Monthly Archives: June 2010

It is time to eliminate minimum wage laws and bring back apprenticeships/internships

Remember the “good old days” when young people would apprentice for a few years earning nothing just for the chance to learn a trade? Well, I don’t either, but that is the way things used to work.

Enter minimum wage laws. All of a sudden, working for no monetary compensation is illegal. In reality, though, the apprentice does receive compensation in return for his labor: the acquisition of a valuable skill. The apprentice receives a valuable skill and the recommendation of his teacher while the employer receives a number of years of labor and the satisfaction of helping a young person succeed.

Today, there is only one way for a young person to gain skills necessary for a career: college. If one studies the situation, one would easily see that this situation is much worse than apprenticeship. Obviously, there are some careers that require college education and many people would benefit and enjoy the broader education college provides. But for somebody who is only interested in learning a skill, apprenticeship is vastly superior than college. Instead of working without compensation a couple of years to learn a skill, the young person is forced to pay a college to learn these skills. Now, the young person has graduated with a debt of tens or hundreds of thousands of dollars. How is that better off than working for nothing? And in fact, the college graduate is often behind where he would have been had he been working in the industry for a number of years learning these skills hands-on instead of in a classroom, making valuable contacts within the industry, and establishing a close relationship with a successful professional in the same field.

The young person today often chooses to skip college and go straight to work after high school. Many have no desire for college and others cannot afford it. Apprenticeships would be great for just such people, but they are now illegal, in almost all cases (political internships and graduate assistants seem to be the most obvious exceptions).

Thus, our young people are stuck in a Faustian choice between going to college and graduating with little or no hands on experience and deep in debt or working at a low skilled job for low pay. And that’s assuming they can get such a job in this environment, where the benefit an employer may receive less output from the employee than the costs of his minimum wage and other costs, such as insurance, payroll taxes, and compliance with government regulation.

As a result, young Americans are not learning the skills they need and thus earning less in later years. To help everybody become more productive and earn a better living, we need to eliminate minimum wage laws and bring back apprenticeships/internships.

Biden: We Can’t Recover All the Jobs Lost. Michael E. Newton: Yes we can!

Vice-President Biden said:

Vice President Joe Biden gave a stark assessment of the economy today, telling an audience of supporters, “there’s no possibility to restore 8 million jobs lost in the Great Recession.”

I say we can restore those 8 million jobs and a lot more. But first, the government has to do something it is not used to doing: get out of the way. Given the chance, the American people will work hard and smart. We will succeed, but only if the government lets us. All we ask is that the government leave us be to work and earn the wages of our success and assume the costs of the risks we take.

First and foremost, government needs to reduce its share of economic output. In reality, government produces very little, but it does take money and redistribute it, a small percentage of which goes into goods and services that Americans want, though most of these could have been produced by the private sector. Look at this chart I posted earlier. Government’s share of the economy has steadily grown over the last hundred years. Every year, government creates more jobs, but this means fewer people available to work for private businesses, fewer people started new businesses, and fewer areas where private business can work without competing with government-run agencies or publicly subsidized organizations. Private business is being crowded out of the marketplace and it should be no surprise that they are not laying people off. Government needs to reverse this dynamic and enable the private sector to create jobs, take risks, and earn a profit.

Everybody knows that higher prices leads to less demand. Everybody except the politicians in Washington. High income tax rates discourages people from working. Taxes on dividends, interest, and capital gains discourage savings and investment. As a result, Americans are “going Galt” and going into debt. Why work hard to have most of your income taken away from you and given to somebody who doesn’t work? Why save and invest, risking a loss on your investment and paying taxes on any gains, when you can go in debt and have the government bail you out? To encourage work, government should lower income tax rates. To encourage new businesses and increased production, government should eliminate investment income. In fact, why not move to a consumption tax as Alexander Hamilton argued for in Federalist #21:

It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit, which cannot be exceeded without defeating the end proposed—that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

While the working public pays exorbitant tax rates, the government has increased the incentives to not work. The government now provides 99 weeks of unemployment benefits. The government has expanded the food stamp program. The government has been “modifying” loans for those who were underwater. While I certainly believe we should be helping those hard hit by the recession, why not do it smartly? Instead of paying people not to work, let’s spend that same money encouraging business to hire more people and invest capital. In other words, lower taxes and reduce regulation. That is the best way to help those who are unemployed.

Federal Government Boycotts Arizona. Time to Return the Favor! reports:

Two federal agencies have joined the “boycott Arizona” trend and nixed conferences there out of concern over the state’s immigration law, a Democratic Arizona congresswoman said, calling the development “very troubling.”

