Questions and Observations

Free Markets, Free People

They call them “economic laws” for a reason

So the citizens of San Francisco voted themselves an increase in prices, er, excuse me, a “$15 minimum wage” and thumb their noses at the laws of economics.

Reality hits back.  Borderland Books, an iconic SF bookstore, provides the perfect two-fold example with this announcement:

In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018. Although all of us at Borderlands support the concept of a living wage in principal and we believe that it’s possible that the new law will be good for San Francisco — Borderlands Books as it exists is not a financially viable business if subject to that minimum wage. Consequently we will be closing our doors no later than March 31st. The cafe will continue to operate until at least the end of this year.

Many businesses can make adjustments to allow for increased wages. The cafe side of Borderlands, for example, should have no difficulty at all. Viability is simply a matter of increasing prices. And, since all the other cafes in the city will be under the same pressure, all the prices will float upwards. But books are a special case because the price is set by the publisher and printed on the book. Furthermore, for years part of the challenge for brick-and-mortar bookstores is that companies like Amazon.com have made it difficult to get people to pay retail prices. So it is inconceivable to adjust our prices upwards to cover increased wages.

The change in minimum wage will mean our payroll will increase roughly 39%. That increase will in turn bring up our total operating expenses by 18%. To make up for that expense, we would need to increase our sales by a minimum of 20%. We do not believe that is a realistic possibility for a bookstore in San Francisco at this time.

Note the key lines.  “The change in minimum wage will mean our payroll will increase roughly 39%.”  Yet, there’s not 39% room in the earnings to weather that increase, because an 18% increase in operating costs puts them in the red.  Borderland Books explains why – retail price is almost impossible to get anymore so they can’t increase the price of the product to cover the cost.  Result?  The workers in the bookstore will have a wage of $0 as of March 31.  I’m sure they’re thrilled.

Meanwhile the cafe will stay open because it can do what?  Pass the cost on to the customer.  So in essence, those who voted for the increase in minimum wage voted dollars out of the pockets of those who opposed it as well as their own.  While the workers in the cafe will get their $15 an hour minimum wage, it will be achieved in an increase in the price of the goods the cafe sells (about 20%).  And if their experience is anything like Seattle’s (which also instituted a $15 minimum wage) tips will dry up to next to nothing, while perks (such as free meals, parking, etc.) will be discontinued now that the workers make enough money to pay for most of them.

Yes, economic illiteracy has a price – and here it is.  Fewer jobs, higher prices, all a result of fools who thought they could magic “a living wage” out of a vote without that having any consequences to the workers or themselves.

Idiots.

~McQ

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If you’re a pacifist, it helps if everyone else is too

That’s the hard lesson Japan’s Prime Minister is learning:

When Islamic State militants posted a video over the weekend showing the grisly killing of a Japanese journalist, Prime Minister Shinzo Abe reacted with outrage, promising “to make the terrorists pay the price.”

Such vows of retribution may be common in the West when leaders face extremist violence, but they have been unheard of in confrontation-averse Japan — until now. The prime minister’s call for revenge after the killings of the journalist, Kenji Goto, and another hostage, Haruna Yukawa, raised eyebrows even in the military establishment, adding to a growing awareness here that the crisis could be a watershed for this long pacifist country.

“Japan has not seen this Western-style expression in its diplomacy before,” Akihisa Nagashima, a former vice minister of defense, wrote on Twitter. “Does he intend to give Japan the capability to back up his words?”

Japan has been a pacifist country by declaration, pretty much forced into that position by the United States after WWII.  But Japan, if its history is any indication, isn’t a pacifist country by tradition.

And, of course, it is easier to be a “pacifist” nation when you’re essentially protected by GreatPower.  Japan has enjoyed that luxury for almost 70 years.

That’s enough time to begin to believe you can be a pacifist nation and survive.  But, as the title indicates, that’s a dream reality won’t support unless certain unlikely conditions are sought.  It’s a bit like demanding that guns be banned with the belief that if law abiding citizens are prohibited from carrying weapons, criminals too will refrain from using them.   Or unilateral nuclear disarmament.  If you destroy your nukes, well, the other guy has an huge bit of leverage hasn’t he?

No country today can afford to be “pacifist” in this world.  Those organizations and countries like ISIS would love that.  It would be like a homeowner putting a sign in their window that says “this is a gun free house”.  Why not send an engraved invitation to those who look for situations like that to criminally exploit?

Like most ideals, while nice to contemplate and certainly wonderful to wish for, reality simply doesn’t look kindly on unrealistic ideals nor does it deal gently with those who try to practice them foolishly.

