, rejects forecasting models that consistently produce inaccurate forecasts. There’s nothing scientific about shouting down anyone who has the audacity to point out that the only thing your model can accurately predict is what the temperature won’t be.

Indeed.

~McQ

Hot gay sex

Michael Sam is a college football player. He’s was a good player in college. Good enough, in any event, to barely make it into the NFL draft at number 249 of 256. Which means he probably isn’t a great player, and probably won’t make it in the NFL. After he finished his college football career at Mizzou, he announced he was openly gay.

So, when he was waiting to hear whether or not he’d be drafted, with his boyfriend at his side, TV cameras were there to broadcast live on ESPN, when he heard he’d squeeked into the NFL and exchanged several kisses with his boyfriend.

Now, TV cameras don’t usually show up to see the reaction of guys who get picked #249, mainly because no one usually gives a crap that they got picked. But Michael Sam is different. They decided they were going to cover him, well before the day of coverage.

“We are very aware that in those last two rounds potentially — maybe even before that — Michael will get drafted and we will definitely spend time on that draft pick,’’ said Eric Weinberger, who is running NFL Network’s draft coverage. “We will spend as much time as we think we have to.”

They were there solely because he is openly gay, hoping to get something good out of it. What they got was several good closeups of gay man-kissing. I’m sure they were very happy with that.

Others were less so. The Dolphins’ Defensive Back Don Jones tweeted his displeasure at the scene, which was broadcast live on ESPN. This got him fined and suspended. Apparently, we are no longer allowed to express our opinions in polite society any more, unless that opinion is anything other than fully politically correct. Personally, I feel pretty much the way Bill Burr does in this comedy bit. I don’t have a problem with gays doing whatever they do. Just don’t care. Looking to get upset at whatever gay people are up to doesn’t interest me.

But, I also don’t want to see gay guys kissing or having sex, because I think sex with guys is icky. That’s not something you’re supposed to express publicly. I’m not sure why, but it’s now hateful to state that you might be a little uncomfortable with gay things. I think heterosexual sex that includes golden showers is icky, too. Not being German, I don’t wanna watch that, either. Nobody will yammer for me to lose my job if say say something negative about golden showers, but saying something less that fully accepting about homosexuality can get you a quick trip to “sensitivity training”, or even the unemployment line. Our limits of acceptable opinion are being circumscribed by political correctness. The government doesn’t have to attack free speech. Our culture is doing that job just fine.

It also irks me how the media handles this. They go out of their way to highlight things that stir up controversy, then gleefully report on the controversy they intentionally ginned up, being sure to point out people who say the “wrong” things about it. Those people then have to make elaborate public apologies for saying something politically incorrect. Then they get suspended or fired. It’s getting pretty constant now. The Opie and Anthony radio show are doing a bit where they are trying to go ten days without one of these cycles of apology. So far, they haven’t made it for three days without resetting the clock.

The Framers of the Constitution were terrified the government would stifle free speech. Turns out, they should’ve been worried about the rest of us. Apparently, it’s not something we really want.


Dale’s social media profiles:
Twitter | Facebook | Google+

Economic Statistics for 13 May 14

The NFIB small business optimism index rose a sharp 1.8 points to 95.2 in April. It’s the highest reading since since 2007.

ICSC-Goldman’s read on retail sales shows a weak -0.1 sales drop from last week, but a strong year-over-year 3.9% increase. Redbook’s weekly retail sales figure shows year-on-year strength, with a 4.2% sales increase.

The Census Bureau’s April retail sales report shows a soft 0.1% increase. Sales ex-autos were unchanged. sales ex-autos and -gas fell -0.1%.

April export prices fell -0.1%, and import prices fell -0.4%. On a year-over-year basis, export prices rose 0.1%, while import prices fell -0.3%.

Business inventories rose 0.4% in March, while a 1.0% rise in sales kept the inventory-to-sales ratio unchanged at 1.30.


Dale’s social media profiles:
Twitter | Facebook | Google+

The “teenage” administration

When Barack Obama was running for the presidency, there were a number of people who warned he wasn’t ready for prime time – that he’d never really “done anything or run anything”.  That he had never demonstrated any penchant for leadership at any time in his life, nor had he ever had any executive experience.  That most of his adult life had been political campaigns for the next highest office – moving directly from one to the next with few if any accomplishments in-between.

Those people were shouted down by their “betters” claiming Mr. Obama was hip, wicked smart, charming, “with it”, confident and a master of social media.  He would change the dynamic in Washington, charm the world into doing his bidding and calm the rising seas etc., etc., etc.