Any cancellations by the Department of Education and the U.S. Border Patrol may have been more out of a desire to steer clear of controversy than outright protest of the law. But Rep. Gabrielle Giffords, who has written to dozens of cities and groups in a campaign to persuade them to end their boycotts, said it was disturbing to learn that the federal government would withdraw from the state over the issue.

If the federal government feels it is appropriate to boycott Arizona, Arizona should boycott the federal government in return. Earlier this week, I called for civil disobedience by the states. Arizona should now do all it can to recover the losses from the canceled conferences. Arizona should sue the federal government for violating Article I Section 9 of the Constitution. Arizona should also sue for slander and libel because of the lost business which was the direct result of the federal government’s attacks against Arizona’s anti-immigration bill.

Arizona should also mention “secession” as a possibility. Arizona has no interest in seceding, but the threat will show the Feds that Arizona is serious. Many states have already mentioned the secession possibility, so Arizona will join a growing crowd of states.

When the federal government no longer represents the people, we need the states to represent us. When they fail to do so, we need to take to the streets. The tea party movement began the street campaign long ago. The states now need to assert their proper role in our federalist system. I am proud that Arizona is leading the fight against the growing collectivism of the federal government.

It is time for civil disobedience by the states

As we learned with the Civil War, states cannot simply secede from the union or nullify federal law. However, they can take a page from Henry David Thoreau and Mohandas Gandhi by simply refusing to enforce federal law.

The federal government itself is selective in which federal laws it enforces. For years, the feds have ignored their own immigration laws. Now, some states, most notably my home state of Arizona, are trying to enforce those laws and the Obama administration is trying to stop them.

If non-enforcement is legal and laudatory, the states should do so as well. Many states have already said they will not enforce the new health care reform bill. California has legalized many forms of drugs that are banned by the federal government. Technically, federal law still applies, but the states choose not to enforce them. Thus, if the federal government puts out a warrant for an individual who failed to comply with the health care law, the state law enforcement agencies could choose to ignore the warrant.

Of course, this situation is far from ideal. It would create chaos and uncertainty, but that is far preferable to the certainty of centralized control and tyranny.

On an individual basis, we are already seeing this civil disobedience. Millions buy goods over the Internet without paying sales tax. Legally, if the Internet retailer does not charge it, it is still the individual’s responsibility to pay it to the state. But nobody does and many buy online to avoid the sales tax and, thus, save money.

Additionally, the American people, by and large, are already “going Galt,” meaning they cut back on the hours worked to give less money to the government. Why work extra hard to have most of the money confiscated by the government and given to those who do not work? Why save and live below your means when you can go deep in debt and then get a government bailout or “government loan modification?”

Along the same line of “going Galt,” our high rates of taxation have also given a huge boost to “do it yourself.” See this post!

In a democratic system, the majority can always vote to take from the minority to give to the majority. The United States has left its republican roots (small government, rule of law, indirect elections) and become more democratic (direct election of Senators, ballot propositions, poll watching). Now that we are a democracy, the liberal/socialist/union/bureaucratic wing finds ways to create a majority of “takers” to elect them into office. Voting them out, permanently, has become impossible. We can overthrow them for an election cycle, maybe even a generation, but the left-wingers always reappear in some new disguise.

It is time to take more permanent action. Conservative states have to lead this effort. They have to oppose federal law through the courts and through non-enforcement. Individuals can go Galt and avoid paying taxes, but risk being sent to jail or having liens put on their property. States though have little to risk by opposing the federal government. A state cannot be put in jail. Fund can be denied it, but that is unlikely and is likely to further calls for secession.

I look to the states to lead us back to republicanism and federalism. And I look to the individual to vote for and defend the Constitution from the always growing federal government, from the many complicit state governments, and from the large population of people who vote themselves benefits at the expense of others.

The “do it yourself” trend caused by high taxes

For at least 2,400 years, philosophers and economists knew the benefits of specialization, also known as division of labor. Xenophon wrote in the 4th century BC, “he who pursues a very specialized task will do it best.” Adam Smith greatly elaborated on this, as did many others.

Today, however, we are starting to see a trend away from specialization toward “do it yourself.” Here’s an example:

Do-it-yourself trend growing

People stretch dollars by doing their own chores

Across the country, people are taking on chores that only a year ago were hired out to someone else. They’re dyeing their own hair, shoveling their own snow, washing their own cars and taking up paint brushes to brighten their living room walls.

This trend toward “do it yourself” is partly caused by the high rates of taxation in the United States. I’ll give you an example:

If I need a plumber to come fix my sink, first I have to earn the money and give 40% or so to the government in taxes.

