Power & Market
Since when are industriousness and hard work criticized? The New York Times op-ed page. Alissa Quart complains,
this nouveau moonlighting continues to be exalted as cool, empowering or freeing. This mantra is false: Side hustles are not simply a new version of working as a “wage slave” so that we can do what we love in our off hours. Instead, far more often, people take on second or third side hustles because of wage stagnation or low pay at their full-time jobs.
So, what’s another word for wage stagnation but inflation. However, Ms. Quart, the author of Squeezed: Why Our Families Can’t Afford America, doesn’t mention the Federal Reserve or increases in the supply of money.
Quart’s Sunday Times piece is entitled “The Con of the Side Hustle.” People taking on multiple jobs refer to them as “side hustles.” Which is kind of cute. Uber is recruiting online, not with the tagline “do you have to have a second job to pay your bills” but rather something cool, like, “Get your side hustle on.”
It just so happens I’ve had occasion to use Uber lately and usually engage the driver in conversation. None were complaining about making a little money on the side even though they have “day jobs.” One was a blackjack dealer who said he made $47,000 last year dealing. When he gets off work he’s bored, so he drives and makes extra money.
Another was a financial planner whose wife just had a baby. He said he was driving to cover the new baby expenses but also to meet potential clients. My favorite driver is a Vice President of Player Development at a large local casino. He was driving his wife’s “shift” because he lost a bet between them. His wife drives because she’s home with their toddler and likes to drive a few hours both for the money but also for adult conversation.
Ms. Quart is far more exercised about these guy’s side hustles than they appeared to be.
Later in her piece, Ms. Quart really cranks up her ire,
Yet this sales pitch for the “side hustle” takes what we once called, more drably, another job and gives it a gloss, with a tiny shot of Superfly, disguising unstable working hours and a lack of bargaining power as liberation. You can see the twisted alchemy of what Reddit’s founder Alexis Ohanian has called “ hustle porn. ”
All this hand wringing is about prices rising faster than incomes and people having the time and willingness to pursue work and pay for more goods and services rather than live with less and enjoy more leisure time. Murray Rothbard wrote in the “Mystery of Banking,”
The essence of inflation is the process by which a large and hidden tax is imposed on much of society for the benefit of government and the early receivers of the new money. Inflationary increases of the money supply are pernicious forms of tax because they are covert, and few people are able to understand why prices are rising. Direct, overt taxation raises hackles and can cause revolution; inflationary increases of the money supply can fool the public — its victims — for centuries.
Of course, Ms. Quart casts no stones at the government or the central bank. It’s private businesses that are to blame. She implores us to never use the words “side hustle,” be more truthful, and most importantly, “we can agitate to raise wages. If we do that, we won’t need cute euphemisms to cloak the chaotic truth of working life in today’s America.”
The truth of the matter is, the Fed makes most all of us poorer, including businesses, while enriching the government. Bravo to those with the gumption to have a side hustle.
New York Gov. Andrew Cuomo just approved a $175.5 billion budget, boasting it as the “broadest, most sweeping state plan that we have done.”
Hoping to spend $19.6 billion on Medicaid and healthcare alone, a 3.6 percent raise from last year, New York’s lawmakers also passed a new “mansion tax,” targeting properties worth more than $2 million. In addition, the state added a new online sales tax to the books, which officials hope will raise enough revenue to allocate $320 million to help with New York City’s transit system, a new vape pen tax, and a ban on plastic shopping bags, which gives counties the freedom to charge 5-cent fees on paper bags.
But are all these efforts enough?
New York, out of all states, should have learned its lesson once affluent residents packed up and left. After all, it was Cuomo himself who announced the state’s income tax revenue had plummeted by $2.3 billion since his budget plan was announced. But despite the backlash, Cuomo doubled down, dismissing the loss in tax-based cash as a product of the 2017 federal tax reform and its $10,000 limit on state-and-local tax (SALT) deductions.
Prior to President Trump, there were no limits on SALT deductions. Naturally, Cuomo believes New Yorkers suffered greatly with the cap imposition. But the problem goes way beyond the change imposed by Trump, as SALT’s goal is to help relieve residents of high-tax states. If local taxpayers didn’t have to deal with such a high tax burden in the first place, there would be no reason to leave.
