Sunday, August 31, 2014

Florida! – the whole state

While I was dealing with no power last week I missed this bit of news. A federal district judge has ruled Florida's ban on same-sex marriage is unconstitutional. Previously, four state courts overturned the ban, some of them in such a way that the ruling applied to only a county or two. This ruling applies to the whole state. Along with the ruling the judge issued a stay, so don't dash to the county clerk's office just yet.

Commemters to the story speculate about whether the Supremes will take up the first available case or wait until there is a conflict at the Circuit Court level. More speculation about how they would rule. One notes that Justice Kennedy's ruling a year ago striking down the Defense of Marriage Act brought on this flurry of rulings in our favor. How likely would it be for Kennedy to now douse the flame when he rules on actual same-sex marriage?

Another notes that when the Virginia case was stayed by the Supremes, the stay was written in such a way that if the Supremes don't take the case the stay expires. Is that a hint the Supremes don't want to deal with same-sex marriage?

Friday, August 29, 2014

A zillionaire for raising the minimum wage

The radio program On Point, hosted by Tom Ashbrook discussed income inequality with Nick Hanauer. I heard a bit of the program Tuesday evening before arriving home to a house without power. Hanauer was an initial investor of Amazon, has founded or funded over 30 companies, and now is one of the super-rich. He has the plane, yacht, and multiple fancy homes. His message is that if the 1% don't work to re-balance the wealth in the economy the whole thing will come crashing down. Alas, there is no transcript of the show, so I summarized while listening on the web. The audio is 47 minutes.

Capitalism is the greatest engine for creating wealth, but it can benefit everyone or it can benefit the few. It is the role of democracy to make sure it benefits everyone. The problem isn't inequality. The problem is high levels of inequality. And we're at record high levels now and the spread is widening. Such levels lead to pitchforks in the streets and damage to democracy.

The upheavals in Ferguson, MO over the shooting death of Michael Brown are an example of the disenfranchised beginning to fight back.

It doesn't make sense for the rich to push for policies that extend and accentuate the inequality gap. First reason: Throughout human history when the inequality got this severe, the pitchforks have always come out – unless there is a police state in place. But a lot of Americans think we're a peaceful society. We don't do that stuff here. True statement?

A correction to what capitalism is: It isn't an efficient allocation of resources. It is creating new solutions to human problems.

Of course, fellow super-rich consider Hanauer to be bonkers. They buy into the "trickle-down" idea that the more money the job creators have, the more jobs they create and the better off everyone is. But it isn't true. Jobs are part of a feedback loop between customers and businesses. When workers have more money, businesses have more customers and need more workers.

Those at the top would rather believe the efficient market hypothesis because if markets are efficient then those at the top deserve to be rich and others deserve to be poor. But markets aren't efficient, they're effective – if well managed.

Hanauer notes that five years ago income inequality was a taboo subject in polite society. But now many of the rich agree that inequality is an issue that needs discussion. But what to do is still an open debate with many of the rich hesitant about the tradeoffs they would need to make. Even so, they recognize the central point (and the second reason to close the inequality gap): When their customers have no money the businesses owned by the rich have no customers.

Reason three: High levels of inequality stretch the society apart. The rich become disconnected from the rest, which reduces empathy and increases contempt (by the rich for the poor and by the poor for the rich), a dangerous and corrosive mix. The poor no longer have a stake in the society. The situation can get wildly out of control very quickly (a tipping point). Alas, if the rich feel aggrieved one thing they are very good at is contacting their senator.

Complaining about the rich and ranting about what the bankers are doing is not a theory of growth. This is: The more people, entrepreneurs and customers, who are included in prosperity the more innovative the economy becomes and the more it grows. The more participants in the economy the more it grows. This is reason four.

Thirty years ago the American middle class was the largest and richest in the world. That's no longer true. Canada is no longer the poor cousin. Their cities are much more vibrant than American cities. A measure of an economy should be how much better the middle class is doing than in other countries.