Using the money I just earned, or the 60% that remain, I hire a plumber. The plumber knows that he needs X dollars per hour for his work. But because he has to give 40% of his income to the government, he actually charges 67% more than he receives after taxes (ie. he needs $60, but charges $100 with $40, a 67% increase in price, going to the government).

So to pay for $60 of plumbing work, I actually have to earn $167 ($167 – 40% of $167 is $100 to pay the plumber’s $100 so he can keep $60).

Thus, the cost of hiring somebody to do a $60 repair is $167. Even if it takes me three hours to do the repair instead of 1 hour, it just about pays to do it myself instead of hiring somebody.

The result of our high rates of taxation is a terrible choice. The homeowner can either hire a plumber to do the work for him, but with a 40% tax on income, he must earn nearly three times the amount of the plumber’s after-tax income to pay him for his work. Or he can do it himself, in which case the plumber loses income and the homeowner loses both time and income he could have made working at his job.

British government suspends new spending. Waiting for the United States to copy them…

Treasury Suspends $12.6 Billion in Spending Projects, Axes Other Programs

U.K. Chief Secretary to the Treasury Danny Alexander suspended 12 projects costing 8.5 billion pounds ($12.6 billion) announced by the previous government and cut completely other programs totaling 2 billion pounds.

Most of the money affects one contract, to supply search- and-rescue helicopters to the defense ministry and the Department for Transport. The 7 billion-pound project, which will now be reviewed, is with the Soteria group made up of CHC Helicopter Corp., Thales SA, Royal Bank of Scotland Group Plc, and Sikorsky, a subsidiary of United Technologies Corp. Deliveries under the planned 25-year deal were scheduled to start in 2012.

I applaud the new coalition of Conservatives and Liberal Democrats for making necessary cuts. I also applaud the British people for kicking out the Labour party and blaming these cuts on that prior free-spending administration.

Alexander said that out of 34 billion pounds in spending commitments made by Gordon Brown’s Labour government between Jan. 1 and the May 6 election, “we’ve had to cancel 2 billion pounds and put 9 billion into the spending review.”

Prime Minister David Cameron accused Brown of using his final months in office to target spending at electoral districts Labour looked as if it might lose.

A YouGov Plc poll this week found that 48 percent of respondents blamed Brown’s administration for current spending cuts, with 17 percent blaming Cameron’s coalition government of Conservatives and Liberal Democrats.

The U.K. finally appears to be on the right track, though they still have a very long way to go. Unfortunately, we have seen no such sense of fiscal discipline here in the United States. Congress and the President continue to push for more spending, not less. Most recently, a $50-90 billion jobs bill.

In 2006 and 2008, Americans voted for “change” after Republicans proved themselves to be incompetent on issues such as Hurricane Katrina, the war on terrorism, immigration, and spending. Now, the Democrats had their chance and have proven themselves to be just as incompetent, if not more so. The two parties have proven one thing over the last four years: our government is incompetent regardless who controls it. As a result, the American people are demanding smaller, more effective government. Of course, the people always want more effective government, but now people realize that government can only be more effective if it reduces its size and focuses on a few key jobs.

God willing, the United States will copy the United Kingdom by kicking out the current administration. And hopefully, the new administration will copy the U.K.’s David Cameron and Danny Alexander (and Chris Christie in New Jersey) by cutting government spending and beginning to restore fiscal discipline to a country that has not had any in well over a decade.

Head of European Commission warns we are back on the path to tyranny

The UK”s Daily Mail reports:

Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned.

In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money.

Meanwhile, the head of the European Trade Union Confederation said:

This is 1931, we’re heading back to the 1930s, with the Great Depression and we ended up with militarist dictatorship. I’m not saying we’re there yet, but it’s potentially very serious, not just economically, but politically as well.

After World War II, just about everybody swore off fascism, even though it continued to exist, most notably in Spain and Argentina. After the fall of the Soviet Union, the world said the same thing about communism. But Friedrich Hayek warned us in the 1956 preface to The Road to Serfdom:

Though hot socialism is probably a thing of the past, some of its conceptions have penetrated far too deeply in the whole structure of current thought to justify complacency.

Not only have we seen outright socialism reappear in places like Venezuela and Bolivia, it slowly took over Europe and the United States so that government now accounts for 47% of the European economy and 43% in the US.

Now we face a challenge similar to the one we faced in the 1920s and 1930s. Will we embrace totalitarianism and its false promises of effective government, cradle-to-grave support, and national rebirth as Germany, Italy, and the Soviet Union did? Or will we re-embrace liberty, economic freedom, and personal responsibility that our Founding Fathers gave us and resulted in the freest and wealthiest society the world had ever seen?