As The Wall Street Journal editorial board put it, averting more damage is the best anyone can hope for — in the time being. In the long run, however, unwinding the state’s bureaucracy is the only solution to the Empire State’s problems.
Taxation: Beneficial Only to the Politician
As Frank Chodorov wrote in the classic Income Tax: The Root of All Evil , the U.S. government hit the jackpot when it succeeded in making an “obnoxious” law, such as the temporary taxation of income, a feature of the American way of life, effectively turning the country’s founding principles into a “collectivistic doctrine.”
After that, everything became fair game.
As explained by Chodorov, when 42 states ratified the tariff bill featuring an income-tax amendment in 1913, the 16th Amendment became part of the U.S. Constitution, “[reducing] the American citizen to a status of subject, so much so that he is not aware of it; [enhancing] Executive power to the point of reducing Congress to innocuity; and [enabling] the central government to bribe the states, once independent units, into subservience.”
As Cuomo exemplifies with his never-ending campaign to destroy the New York state economy, income tax (or any tax for that matter) only benefits politicians. As the idea of taxing those who have property appeals to those who do not have any or at least as much as others.
It is “political ambition and the sin of covetousness,” as Chodorov put it, that help to perpetuate the idea that government has a right to confiscate property in the name of the common good. And politicians bank on it, using it to boost political clout.
Suppose someone wanted to misrepresent a public policy to you. How could they do so most effectively? And who can help you resist?
It’s certainly a believable hypothetical. With two major parties who seem to disagree on everything, multiple intra-party fault-lines, and a plethora of interests who wish to turn laws and regulations in their favor, whipped together by a press in search of partisan scandal and ratings, it is hard to see how it could be otherwise. In fact, for almost every issue, it seems very likely that some, if not many, groups, will be tempted to promote their interests using techniques ranging along the spectrum from “putting one’s best foot forward” to bald-faced lies.
There are plenty of common political tricks that fall short of outright lying. For instance, one can bury desired changes in the paper avalanche of an omnibus bill, as in the Minnesota legislature’s recent attempt to sneak in enactment of the National Popular Vote project. Or one can pass vague legislation that passes the buck for what it will mean in practice to executive agencies and the courts. But such forms of subterfuge are not my interest here.
I wish to ask how people would misrepresent things in the open, rather than behind such political camouflage? As I warn my public policy students, the general principle is that people will lie to you in whatever areas you are most vulnerable.
If you are American, one of those weak spots is typically mathematics, and particularly statistics, which is why it earns its place of shame along with lies and damned lies. That is why the tricks for how to misrepresent statistics discussed in Darrell Huff’s How to Lie with Statistics still keep the book selling 65 years after its initial publication.
However, widespread ignorance goes deeper than the science of statistics itself. Very few people have a clear idea on what the data involved actually measures, under what assumptions and limitations, which can lead to careless and irresponsible usage. For instance, few people can articulate why both the employment and unemployment rates could go up at the same time, and which would be a more reliable economic indicator in such a case, when their names suggest it shouldn’t be possible.
Thomas Sowell , in his most recent book, Discrimination and Disparities, describes the problem as “overlooking simple but fundamental questions as to whether the numbers on which… analyses are based are in fact measuring what they seem to be measuring, or claim to be measuring,” which, in order to defend ourselves against misrepresentation, requires “much closer scrutiny at a fundamental level.” But far too few apply such careful, fundamental scrutiny.
However, there are a few people who do yeoman work in this area, providing valuable “insurance” against errors others would encourage us to make. They deserve our appreciation for toiling in that underserved area, and I would like to express thanks to several whose efforts I have particularly benefitted from.
Thomas Sowell is one such author who has provided a great deal of clarification over decades of prolific publication. For example, one common theme of his is the need to distinguish between what happens to a particular category of people (e.g., “the rich” or “the poor”), interpreted as a stable group, which lends itself to class-based conclusions, and the very different experiences of real people who move in an out of such categories over time, which upsets such analyses.