Japan is emerging from a long sleep in which they were able to indulge themselves in their dream.  But with China rattling sabers and looking at least regionally expansionist, North Korea in the hands of a mad man and the US showing little or no leadership nor inclination to back Japan like it has in the past — dreamtime is over.

It’s time for them to embrace the suck and do what is necessary to survive and thrive in it.

~McQ

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Economic Statistics for 2 Feb 15

Gallup’s self-reported daily consumer spending measure fell to $81 in January from $98 in December.

Personal Income rose by 0.3% in January, while personal spending fell by -0.3%. The PCE Price index, and inflation measure, fell by -0.2% at the headline level, while the core rate, excluding food and energy, was unchanged. On a year-over-year basis, personal income is up 4.6% while spending is up 3.6%. The PCE price index is 0.7% higher than a year ago, while the core PCE is up 1.3%.

The Markit PMI manufacturing index for January was unchanged at 53.9. 

The ISM Manufacturing index fell -2.0 points in January to 53.5.

The J.P. Morgan Global Manufacturing PMI rose just 0.1 points in January to 51.7.


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Why is Jonathan Chait concerned about Political Correctness?

Because, as we’ve been observing for a while, it has now become a tool by which the left finds itself the victim.

And they don’t like it.

By the way, Chait even defines it:

Political correctness is a style of politics in which the more radical members of the left attempt to regulate political discourse by defining opposing views as bigoted and illegitimate. Two decades ago, the only communities where the left could exert such hegemonic control lay within academia, which gave it an influence on intellectual life far out of proportion to its numeric size. Today’s political correctness flourishes most consequentially on social media, where it enjoys a frisson of cool and vast new cultural reach. And since social media is also now the milieu that hosts most political debate, the new p.c. has attained an influence over mainstream journalism and commentary beyond that of the old.

More “radical” my rear end.  Unless Chait wants himself labeled a radical leftist he’s used it any number of times (and there are plenty of those who have commented on his article that point that out).  It’s how the left works.  It’s a product of the left’s identity politics.  It is meant to kill debate by marginalizing the opponent and thus dismiss their argument.   It focuses on the facile but effective use of sex, gender, race, etc.

So now we see it being turned on leftists.  And they’re whining.

In a short period of time, the p.c. movement has assumed a towering presence in the psychic space of politically active people in general and the left in particular. “All over social media, there dwell armies of unpaid but widely read commentators, ready to launch hashtag campaigns and circulate Change.org petitions in response to the slightest of identity-politics missteps,” Rebecca Traister wrote recently in The New Republic.

Aye, and like political activists anywhere and on any side, this army of “unpaid but widely read commenters” won’t brook any deviation from the leftist cant. Plus its much easier to be an “extremist” when you don’t have to report to anyone or have your work edited.  So they expect the Chait’s of the world to toe the ideological line or be #destroyed.   Liberals like Chait used to have the entire field open to only them.  They had the access and the means to publish and didn’t have to be worried about being judged inadequate by some lonely leftist in Santa Barbara.

That exclusivity is gone.   They’re just another voice … not even much of an agenda setter anymore.  It hurts the ego a little.  And then, to see yourself a victim of your own favorite device – well time to whine a little.  Because what has happened is the left is constantly isolating segments of itself into little identity communities.  If a man can’t speak for a woman because they’ve never been a woman and don’t understand, what in the world are feminists doing trying to pretend they understand men?  Etc:

I am white and male, a fact that is certainly worth bearing in mind. I was also a student at the University of Michigan during the Jacobsen incident, and was attacked for writing an article for the campus paper defending the exhibit. If you consider this background and demographic information the very essence of my point of view, then there’s not much point in reading any further. But this pointlessness is exactly the point: Political correctness makes debate irrelevant and frequently impossible.

Under p.c. culture, the same idea can be expressed identically by two people but received differently depending on the race and sex of the individuals doing the expressing. This has led to elaborate norms and terminology within certain communities on the left.

I love it.  I really do.  This is so pathetic.

Kevin Williams deals with it all with one line:

Chait is stumbling, in his way, toward the realization that in political arguments intelligent adults pay attention mainly to what is being said, while fatuous children pay attention mainly to who is saying it.

And that’s really all you need to know.  Sorry lefties – no exemptions for you.  You birthed it and now you get to live with it.

~McQ

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ObamaCare – the numbers are in

“It’ll save the average family $2,500 a year!”  That was the promise.  Here’s the reality:

… It will cost the federal government – taxpayers, that is – $50,000 for every person who gets health insurance under the Obamacare law, the Congressional Budget Office revealed on Monday.

