The Cost of the Minimum Wage

There’s a push to raise the minimum wage to 15 bucks an hour. Of course, the actual cost to an employer will be greater. For example, the employer’s share of the FICA tax on $15 is 93 cents, and there will be other additional expenses. But for the this exercise, let’s use $15.93 an hour as the employer’s cost. What will happen to a marginally skilled employee who provides less than $15.93 of value to the business and whose presence is a net loss to the employer?

Let’s not always see the same hands.

The real effect of a minimum wage is not to make it illegal to pay workers less than some arbitrary wage. Instead, it outlaws the participation of marginally skilled workers in the on-the-books economy, forcing them to work in the shadow economy.

BTW, some politicians see that result as a feature rather than a bug.

I’m Not Making This Up, You Know

She Guevara is espousing Capitalism to support her Socialism—If you’d rather support genuine Capitalism (and save a few bucks while you’re at it), you can buy the Hogewash! Team Lickspittle sweatshirt for only $35.99 at The Hogewash Store.

Buy one and increase this blog’s taxable profits!

I Never Had a Student Loan

I graduated with my Bachelor of Engineering degree from Vanderbilt in 1970 after paying tuition in full each semester. Fairness dictates that if student loans are to be forgiven, then those of us who paid up front should receive tuition rebates with interest. At the current legal interest rate in Tennessee (Vanderbilt is in Nashville) I would be due a bit more that $90,000.

I’d be willing to take the rebate in the form of a tax credit that I could spread over several years.

My Personal Plan B If Biden Wins

I don’t believe that the Harris presidency will be good for the American economy. I expect it would have a devastating impact on the value of my retirement investments which are mostly in an IRA and a 401(k). I had planned retiring again (I’ve done it twice before) around my 75th birthday at the end of 2022, but I don’t believe putting away maximum contributions into my 401(k) will sufficiently offset the losses I expect over the next two years. Also, I expect that inflation will return and make up for lost time, further reducing the real value of my investments. I’m beginning to examine the possibility of postponing retirement until my 80th birthday.

Quote of the Day

This planet has — or rather had — a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn’t the small green pieces of paper that were unhappy.

—Douglas Adams

“New” Jobs

The Bureau of Labor Statistics is reporting that the unemployment rate is down because 2.5 million more people were working in May.

I’ll bet that very few of those people were hired for new created jobs. Most of them were rehired or recalled to an old job that was put terminated because of the Wuhan virus shutdown. I suspect that there will be a fairly rapid recall of employees to businesses that were able to withstand the shutdown. The unemployment rate is now around 13 or 14 percent, and I’m guessing that it will drop to 7 or 8 percent by Labor Day. At that point, we’ll need to be creating new businesses to replace those killed off by the pandemic shutdown in order to create the new jobs necessary to restore the 2021 economy to a level comparable to 2019’s.

It’s going to be easier to rebuild in those places where the residents haven’t trashed their communities’ physical and moral resources.

A substantial number of communities will now have to make hard choices. The cost of rebuilding housing, businesses, and public facilities and the cost of restoring standards of public behavior will undoubtedly make some previously fashionable luxury opinions untenable. It will be interesting to see who engages in what sort of bitter clinging.

Who Wants To Go To Work?

I don’t especially want to go to work. I’m doing just fine, sitting in my office at home and telecommuting. As long as I keep getting paid with money that has sufficient purchasing power in the economy, I’d just as soon not have to drive to someone else’s office to do what I can to across the hall from my kitchen. (And my coffee is better than the Folger’s junk that seems to infest so many workplace coffee pots.)

Looking around the neighborhood, I can see several other professionals who have moved their work into their homes and who are continuing to do well economically. Other neighbors aren’t doing so well. They normally engage in businesses, trades, and professions that require close one-on-one interactions with people. Some of them haven’t earned anything for weeks.

Gentle Reader, can you guess which group is more favorably disposed to reopening the economy quickly?

On the leading edge of the Wuhan virus pandemic, most Americans were willing to put up with some significant disruptions in their personal lives in order to protect the public health. There really was a sense of “we’re in this all together,” but that has dissipated as people who want to feed their families are told by a governor that they can’t buy seeds to plant in their gardens because of a virus lockdown. Another governor’s sending Covid19-infected patients to old folks’ homes has not increased the public’s trust in government’s competence either. Thus, we have a large group of Americans who are wanting to and are ready to go back to work—and who are losing or have lost patience with the “experts.”

Meanwhile, those of us doing “essential” work have been paid all along—at least so far—but now, the lack of tax revenue is eating away the ability of many states and localities to make payroll. Oh, and advertising is now down, resulting in media layoffs. It may be that some of the less protected members of the “essentials” may begin to favor reopening the economy as well.

So, who is still in favor of broad, non-targeted lockdowns? Cui bono?