Discrimination and Disparities reiterates that theme from his earlier books. But my favorite illustration is his discussion of the famous Card and Krueger minimum wage study, which purported to overturn the conclusion that raising the minimum wage increases unemployment. It surveyed the same employers, asking how many employees they had before and after a minimum wage increase. The problem is that “you can only survey the survivors.” Anyone who went out of business, and the jobs that consequently disappeared, would not be included, so even if surveyed survivors did not reduce employment, many jobs invisible to their approach could still have been lost. To reinforce the image, he notes that a similar before-and-after survey of those who played Russian Roulette would show that no one was hurt, and cites a quip by George Stigler that if it had been used in a survey of American veterans in both 1940 and 1946, it would “prove” that “no solider was mortally wounded” during the war.
Another very prolific watchdog for statistical malfeasance is Mark J. Perry . He points out so many useful “red flags” in multiple outlets that I look forward to what is almost a one-a-day pleasure. A good example is his evisceration of “Equal Pay Day” discussions that attribute differences between median yearly incomes to unjustifiable discrimination against women “doing the same work as men.” He points out that the data fails to adjust for differences in “hours worked, marital status, number of children, education, occupation, number of years of continuous uninterrupted job experience, working conditions, work safety, workplace flexibility, family friendliness of the workplace, job security, and time spent commuting,” each of which would lead men to be paid more, on average.
Andrew Biggs is another stickler for statistical responsibility, particularly in areas connected to retirement security and retirement plans. For instance, in Forbes , he showed that a recent GAO report concluding that 48% of U.S. households aged 55 and over in 2016 “had no retirement savings” was far different from reality, as 72% of people had such savings plan, when those with traditional defined benefit pensions are counted, and 83% of married households had such savings when including those where only one had a retirement plan. Just those two changes massively changed the conclusions. And he pointed out other biases, as well.
These three people have each helped me understand measurement issues far better than before, enabling me to avoid errors that would have undermined my analyses of policy issues. I owe them thanks. But readers might also give them more attention, for similar “tutoring.” Many others have also been of use to me, and as I continue to learn, perhaps I can give a shout-out to others in the future, especially as this labor pool is still far too shallow. But mainly I wanted to put out a serious warning about ignorance not only of statistical applications and presentations, but also of the data that is often misused in reaching policy conclusions.
Unmentioned in Assange arrest coverage — the US government after 9/11 dropped an Iron Curtain around itself. Wikileaks exposed US government crimes no one else would touch.
Julian Assange is charged with "conspiracy to commit computer intrusion." What about all the politicians and military officials who conspired to deceive Americans about the Iraq war?
The Assange arrest proves that no government critic "is above the law." But governments remain free to secretly trample the law as they please. Assange was labeled "our property" by same nitwit U.S. senator from West Virginia who wailed in 2016 that "due process is killing us."
Britain's foreign secretary whoops that Assange's arrest shows "no one is above the law." Except for the governments whose crimes Wikileaks and Assange helped expose.
The cheering by some of the US media on the Assange arrest vivifies how journalists no longer understand how government coverups destroy democracy.
Here's my USA Today piece from last November when reports surfaced of Assange’s indictment.
Formatted from @JimBovard on Twitter.
The so-called Green New Deal is only tangentially related to climate issues.
It’s best to think of it as the left’s wish list, and it includes a paid leave entitlement, government jobs, infrastructure boondoggles, and an expansion of the already bankrupt Social Security system.
But the most expensive item on the list is “Medicare for All,” which is a scheme concocted by Bernie Sanders to have the government pay for everything.
Would this be a good idea? In a column for Forbes, Sally Pipes of the Pacific Research Institute explains that government-run healthcare in the United Kingdom has some very unfriendly features.
Nearly a quarter of a million British patients have been waiting more than six months to receive planned medical treatment from the National Health Service, according to a recent report from the Royal College of Surgeons. More than 36,000 have been in treatment queues for nine months or more. …Consider how long it takes to get care at the emergency room in Britain. Government data show that hospitals in England only saw 84.2% of patients within four hours in February. …Wait times for cancer treatment — where timeliness can be a matter of life and death — are also far too lengthy. According to January NHS England data, almost 25% of cancer patients didn’t start treatment on time despite an urgent referral by their primary care doctor. …And keep in mind that “on time” for the NHS is already 62 days after referral.
