Article Response #5

Article:
http://www.idsnews.com/news/story.aspx?id=72835

Response:

I'm no fan of Bush. I'm basically a libertarian. I have MANY issues with his policies, but at the same time, this article uses cherry picked items to indict Bush while skipping things that . By picking a 2000 DJIA point and then comparing it to now is extremely misleading and omits the fact that the 14K+ record was set during Bush's time. Same with the median income. 1998 was during the height of the boom economy. It's again misleading to compare incomes then with incomes during a recession while leaving out that there were higher incomes in 2006 & 2007. There are many things to complain about with regard to Bush, we need not cherry pick things to do so.

There are a several comments on that article. A couple of those sparked my response. I'm reposting them here for less confusing chronology and better readability using names submitted to the public forum.

By POR Economy:

The Pelosi-Obama-Reid (POR) economy kicked in during the latter part of June 2007, when its Congressional architects — Nancy Pelosi, Barack Obama, and Harry Reid — decided that starving the economy of energy by refusing to allow more offshore drilling in the face of $4 gas prices was a winning political position. Pelosi claimed that because we couldn't totally "drill our way out of this," we shouldn't increase drilling at all. Reid put an exclamation point on Pelosi's stubbornness by insisting that fossil fuels are "making us sick." Well, they only thing sickened by their policies was the US Economy. FDR tried massive public works programs during the Depression. All he did is prolong it for seven years. Japan tried government stimulus for 10 years running in the 1990s. It only resulted in "the lost decade." What Pelosi, Obama, and Reid should do is expand the tax cut element of the stimulus plan to include all incomes, ditch almost all of the alleged "investments," open up oil and gas exploration, and, eventually, watch the royalty money pour in. I know; that's way too much to "hope" for. 

Response to POR Economy:

I personally believe that while the internal energy embargo definitely put a cap on the economy's ability to grow, it was the increase in the minimum wage that lit the fuse of our current issues. In an economy beginning to struggle for real growth, already in a bubble, shifting the entire wage scale (which is what we should really call a minimum wage increase), was the tipping point that halted any growth and began to exacerbate the tearing where it was already stretched thin.

By Jared:

Ashley: Great editorial, but I think its time we stop talking about how bad Bush was as President. But essentially, the 00's basically proved that neoconservative and inherently conservative policies do not work. When you essentially tell regulatory agencies to stop regulating, financial giants are free to break the law and prey upon their customers. When you spend more than all past presidents combined while enacting exceedingly high tax cuts, you drive up the deficit to dangerous levels. When you go to war against one country based on an ideology while the real war is denied resources, terrorism spreads. I honestly think that the world is experiencing a global transition where the focus of power lies between China and the US, rather than just the US. The road may be tough, and lower class Americans may be left behind as China's middle class grows. Bob--you are an exception to the rule. Thrift is not a trendy word these days. Between the cars people own, the clothes they wear, to the college they go to, its more of a competition than what is practical. Being financially secure should be the equivalent of having that big-screen plasma HD TV, however it is not. 

My Response:

What free market ideas were actually tried that didn't work? When did we have limited government? Bush cut taxes in 2001 and the recession bottomed out (even with 9/11). Outside of that and working to increase trade with foreign countries (though even this was more protectionism than it was free trade), I'm hard pressed to really think of anything significant that Bush did that was free market, limited government oriented. No Child Left Behind - Nope, bigger govt spending and regulation. Prescription Drug Benefit - Nope, bigger govt spending and regulation. The Bailouts - Nope, bigger govt spending and regulation. Sarbanes-Oxley - Nope, massive increase in regulation. Even things like his proposed social security reform was nothing more than moving from tax&spend to a forced savings account (he even suggested lifting the FICA tax cap to pay for it). Please show me where government spending was reduced (even minus the wars), government programs were cut (and a "cut" of an 8% increase to a 3% increase doesn't count), or the pages of government regulations were reduced. The whole "compassionate conservatism" was, I feel, a ploy to get conservatives to THINK he was for free markets and limited government while it was basically just slightly slower government growth than what liberal Democrats would have done. The 00's didn't prove free market, limited government policies to not work. We didn't HAVE a free market and limited government. However, if you don't believe that the 00's show that expansive spending and strict control by government do not create prosperity, if we continue along the path we're traveling, the 10's may prove it beyond a reasonable doubt.

Jared:

I wonder how many of you have actually gone to IU in some academic capacity, especially POR? Copying Fox News articles does not mean you know what you are talking about. In fact, it means the opposite. If you can show me objective, peer-reviewed analytical proof that FDR's policies protracted the Great Depression I might actually read the rest of your BS. Ever hear of a Hooverville? For now, put down the glue and put your nose in a book.

My response:

I don't like worshiping at the alter of "peer-reviewed" primarily because I'm aware of the flaws in the peer-review process. However, if you are going to be condescending and refuse to open your mind unless you get what you want, I will try to satisfy you. If you don't like the hundreds of historical descriptions of the cause and effect relationship of FDR's policies and the lengthening of the Great Depression (also read what Milton Friedman says about it), here's a paper that analyzes exactly what you apparently consider to be hallucination induced fantasies: http://www.journals.uchicago.edu/doi/pdf/10.1086/421169 As for a Hooverville, I hope you're not suggesting that Hoover was the sole cause of the Depression. He certainly shares in part of the blame due to his massive spending attempts to "stimulate" the economy (sound familiar?). In fact, Hoover spent so much in an effort to right the ship that FDR actually ran his campaign against him on a platform of fiscal responsibility, though obviously his actions did not match his promises.