That should be an interesting topic for research by a good investigative reporter.

You know, I once saw a movie about investigative reporters. The line in the film that helped them put their big story together was the advice, “Follow the money.” I’ll bet that would be good advice for this story.

Bankrupt States

There’s beginning to be a bit of noise about the possibility of states going bankrupt, but current bankruptcy law doesn’t provide for state bankruptcies. A state could default on its debts, but its creditors only real recourse would be to stop providing goods or services to the state government.

There have been several proposals floated for Congress the enact a new chapter in the Bankruptcy Code that would allow for state bankruptcy. However, the Eleventh Amendment prohibits citizens of one state suing another state in a federal court. IANAL, but that seems to prohibit out-of-state creditors from having standing in Bankruptcy Court. Also, Article IV, Section 4 requires the United States to guarantee “a Republican Form of Government” to each of the states. Placing a state under the control of a receiver in bankruptcy would likely violate that requirement.

So it may be that states can’t go bankrupt. But perhaps a territory can because territories don’t have the protections of the Eleventh Amendment and Article IV. Maybe Congress could enact legislation to allow for territorial bankruptcies and to allow insolvent states to revert to territorial status to go through bankruptcy. Of course, a state using the process would become a territory and lose its Senators and all of its Representative, but it should be allowed a non-voting delegate in the House, and after it had put its affairs back in order, it could apply for readmission to the Union.

Given that the states with the greatest insolvency problems are blue states, … oh, never mind.

Compared to What?

Johns Hopkins University has a site up that is tracking the spread of the Wuhan virus pandemic. Some of the data are very detailed. For example, county by county confirmed case and death numbers for the U. S., and the data is well presented.

One page I found interesting shows the cumulative case and death rates for the ten hardest hit countries. These graphs are of five day moving averages. Note that all of curves in both graphs (except for China’s, but they’re lying about their data) seem to be converging into a single, but broad, band. Some countries are doing better than others, but cases seem to be settling down at about 100 to 300 per 100,000 and deaths around 3 to 30 per 100,000.

The data show that America’s performance versus the virus is about average. They also show that countries that did not take proper public heath precautions (Iran, Italy, Spain, Belgium) have seen the most rapid onset of the disease, but that taking proper measures does begin to arrest the spread and perhaps constrain the total cases and deaths to within only about 3 to 10 times what could have been achieved with earlier prevention. That’s a lot of unnecessary illnesses and deaths, but not as bad as it could have been.

So it appears that we got enough ahead of the Wuhan virus pandemic to prevent it from becoming a public health disaster on the order of the 1918 Spanish flu pandemic. That’s good. Now, we need to act wisely and prevent those public health measures from provoking an economic and social decline on the order of the 1930’s Depression.

“Chinese Chernobyl”

The Gentle Reader has no doubt heard of a catastrophic reactor accident that occurred in the Soviet Union in 1985 at a place called Chernobyl (now in Ukraine). The reactor was a typical example of Socialist engineering—the RBMK-type was in common use throughout the USSR—with an inherent design flaw related to the core’s cooling system. The Chernobyl reactor exploded during a reactor test of the core’s cooling system. This risk of a core meltdown was not made evident in the test operating instructions, so the operators proceeded with  testing the reactor in an unstable state. Upon test completion, the operators triggered a reactor shutdown, but a combination of unstable conditions and reactor design flaws caused an uncontrolled nuclear chain reaction instead. Poor design, bureaucratic inertia, and operator carelessness created history’s worst peacetime nuclear event.

It’s being suggested that the Wuhan virus pandemic is China’s Chernobyl. If the virus got into the wild because of improper procedures in a Chinese laboratory, it would be a striking parallel example of Socialist bureaucratic incompetence acting with disregard for public safety. However, even if the actual source is something else, a wet market or whatever, the Chinese Communist Party’s attempts to strong-arm reality so as to avoid blame for the meltdown resulting from their carelessness and mendacity is a nearly perfect example of why socialist systems all fail. Wishing won’t make it so. Facts are stubborn things.

The Laws of Thermodynamics, when compounded with Murphy’s Law, assure us that bad stuff will happen on a random basis. It’s wise to take steps to protect ourselves from such events. “The battle is not always to the strong, or the race to the swift, but it’s the way to bet.” History tells us that competition in free markets has the best track record for generating the resources needed for healthy living.

The Chinese people will have to sort out their own political destiny. It may be that they will grow tired of their current masters and that the CCP virus pandemic will inch them along a path to something new.

Meanwhile, the Wuhan virus pandemic has given many Americans a 30-day free trial of nanny state control.