If this sounds like the VA health care system, you’re right.
And both produce bad outcomes. Here’s some of the data from the British system.
Unsurprisingly, British cancer patients fare worse than those in the United States. Only 81% of breast cancer patients in the United Kingdom live at least five years after diagnosis, compared to 89% in the United States. Just 83% of patients in the United Kingdom live five years after a prostate cancer diagnosis, versus 97% here in America.
Just like I told Simon Hobbs on CNBC many years ago.
The best part of Sally’s column is that she explains how the flaws in the U.K. system are being copied by Bernie Sanders and other supporters.
Great Britain’s health crisis is the inevitable outcome of a system where government edicts, not supply and demand, determine where scarce resources are allocated. Yet some lawmakers are gunning to implement precisely such a system in the United States. The bulk of the Democratic Party’s field of presidential candidates — including Senators Kirsten Gillibrand, Kamala Harris, and Elizabeth Warren — co-sponsored Senator Bernie Sanders’s 2017 “Medicare for All” bill. That plan would abolish private insurance and put all Americans on a single government-run plan… Britons face long waits for poor care under their country’s single-payer system. That’s not the sort of healthcare model the American people are looking for.
The bottom line is that Medicare for All would further exacerbate the third-party payer problem that already plagues the health care system.
And that means ever-escalating demand, rising costs, and inefficiencies.
Taxpayers in the U.K. endure higher burdens than their counterparts in America, But they also suffer from the second option for dealing with the cost spiral, which is rationing.
Some of the data was in Ms. Pipes’ column.
Originally published at International Liberty.
According to multiple reports, Donald Trump is preparing to nominate Herman Cain to fill one of the two vacant positions on the Federal Reserve’s Board of Governors.
Cain, the former CEO of Godfathers Pizza and a meme-friendly 2012 presidential candidate, shares several similarities to Stephen Moore, who was also nominated last month. To their credit, neither man comes from the arena of economic groupthink that persists among many central bankers. Both also owe their nomination to the strong personal relationship they both have with Trump, which is why the administration isn’t worried about their past superficial criticism of the low interest rate policy the president has made clear he desires.
While Moore has been criticized strongly within beltway circles since his nomination, it will be interesting to see how Trump critics handle Mr. Cain. After all, he has the one quality Elizabeth Warren and other Democrats have chosen to focus on when it comes to a Federal Reserve nominee: he isn’t a white guy.
For several years now, Warren and other Democrats have been pounding the table for greater diversity at the Fed. As a letter from 2016 states:
Given the critical linkage between monetary policy and the experiences of hardworking Americans, the importance of ensuring that such positions are filled by persons that reflect and represent the interests of our diverse country, cannot be understated. When the voices of women, African-Americans, Latinos, and representatives of consumers and labor are excluded from key discussions, their interests are too often neglected.
If the view point of Warren and her colleagues truly is that simply skin color and experience are important to the Federal Reserve considering the interests of Americans broadly, it would make sense for them to celebrate this nomination. Here we would have the first African American Fed governor in several decades, who rose up from a working class background to become an American success story.
Should Cain be nominated, anything short of grand applause from Democrats will only highlight how shallow the emphasis on superficial “diversity” truly is.
The additional irony here is that Trump’s desire to stack the deck with his own allies actually serves the policy goals of progressive groups. For example, Fed Up, a left-populist organization policy that has been part of the larger push to emphasize “Fed diversity,” has been pounding the table against interest rate increases for years. In theory, a Governor Herman Cain that is loyal to Trump’s vision should check the two largest boxes the organization has been promoting.
Of course, there is a real tragedy connected to this superficial push for “diversity,” as it is precisely the interventionist monetary policy advocated by politicians like Warren and groups like Fed Up that do real damage to minority communities. While Fed Chair Jerome Powell took time to visit the historically black college of Mississippi Valley State this February, his speech failed to highlight how the Fed’s post-2008 monetary policy has disproportionally hurt black communities due to the fact African Americans are less likely to be invested in a juiced up stock market. Or how the Fed-fueled housing bubble was particularly damaging to black communities.