Jared:

Your comment that you don't "worship the alter of 'peer-reviewed'" says all I or anyone else needs to know in how you gather and analyze the information you use to form your opinions. Granted, some articles may have poor analytical methodologies, but when you form opinions about complex topics, I suggest you have facts to back them up while also taking into account the inadequacies in your own arguments. I've learned at least in introductory US History classes that Hoover thought that the severe downturn in the economic was simply part of a larger "economic cycle." As a result, he earned the nickname "Do Nothing Hoover." He thought that the market would simply correct itself over time. Although he did rack up the largest peace-time federal deficit in history at the time, it was not enough.

My Response:

You're exactly wrong on two accounts. Firstly, the reason I don't worship at the alter of peer-reviewed is NOT because I think they're all wrong or have "poor analytical methodologies". But many times, errors in peer-reviewed papers DO slip through, despite reviewers. Beyond that, peer-reviewed papers can be completely wrong and still get published simply because of things like the reviewers agreeing with the premise of the paper or the technology or understanding of the time doesn't provide for good criticism. You have to admit, the peer-review process itself has problems: http://tinyurl.com/y9e64s8 or http://tinyurl.com/n5dbdz But my point was that I don't think 'peer-reviewed'='absolutely true' any more than 'found on the internet'='absolutely false' and that it is close-minded for you to demand peer-reviewed material to even consider that you may be misinformed. And regarding how I gather the information on which I base my opinions, I find your assumptions based on "poor analytical methodologies." Secondly, maybe you need to do some reading beyond what you learned in your Intro US History before you get condescending with people. The name "Do-Nothing Hoover" was started by opponents of Hoover! But looking at the facts, nothing could be further from the truth http://tinyurl.com/dbdbq5 He spent large amounts of money and used the government as the mechanism to try to bolster the economy: http://tinyurl.com/ye38el9 or http://tinyurl.com/lr2g56 And in the end, Hoover himself indicated that he had ignored those who recommended "do-nothing" and that it was he who initiated the interventionism: http://tinyurl.com/ydhbp3x Actually, I'm curious how you explain the contradiction in your own last sentence. If his plan was "do nothing", how and why did he rack up such massive deficits?

The Effects of Minimum Wage

I keep getting into discussions with liberal friends of mine about increasing the minimum wage. I have problems with minimum wage in general and especially with raising it. Now I'm not positive that getting rid of it altogether would be good, but I do believe that raising it causes small problems to be exposed and compounded, and bigger problems to become "crises" (sorta like we're seeing now). Now I'm not an economist, but despite the fact that I've heard remarkably little about the raise in minimum wage with regard to the current economic strain, I still feel that there's an impact that's going unreported. So I thought it through, past the initial hike and the more money people would initially get. I wanted to post the cause-and-effects with regard to minimum wage as I see them.

Firstly, let's make it clear. When the govt raises minimum wage, what they're doing is basically forcing companies to pay ALL of their employees more. Because when you raise the rate you have to pay your entry level positions, they would be earning the same as the second tier employees. Because these second level positions usually require some additional training or skills, you have to pay them more than the bare minimum. Then to keep wages competitive, corporations have to raise the amount they pay their third tier workers as well. Etc, etc on up the chain.

Remember that as long as we're in a capitalistic society, the goal of companies is to ethically make as much money as possible. Now, as I see it, in order to be able to pay all their employees more money, there are really only a few options they have:

• Absorb the extra costs and take a cut in profits
• Some would say this is acceptable considering how outrageously large the profits are for some of these corporations. Problem is, while these multi-billion dollar profit oil companies could probably absorb the increase, the vast majority of businesses in America are small-medium businesses.
  
• [Admittedly, small businesses (<$125,000 revenue) get some tax cuts to help with the additional costs. However, I'm dubious if the cuts cover the entire cost of paying higher wages, so they still have to come up with more money.]
  
• How would a non-profit deal with this?
• Also ask yourself, how do you think the stock of a publicly traded company would react if the company suddenly announces a cut in profits?
  
• Increase prices
• If you don't take the money from profits, then you have to get more money from somewhere. So many companies will resort to increasing the costs of their goods and services. By increasing costs (and hoping their demand doesn't decline) they will look to increase revenue and hopefully be able to handle the extra expense of paying their workers more without reducing profits.
  
• Now to me, the widespread increase in costs is basically artificial inflation. And inflation was the reason why people were shouting for the increase in minimum wage in the first place! So by increasing the minimum wage, we've indirectly increased the cost of living and artificially accelerated the rate of inflation. So in another 5-10 years, guess what they say is needed again?
  
• [I'm picturing a dog chasing its tail right now.]
  
• Lay off employees
• If you don't take the money from profits and you don't increase prices to increase revenue, then you don't have enough money to spread out across the employees. So something has got to give. The next relief valve is to reduce the number of employees. So it's not surprising to me that we're now hearing about numerous companies laying off batches of workers.
• Move overseas
• Say you don't want to lose profits, price-tolerance says you can't raise prices, and you can't afford to reduce supply by eliminating employees. Now say you're considering updating or expanding production. What incintive is there to open a new factory in the US? Not much other than being closer/easier to manage and perhaps patriotism. Looking that the possible advantages:

• Lower cost of materials
• Lower cost of labor
• Minimal environmental regulations
• Less red tape and paperwork requirements
  
• Lower taxes (a whole other article)

• Add into that the fact that the US has free trade agreements with numerous countries and I'm surprised there are still even factories left in the US!
  

Now I'm not an economist. I have only looked at what seems to me to be logical cause-and-effect. And what we're observing in the economy lately seems to be support me. Please someone tell me where I'm wrong, because both Democrats are talking about raising it to a "living wage" which could be $10 or $11 /hour or more!