Eliot Cohen, in a Wall Street Journal op/ed, says instead, we’ve got a bunch of people in the administration that basically and unsurprisingly act like teenagers:

Often, members of the Obama administration speak and, worse, think and act, like a bunch of teenagers. When officials roll their eyes at Vladimir Putin‘s seizure of Crimea with the line that this is “19th-century behavior,” the tone is not that different from a disdainful remark about a hairstyle being “so 1980s.” When administration members find themselves judged not on utopian aspirations or the purity of their motives—from offering “hope and change” to stopping global warming—but on their actual accomplishments, they turn sulky. As teenagers will, they throw a few taunts (the president last month said the GOP was offering economic policies that amount to a “stinkburger” or a “meanwich”) and stomp off, refusing to exchange a civil word with those of opposing views.

In a searing memoir published in January, former Defense Secretary Robert Gates describes with disdain the trash talk about the Bush administration that characterized meetings in the Obama White House. Like self-obsessed teenagers, the staffers and their superiors seemed to forget that there were other people in the room who might take offense, or merely see the world differently. Teenagers expect to be judged by intentions and promise instead of by accomplishment, and their style can be encouraged by irresponsible adults (see: the Nobel Prize committee) who give awards for perkiness and promise rather than achievement.

If the United States today looks weak, hesitant and in retreat, it is in part because its leaders and their staff do not carry themselves like adults. They may be charming, bright and attractive; they may have the best of intentions; but they do not look serious. They act as though Twitter and clenched teeth or a pout could stop invasions or rescue kidnapped children in Nigeria. They do not sound as if, when saying that some outrage is “unacceptable” or that a dictator “must go,” that they represent a government capable of doing something substantial—and, if necessary, violent—if its expectations are not met. And when reality, as it so often does, gets in the way—when, for example, the Syrian regime begins dousing its opponents with chlorine gas, as it has in recent weeks, despite solemn deals and red lines—the administration ignores it, hoping, as teenagers often do, that if they do not acknowledge a screw-up no one else will notice.

It is a pretty fair and devastating summary of an immature, selfie-taking, hashtag loving administration.  Intentions speak louder than action in their world.  They don’t take criticism well.  And they are about as petty as it comes when talking about their opposition. They demand respect for the man in office, but the man in office shows no respect to those whose views differ from him.

He is also given very little if any respect in the world because he’s really done nothing to earn it (and quite a bit to unearn any he had when he took office).  Hostile nations, knowing how thin skinned this administration is, openly taunt the President and his policies. They fear no reprisal from the US.  Iran recently declared victory over the US in Syria.  Russia – well Russia has simply decided the US isn’t a real threat as it plays out its expansionist intentions.   Even our allies have openly criticized the administration for their inept handling of foreign policy.

We live in a very dangerous world, one in which the predators are always looking for an opening (usually in the form of a power vacuum) of which they can take advantage.  This administration has provided no leadership whatsoever during its tenure and that power vacuum has developed during our unilateral withdrawal from our previously prominent position in the world.  And just like a bunch of teenagers, this administration is sure that it is the fault of everyone but themselves.

After all, their intentions were pure … or something.

~McQ

So how are those sanctions against Russia going?

Ask France:

France will press ahead with a 1.2 billion-euro ($1.66 billion) contract to sell helicopter carriers to Russia because cancelling the deal would do more damage to Paris than to Moscow, French diplomatic sources said on Monday.

France has come under pressure from Washington and some European partners to reconsider its supply of high-tech military hardware to Moscow. It had said it would review the deal in October – but not before.

However, French diplomatic sources said on Monday the 2011 contract with Russia for two Mistral helicopter carriers, with an option for two more, would not be part of a third round of sanctions against Moscow.

“The Mistrals are not part of the third level of sanctions. They will be delivered. The contract has been paid and there would be financial penalties for not delivering it.

“It would be France that is penalized. It’s too easy to say France has to give up on the sale of the ships. We have done our part.”

And, we can’t have the sanctions hurt France, can we?

One of the attack helicopter carriers will be deployed in the Black Sea, where all the trouble began:

The first carrier, the Vladivostok, is due to be delivered by the last quarter of 2014. The second, named Sebastopol after the Crimean seaport, is supposed to be delivered by 2016.

How does France justify its intention to provide the ships?

“We are not delivering armed warships, but only the frame of the ship,” the source said.

That, of course, misses the entire point of sanctions. It is a punishment for wrong behavior. It is supposed to be a way one side teaches the other not to do what it has done. And the Western powers agreed that “strong sanctions” be imposed because of Russia’s unacceptable behavior. Now we see the exceptions being made – exceptions that Russia will, rightfully, view as weakness.

Additionally, that “frame” the French are dismissing as inconsequential will give Russia access to advanced technology. And these “frames” have quite a potent capability. The Mistral can carry up to 16 attack helicopters, such as Russia’s Kamov Ka-50/52; more than 40 tanks or 70 motor vehicles; and up to 700 soldiers.

As for leadership from the US insisting that the French not provide the Russians with advanced weaponry?

A French government source said at no point had the U.S. officially expressed any concern over the sale …

Another example of why “strong sanctions” is, in reality, an oxymoron, especially when the Western powers are concerned.

~McQ

Buy Dale’s Book!