So while Herman Cain does check a diversity box for the Federal Reserve, he is unlikely to bring the far more important ideological diversity to America’s central bank that is desperately needed. On the bright side though, at least he isn’t Marvin Goodfriend.
The timing of Jerome Powell’s appearance on “60 Minutes,” along with Janet Yellen and Ben Bernanke, is curious. Scott Pelley asked no penetrating questions, so nothing was learned. Fed Chairs aren’t known to hit the interview circuit. Bernanke appeared during the crisis to reassure the nation that the central bank can and will fix anything and everything.
Donald Trump (aka "Individual 1") tweeted in January:
The economy is doing great. More people working in U.S.A. today than at any time in our HISTORY. Media barely covers! @foxandfriends— Donald J. Trump (@realDonaldTrump) January 24, 2019
The folks at GNS Economics, in their Q-Review 1/2019 report, contend, contrary to the president, “the global economic recovery since 2009 has not been real. It has been achieved with massive debt and monetary stimulus, which has created an economy where normal rules of the market economy do not apply.”
The emphasis of the GNS report is the economy’s fragility. The economy “is unable to stand on its own without ongoing massive debt and monetary stimulus.”
Powell and the ECB’s Draghi recent U-turns back to monetary stimulus support this notion. If central banks exist for anything it’s to keep commercial banks in business. Forget about full employment and a strong currency, the Fed’s job is to keep the banks open. And, when rates were normalizing or heading upward last year, what was it doing to U.S. bank balance sheets?
Wolf Richter at WolfStreet.com provides the highlights from the FDIC’s Quarterly report, and mentions a doozy of a detail—”US Banks Report $251 billion of ‘Unrealized Losses’ on Securities Investments in 2018, the Most Since 2008: FDIC”
These are “paper losses” so far and, as Richter explains, don’t impact bank bottom lines. Richter writes,
“Unrealized losses” are losses on securities that dropped in value but that the banks have not yet sold. In other words, they’re “paper losses.” Every quarter in 2018 brought steep unrealized losses: Q1: $55 billion; Q2: $66 billion; Q3: $84 billion; and Q4: $46 billion.
When interest rates go up, bond prices fall. Everything will be oakey-dokey if banks can hold the securities until maturity and are repaid in full. However,
if banks are forced to sell those bonds during a liquidity crunch, as happened during the Financial Crisis, the “unrealized losses” become real losses.
Richter points out that America’s banks hold nearly half a trillion in US Treasuries. That’s quite a concentration of debt extended to a borrower that on its books is $22 trillion in debt. Off balance sheet liabilities are multiples of that amount and the country’s budget deficit is running over a trillion a year. Government debt can never be repaid, only refinanced. This is referred to as Ponzi finance.
Mr. Wolf concludes,
So, it’s still a good time to be a bank – especially since $251 billion “paper losses” don’t need to be included in net income. But loan-loss provisions are starting to indicate that the credit cycle has turned, and that banks are preparing little by little for the next phase in the cycle.
The next phase may turn those paper losses into real ones. Powell’s TV appearance and sudden change of policy signals the turn is near.
[formatted from this twitter thread- ed.]
I present two conflicting theories of how the standard of living of the average wage earner rises: the prevailing, anti-capitalist theory, and my own, pro-capitalist theory.
Keep in mind that every law ultimately rests on the threat to kill violators. That is the threat made against all who forcibly resist lesser punishment, such as paying a fine or going to prison.
Thus, the prevailing theory of how wages rise is essentially that the government tells businessmen and capitalists, raise wages or we’ll kill you.
The prevailing theory of how the work week shortens is that the government tells businessmen and capitalists, shorten the work week or we’ll kill you.
The prevailing theory of how child labor is eliminated is that the government tells businessmen and capitalists, stop employing children or we’ll kill you.
The prevailing theory of how working conditions improve is that the government tells businessmen and capitalists, improve working conditions or we’ll kill you.