… The numbers are daunting: It will take $1.993 trillion, a number that looks like $1,993,000,000,000, to provide insurance subsidies to poor and middle-class Americans, and to pay for a massive expansion of Medicaid and CHIP (Children’s Health Insurance Program) costs.

Offsetting that massive outlay will be $643 billion in new taxes, penalties and fees related to the Obamacare law. …

Enjoy!

~McQ

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Check The Sky For Flying Pigs

Because this actually happened:

In response to Uber ride-sharing drivers now working in the city, the [Portsmouth, NH] Taxi Commission on Wednesday recommended the elimination of taxi medallions, regulation of taxi fares, city taxi inspections and the Taxi Commission itself.
The commission voted unanimously to send a memo to the City Council outlining its recommendations to lift many regulations currently imposed on drivers-for-hire. The council will be asked to instruct City Attorney Robert Sullivan to rewrite the city’s taxi ordinance to reflect the following changes:
* Recognize so-called ride-sharing services offered by platforms including Uber.
* Replace the current taxi medallion system with a registration process that would require all drivers to register with the city clerk’s office and provide proof of commercial insurance.
* Require the Police Department to conduct criminal background checks on all registered drivers, who would be charged a fee for the background checks.
* Require all drivers-for-hire to sign and adhere to a code of conduct.

That’s right. The Taxi Commission voted, unanimously, to end its own existence. I honestly don’t know if that has ever happened before. And if it has has, it was a very long time ago.

[Taxi Commissioner Larry] Cataldo said if drivers are smoking, or offering rides in unkempt vehicles, consumers will decide if they want to hire them. Under the proposal, police would continue to conduct background checks of registered drivers who would also have to provide proof that their passengers are insured for a minimum of $300,000 under a commercial policy.

Several commissioners compared the proposed deregulation of taxi fares to the fact that someone can buy a glass of beer for $4 at a downtown pub and pay $8 for a glass of the same beer at a nearby restaurant.

“I guess it’s going to come down to what consumers want to do,” said Lt. Chris Cummings, the Police Department’s liaison to the Taxi Commission.

Novel concept, huh?

Just to put this in perspective, local officials, who are often the source of particularly pernicious intrusions into our personal lives, have agreed to give up power in favor of consumer choice. Power that can be lucrative in the form of kickbacks, favoritism, and political brokering. Yet, this body of politicians decided that what was best for their constituents was to put in place simple rules and disband itself. That’s just … amazing.

Of course, don’t go hunkering down in your pig blind any time too soon. The ordinary state of affairs looks like this:

After being a promised a blizzard of historic and catastrophic proportions on Monday, New York City residents woke up today to rather meager snow totals and a lot of questions for their public officials.

[…]

The focus, in particular, seems to be about the decision to shut down New York City at 11:00 p.m. Tuesday night. All roads in the region (not just in the city, but in Connecticut and New Jersey, as well) were closed to non-emergency traffic, but Governor Andrew Cuomo also made the unprecedented decision to preemptively shut down the entire NYC subway system. That’s never happened in the 100-plus years of the subways due to snow.

Yet, by 11:00 p.m., it was already becoming clear that such a move was likely going to be unnecessary. That confusion quickly turned to outrage after a report by The Brooklyn Paper that the subway was actually still running. In order to keep the power on and the tracks clear, the MTA continued to shuttle empty trains all throughout the system and was planning to all along. It was apparently Cuomo’s decision to shut the system to passengers, a move that caught MTA off guard and appeared to be unnecessary.

Naturally, some people are upset about the overreaction. It’s one thing to clear the streets of cars, but the subway is the lifeline of the city, particularly for those people who work third-shift jobs or have family and friends in other boroughs. Cries of “nanny state”-ism, political posturing, or just plain cowardice are ringing out today.

Ace describes it this way:

So, now it’s accepted that government officials will essentially declare Martial Law on a whim. Martial Law has become mainstreamed, thanks to our viciously incompetent media.

[…]

These high-handed, alarmist, panicky, lawless actions are being defended on grounds of “safety.”

This is not an overblown statement: All forms of fascism and totalitarianism proceed under the guise of securing the public’s “safety and security.” I don’t think you can cite a single time where fascism did not ride upon twin horses named Public Safety and Public Security.

We seem to becoming jaded by frequent assertions of dictatorial power for this claimed emergency or that imagined crisis.

And let us be clear about things: Cuomo did not do this to “protect the public safety.” He did this to protect his own political safety.