Modeling Versus Real World Data

I went over to the IHME web page for their Covid19 modeling for Maryland to check out their predictions for the state for yesterday. (The web page says that the results shown used their model as updated on Wednesday.) I then went the Maryland State Health Departments Covid 19 page to look up the actual data reported by the State.The Gentle Reader can see that the Daily Deaths and Total Deaths are within 10 % of the model’s predictions (pretty good performance for such an immature system), but the New Hospitalizations are well below the predicted value . In fact, they’re just barely above the model’s low side estimate of 63.

This suggests that Maryland’s current response to the pandemic has been effective in reducing transmission of the virus to people with who would likely require treatment in a hospital, i.e., the elderly and people with other medical complications. If the rate of hospitalizations continues to decline over the next week or so and falls completely out of the predicted range, then it’s going to be time to start making the political decisions about restarting Maryland’s economy.

As I’ve noted before, impoverishment resulting from economic stagnation will sentence many to misery, despair, and poorer health. At some point, we will cross the line beyond which the current method of dealing with the pandemic will do more harm than good. The data above are a hopeful sign that day is coming sooner than some interpretations of the model predict.

I hope so.

A First World Problem

There’s a post over at National Review by Itxu Diaz about Europe’s response to the Wuhan virus pandemic. It catalogs a list of “important” crises that various countries were dealing with instead of the disease until Reality became too noisy to ignore.

In just ten days, we discovered that neither the tampon issue, nor the participation of transsexuals in the Olympic Games, nor the climate emergency were real problems, nor emergencies, nor anything of the sort. They were just fictitious problems, the pastimes of a generation that hadn’t known tragedy.

Read the whole thing.

Indeed, those “important” issues are really luxuries, problems that most people in the world cannot afford. Europe and Blue State America have enjoyed enough surplus income from previous generations’ capital investment that, on the whole, they haven’t had to worry about food or shelter or the other necessities of life. Or at least, they didn’t think they had to worry in “normal” times. They believed they could afford to live in Pretendyland.

They’re now being forced into the Real World, the place where generations of people learned the hard way about what is actually important.

I Haven’t Lost Any Money Yet

That’s because I haven’t sold any of my investments yet. Even if I did, I’d still make a profit because the market price of most of what I’ve bought is higher than what I paid. But I’ll hold most of what I’ve got because I expect it to rise in value over the long term.

Investors were stupid to panic and blow up trillions of dollars of market value, but I believe that those of us who hold on for the long term and who take the opportunity to make margin buys as they are available will be better off than the panic sellers.

As key manufacturing comes by onshore, the companies who provide the equipment and the people who provide the know-how will do well. After the dust settles, the next couple of years will be interesting.

Meanwhile, in Iran …

… the coronavirus pandemic appears to have spread to all regions of that country. The BBC has this video posted with footage from social media showing a morgue in the city of Qom full of dead bodies to be tested for the coronavirus.

Totalitarian societies such as China and Iran have not done well in their public health responses to the virus. Neither have most countries with socialize medicine, e.g., Italy. Could it be that part of the reason for Bernie’s burnout in the last few primaries is that too many Democrats gat hurt by changes in their health insurance under Obamacare, and that the prospect of having the same sort of system as China has caused them to reconsider giving the leadership of their part to a Socialist?



Investment Opportunities

I make money in the stock market two ways. One way is buying stocks that pay dividends, and I hold those stocks long term as long as the dividends they pay are a good return on investment. The other way is buy stocks that I expect will appreciate in market value. I sell those stocks when I feel I can make a satisfactory profit. The recent coronavirus and Bernie scares that caused share prices to drop unreasonably was an opportunity to engage in that second method.

The DJIA is up over 5 % today.


Math is Hard

Bernie Sanders is proposing a national health care system commonly referred to as Medicare for All. The low-side estimates of the program’s cost are around 3 trillion dollars a year.

Michael Bloomberg’s net worth is estimated to be about 62 billion dollars. If Bernie were to confiscate all of that wealth (and it could be liquidated as cash), he could pay for a week of his proposed program. If he could similarly liquidate the fortunes of the ten richest Americans, he wouldn’t find enough money to run Medicare for three months. And he would have destroyed productive assets that would generate further cash flow to fund the system. Even if he kept the seized assets as an investment portfolio (equivalent to a 100 percent income tax rate), a reasonable long-term rate of return would only provide for a week-and-half of Medicare for all each week.

The other 95 percent of the money required would exceed the government’s current income from taxes, so bringing Medicare for All online while maintaining something near the current level of other government services would require at least doubling the current total amount of federal taxation. If the billionaires have had their assets seized so that they have nothing left to be taxed, who do you think is left to be taxed? Cleaning out the millionaires won’t produce the same windfall as billionaires. If it’s still possible to pay wages at the current level after much of the productive investment in the economy is destroyed, then the average citizen’s share of the federal tax burden would likely rise to above 33 percent of personal income.

And then we’d have to figure out how to pay for the Green Nude Eel.