Now here’s my theory:
Businessmen and capitalists are continuously striving to introduce new and improved products and more efficient methods of production. They are impelled to do this by virtue of the profit motive.
To the extent that the businessmen and capitalists succeed, the supply of products is increased relative to the supply of labor, which causes the prices of products to fall relative to wage rates. This means a rise in the buying power of wages, i. e., a rise in “real wages.”
As real wages rise, more and more workers are put in a position in which they can afford to work in jobs that pay less but offer shorter hours. In fact, they become able to afford to take reductions in pay in greater proportion than the reduction in hours. Wage cuts in greater proportion than the reduction in hours make it positively profitable for employers to offer shorter hours. E.g., instead of two 12-hour shifts, it becomes more profitable to have three 8-hour shifts at lower hourly wages.
As the real wages of workers rise, not only do their hours shorten, but also the need for a financial contribution from their children diminishes. Thus, as capitalism progresses, the age at which children go to work rises. Since 1780, it’s gone from 4 to over 24 in many cases.
Furthermore, as the real wages of workers rise, they are more and more put in a position in which they can afford to take jobs that pay less but offer better working conditions, and, by the same token, refuse to take jobs that offer poor conditions.
Because of the height of real wages in capitalist countries, wage earners are routinely able to refuse to take jobs with poor conditions, except at such a premium in wage rates that it is usually much cheaper for employers to pay the cost of improving the conditions.
In sum, without government intervention, capitalism operates to raise wages, shorten hours, end child labor, and improve working conditions.
I turn now to a brief account of the effects of imposing the prevailing, anti-capitalist, gun-slinger, we’ll-kill-you theory of how the standard of living of the average wage earner rises.
Imposing wage rates above the free-market level causes unemployment. Insofar as those forced into unemployment in one field then add to the supply of labor in other fields, wage rates in those fields drop. An arbitrary inequality in wages is created. And skills are wasted.
Forcibly raising wage rates at the bottom of the skill-ladder, as do minimum-wage laws, forces the displaced workers into unemployment. These workers were already earning a wage below the now prescribed minimum and being employed elsewhere would require a yet-lower, illegal wage.
Forcibly reducing hours reduces production and causes higher prices. Even if the average worker’s hourly wage is increased to the point of leaving his weekly wage unchanged, the rise in prices reduces his real wages. Poor people are gunned into being poorer than they need to be.
Denying parents the ability to obtain a financial contribution from their children makes desperately poor families poorer still.
Forcibly improving working conditions diverts take-home pay into paying for the improvements and thus can literally take food off the table of poor workers’ families.
In sum, the so-called do-gooders are not at all do-gooders. They are EVIL-doers. They have an imperious mentality as far removed from reality as Marie-Antoinette’s and go about like drunken fools urging the government to brandish its weapons, not knowing who or what might be hit.
To learn about every aspect of the case for capitalism, read my Capitalism: A Treatise on Economics.
Formatted from Twitter: @GGReisman
In the 1940s, economist Friedrich Hayek said in his book, "The Road to Serfdom," that the road to serfdom was socialism. Economist Joseph Schumpeter, in "Capitalism, Socialism, and Democracy," feared that socialism would displace capitalism even though capitalism was a better system.
In the 21st century, self-proclaimed socialists like Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) are keeping the fears of Hayek and Schumpeter alive. Those fears are misplaced. The biggest threats to capitalism aren’t socialists, they are capitalists.
While socialists float aspirational ideas for a better society, capitalists conspire with the political class to enact policies that benefit the political and economic elite at the expense of the masses.
The result is that business profitability increasingly comes from political connections rather than by satisfying the demands of consumers, undermining free markets and the capitalist system.
This is widely recognized, if not widely understood. People talk about cronyism, corporatism, the division between the 1 percent and the 99 percent and the threats of the military-industrial complex. In my recent book, I call this phenomenon "political capitalism" and explain how it undermines the market system and threatens capitalism.
When capitalists tout pro-business policies, they inevitably are talking about policies that use trade barriers and regulatory impediments to give themselves advantages over competitors.
Read the full article at The Hill
Watch Dr. Holcombe's talk on Political Capitalism from this year's AERC:
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