Let us stop pretending to believe the most ridiculous lies of politicians. Let us start dealing forthrightly with one another.

Hearkening back to the Boston Bomber manhunt, he’s not that far off. The question, as always, is how much will the citizenry put up with, and at what point do they stop acting like sheep in the face of “do as we command; it’s for your own good!”

At least in Portsmouth, NH, they’re getting a chance to decide for themselves what’s in their own interests. Let’s hope that catches on.

(h/t: Instapundit)

~ MJW
Twitter: @mjwadeesq

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Economic Statistics for 27 Jan 15

Durable goods orders continue to fall, down -3.4% overall in December following November’s -2.1%. Excluding transportation, orders fell -0.8%. On a year-over-year basis, orders are up only 0.3%, though non-transportation orders are up 3.8%.

Redbook reports retail sales continue to weaken, rising just 3.2% on a year-ago basis, the weakest reading since July.

The S&P/Case-Shiller home price index rose 0.7% in November, and is up 4.3% on  year-over-year basis.

The Markit PMI services flash for January is up 0.4points to 54.0.

New home sales surged by a better-than-expected 11.6% in December to a 481,000 annual rate, while the median price rose 2.2%  to $298,100.

The Conference Board’s consumer confidence index for January rose a sharp 10.3 points to 102.9.

The Richmond Fed manufacturing index slipped -1 point in January to 6.

The State Street Investor Confidence Index fell from 112.1 to 106.7 in January, almost entirely on confidence slipping back in Europe. That said, the European index still remains quite high at 113.9.


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The sad state of the union

Richard Epstein analyzes the performance of Barack Obama as President of the United States, and unsurprisingly, finds it wanting.

In working with matters overseas, the President must lead.  The most that one can expect of Congress is to authorize or ratify the actions that the President must implement. Presidential leadership, announced in a single and decisive voice, is essential, for no one can expect a deliberative body to take the lead in foreign statecraft. On domestic affairs, the opposite stance is appropriate. It is wise in general to look to the Congress to take some leadership in setting basic social and economic policies. But the President gets this division of labor exactly backwards. He is far too passive on foreign affairs and far too meddlesome on domestic ones, which is why his policies in both domains have failed.

A very succinct statement of Obama’s failure.  That leadership thing again … he isn’t one.  And he has no idea how to deal within the political reality of a 3 branch government … even though he was, allegedly, a legislator and Constitutional scholar.  He’s spineless when it comes to the part of the governmental pie that is his pretty exclusively (i.e. foreign policy) and a petulant child in matters concerning domestic affairs using his “pen and phone” to accomplish his goals (goals that are likely to be dismantled at the first opportunity a new president has) rather than working in the prescribed system.

Epstein goes on:

Starting on the foreign policy side, Obama’s policies are driven by the flawed proposition that “smarter” leadership lies in building coalitions that “combine military power with strong diplomacy.” This position, he said in his State of the Union, pays concrete dividends: “In Iraq and Syria, American leadership—including our military power—is stopping ISIL’s advance. Instead of getting dragged into another ground war in the Middle East, we are leading a broad coalition, including Arab nations, to degrade and ultimately destroy this terrorist group.” 

It is all wishful thinking. Militarily, it is never enough to stop an advance if it allows the enemy to use the breathing space to entrench itself further in the places that are under occupation. Obama’s word choice of “ultimately” allows for endless equivocation and delay. The odds of putting together an effective coalition without demonstrable leadership are slim to none, for the President’s only firm commitment—not to use ground troops ever against ISIL—signals to our allies that they too can discharge their obligations by flying the occasional sortie against ISIL positions.

The President may think that it has been an accomplishment to reduce over the past six years the number of American troops in Iraq and Afghanistan from close to 180,000 to under 15,000. But to everyone else, the civil disorder attributable to American disengagement signals that America is not an ally to be trusted.

The President therefore grossly miscalculates when he concludes that “The shadow of crisis has passed, and the State of the Union is strong.” Unfortunately, the facts on the ground show the opposite. Right now the President is bogged down in negotiations with the Iranians over their deployment of nuclear weapons. Little visible progress has been made to date.

And there’s very little incentive for the Iranians to actually cooperate.  It’s all about stalling and buying time.  Meanwhile, Russia and Iran have signed a military pact.  Any guess who has already lost to Iran and just doesn’t know it yet?  It appears at least Congress does and is trying to do something about it (and yes, it’s supposedly outside the scope of their charter, however, Mr. Pen and Phone has declared how he plans to operate … why not Congress.  As someone said, ‘it’s like there are no rules anymore’).

