I don’t know whether President Barack Obama is simply oblivious to the basic laws of economics or he simply does not care, preferring instead to play politics while the economy burns — a sort of modern-day Nero with an economic fiddle.
As we move from one economic crisis to another, Obama has decided now would be a good time to use the force of government to increase wages for some middle class teenagers while putting others out of work.
Yes, the perennial liberal mantra to increase the minimum wage.
His proposal is not as silly as the one put forth by the Occupy Wall Street gang. They wanted to increase the minimum wage to $20 an hour. Obama simply wants to move it to $9.
While that makes Obama more reasonable than a bunch of spoiled, 20-something beatniks who liked to sleep in the park, it is still a bad economic idea.
First, simply from a constitutional viewpoint, it is illegal for the federal government to mandate a minimum wage. Even the Supreme Court, back when it actually understood and cared about the Constitution, said so many times. For example, in 1923 it found the Washington, D.C., minimum wage law unconstitutional in Adkins v. Children’s Hospital (http://j.mp/UOj4kg). Even as late as 1936, the court struck down a New York minimum wage law in Morehead v. New York (http://j.mp/UOkfQT).
It wasn’t until 1937, after President Franklin D. Roosevelt threatened to pack the court and Justice Owen Roberts, whose name should live in infamy, suddenly had a change of heart and began voting with the liberals on the bench. While some scholars claim Roosevelt’s threat had nothing to do with Roberts’ change, I shall let the record speak for itself.
Because of that change, however, suddenly minimum wage laws went from being unconstitutional in 1936 to constitutional in 1937 thanks to the ruling in West Coast Hotel Co. v. Parrish (http://j.mp/UOlsaF).
However, even if you think the court got it right, minimum wage laws still make no economic sense.
Think about it for just a second. When you shop to hire someone, for example, a plumber or electrician, you are unlikely to hire the most expensive person you can find without some other justification.
Look at it another way. Say you have $100 to spend and an item you want to buy costs $50, you can buy two of them. However, if the price were $100, you can only buy one.
That is what happens. A company might be able to hire two workers at $4.50 an hour but only one worker at $9 per hour. Or possibly hire them both but work them fewer hours.
As you can see, the very people Obama claims to be helping by increasing the minimum wage are likely to be hurt instead.
In a letter to the president, Donald J. Boudreaux, an economics professor at George Mason University, asked a very simple question that no liberal on this planet could answer with any credibility.
He first pointed out that Obama advocated a tariff on Chinese automobile tires that raised the price of the tires 30 percent with the expected result that Americans would purchase fewer Chinese tires. He then contrasted that with Obama’s plan to raise the minimum wage 24 percent.
His question: “If a government policy that artificially raises the price of Chinese-made tires reduces the quantities of such tires that are bought, why does a government policy that artificially raises the price of low-skilled labor not reduce the quantities of such labor that are hired?”
If this were a “Star Trek” episode and Obama were an alien computer or robot, this would be the part of the show where said computer self-destructed from the illogic of his own position.
Even Paul Krugman, the left-wing economist who must be the reincarnated John Maynard Keynes, wrote in 1998 that you can’t simply raise the minimum wage without considering the economic realities of supply and demand. This is the same Krugman, by the way, who believes the best thing that could happen to our economy would be an alien invasion.
Keep your ears open for Obama’s answer to Boudreaux’s question. I’m sure it will be forthcoming.
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Doesn’t get any simpler than that.
The other side of that choice is just as bad and would lead to the same results. Companies would pass on the cost increase. They would have to if they want to remain in business. This would mean lower sales due to folks not wanting to, or not being able to, buy the product or service. This in turn would lead to layoffs or less hours for workers. It all ends up on the same bubble on the flow chart.
The democrats always hurt the people they are supposed to be helping. They know they are doing it, but it gets votes. A few years ago, I worked for a non profit that had a legally blind person person be the janitor. Of course, we would go over his work, because he couldn’t see to do his job adequately. However, he was friendly, and showed up for work every day, always eager to help any of us. When the wages were increased the last go round, he had to be let go. He cried, and was upset because we were mostly his contact with the outside world. And, the extra money came in handy for he and his wife. That affected me deeply, and I am still angry at the government for butting in where it has no business.