Originally, the President supported at most a six-month moratorium on sanctions in order to lead the Iranians to the bargaining table. Yet when faced with their stalling tactics, he has pleaded for additional time, thus backing away from his explicit promise to keep a firm deadline for making a deal and vowing to veto any legislation that tries to firm up the initial position. Congress may well intervene to keep him to his original word. Generally, this kind of interference is most unwise, but the bipartisan unhappiness on the Iran problem reveals a complete and bipartisan breakdown in trust between Congress and the President.

That’s probably as interesting as anything – even Democrats in Congress have had their fill of Obama’s foreign policy incompetence.  Bottom line?

The President, through his foreign policy, has lost the confidence of his allies across the globe and has emboldened the aggressive behavior of our enemies. Lacking confidence in the United States, our allies will have to fend for themselves, which helps explain the hopeless impasse in the Israeli-Palestinian negotiations, and the recent coup in Yemen, to which a few drone attacks are no response. There is also the strong likelihood that Afghanistan will lapse into further violence. It boggles the mind that the President can gloss over such massive failures with empty platitudes.

Indeed. But then “empty platitudes” are one of his few “strengths”.  Naturally, he’s full of them.

Domestically:

The situation on the domestic front is different. On these issues, the President knows that none of his short-term proposals are likely to get through a Republican Congress that is set against further tax increases and government transfer payments. But he nonetheless charges forward in an effort to build a populist political base that will perhaps in time enact most of his program.

But politics aside, the President wholly fails to understand the importance of economic growth in his relentless attack on economic inequality. The difference between these two programs is striking. A growth-program seeks to expand the size of the overall pie, trusting that the able and hardworking people whom the President lauds will be able to garner their share of the pie. The key point here is that gains from growth are sustainable because no firm has any incentive to back away from employment contracts that work to its own advantage. The hands-off policy thus improves economic incentives and reduces administrative overhead at the same time.

None of this makes the slightest impression on the President, who has concluded that his own brand of “middle-class economics works.” At one level, he is surely correct to insist that everyone “gets their fair shot, everyone does their fair share, and everyone plays by the same set of rules.” But it hardly follows that the way to make “working class families feel more secure” is to ply them with a set of educational, housing, and health care subsidies, all of which have to be paid for by someone else, whose life is made less secure by the constant threat of ad hoc government intervention.

This is the cognitive dissonance we often note with leftists in power.  They may be quite bright intellectually, but economically, most are illiterate.  Nothing is “free” … someone pays for it.  And 90% of the time those paying for it are in the middle class.

Then there are the big lies they push in an effort to make themselves look better in the eyes of the public, even though fact don’t support their claims.  Not that it stops them from continuing to claim success.  For instance:

He speaks about the 11 million jobs created since the depths of the last recession. But his claim is full of holes. Right now, the total number of employed individuals in the United States is about what it was six years ago, notwithstanding a population gain of over 15 million people. Worse still, virtually all the gain in employment has come from part-time employment, which is encouraged in part by the Obamacare mandate that stipulates that employers must provide health care insurance for those who work 30-hours a week or more—a topic on which the President was mysteriously silent in his State of the Union address.

So what happens when you begin to believe your own lies?  You make stupid decisions or you back stupid policies:

Unfortunately, the President has already proposed an increase in the capital gains tax to 28 percent for people who earn more than $500,000 in order to fund a variety of educational programs, chiefly by offering a free ride to students who attend community colleges and maintain a 2.5 average, which he hopes would hone skills needed for middle class jobs, but which is more likely to lead to grade inflation. But the argument is wrong on both sides. Proprietary schools are more likely to train people for jobs than community colleges, because they face market responses when they don’t perform. The President’s program thus increases government subsidies without any promise or expectation of improved performance.

Yet the increase in the capital gains tax creates a double whammy. The first point is that the reduction in capital investment that this tax promises will make it more difficult for wages to rise. The simple proposition here is that capital and labor are complementary goods, so that higher wages depend on the better facilities and equipment that makes labor more productive. The second point is that the increase in capital gains rates is likely to translate into a reduction of taxable income. Unlike income from earnings, the capital gains tax is only triggered by a sale or other disposition of property. The high tax results in a reduction of the number of sales. That in turn not only decreases tax revenues, but also the efficiency of the capital markets, because it is more costly for people to switch their investments from inefficient to efficient firms.

And that’s why this man should be no where near the White House.

But we told you all that before he ever ran.

~McQ

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