Today's politicians don't make decisions based on sound economic policy, they make decisions based on rules-of-thumb, which were taught as good economics maybe 50 years ago but are now being shown to be false. One of those is tax cuts to the rich benefit the entire economy. Another is the rich are job creators, the more money they have the more jobs they create. The people at the top matter, the people at the bottom do not. Trickle-down economics works. The bigger the big get the better off everyone is. When you raise the price of employment, you get less of it. The GOP budget encapsulates those rules. Some of these rules are used because of confusion, some because rich people know who will be advantaged by using them.

Seattle raised the minimum wage to $15 an hour. It raised the wages of tipped workers to somewhere around $9 an hour – the federal minimum for tipped workers is around $2. So why is the restaurant scene in Seattle booming? Because even tipped workers can now afford to eat in restaurants. The poor getting richer is not bad for the economy.

We as a country can choose policies that spread prosperity. Raising minimum wage, especially of tipped workers, is one such policy. Another is to help the small business compete against the big. Also, balance the power between owners and workers.

Our policies used to help people become rich. They now reward people for being rich.

We've already outsourced all the jobs that can be. The job of hotel maid can't be outsourced. But why should that job be a low-paying job? Walmart made $27 billion in profit last year. Why can't it use $10 billion of that to pay each of its million workers another $10,000 a year, which would get them off food stamps – and give them enough money to buy more products from Walmart? Why shouldn't the service job of today match the manufacturing job of 50 years ago that provided a middle-class income? The big reason why it doesn't is power. Manufacturing workers had unions.

Will the rich see this understanding and change their ways? Maybe not. But another goal of Hanauer's message is to wake up the other 99.8% of us, remind us we're the source of growth and prosperity, and get us to demand policies that spread prosperity.

Hanauer was invited to be on the show because he had written an article for Politico making the same points he made on the air. It is easier and more complete to read that rather than listen to the show.

A quote from the article:
In any large group, some people absolutely will not do the right thing. That’s why our economy can only be safe and effective if it is governed by the same kinds of rules as, say, the transportation system, with its speed limits and stop signs.
And some more ideas:

Want to reduce the size of government? Reduce the need for government. Pay workers well and they don't need food stamps or rent assistance or medical care.

Democrats say raising the minimum wage is a justice issue, all about fairness. And that's why they lose the argument. Republicans campaign on growth, but they provide the wrong solution. Minimum wage is a growth issue.

There can never be enough super-rich Americans to power the economy. Paying a CEO 1000 times more than the average worker does not benefit the economy. That CEO does not buy 1000 shirts for every shirt the average worker buys. Instead, that CEO puts the cost of 998 shirts into savings.

A problem with the Occupy movement is their message that capitalism is bad. What is bad is mismanaged capitalism, which concentrates wealth. Smart capitalists will make sure capitalism is sustainable, and that means spreading prosperity.

Tim Worstall is a contributor to Forbes and thinks Hanauer's ideas are insane. Some of his rebuttals:

A central story by Hanauer is that when Henry Ford raised wages to $5 a day he boosted sales of his cars. But Ford had 14,000 employees, which wouldn't put a big change in annual sales of 200,000. The raise cost Ford $9 million a year. If all employees bought a car that would increase sales by $7.75 million. That doesn't increase profits. The reason why Ford went to $5 a day was to reduce turnover so he didn't have to hire 50,000 a year to fill 14,000 jobs.

Worstall considers the price of labor and says, "People who employ more expensive labor use it more sparingly." Raising the minimum wage changes the way companies use their workers – though it seems Worstall doesn't factor in the number of workers may need to stay the same or grow to handle increased customers.

Worstall says Hanauer dismisses the effect of savings – it was savings that allowed Hanauer to invest in Amazon. So Hanauer should use his money to fund more companies rather than tell companies to raise wages. Even I see a disconnect here, and my last economics class was a long time ago. Hanauer won't invest in a company (which would create jobs) unless he knows that company is likely to make money. And for that it needs customers, which would come from a healthy middle class.

I note that Worstall doesn't refute one of Hanauer's central themes – when their customers have no money the businesses owned by the rich have no customers.

Happy Labor Day!

Thursday, August 28, 2014

Let there be light

I came home this evening to lights in houses down the street. I opened the door and could hear the radio playing – if it loses power while on there is no way to turn it off. So, yes, I have power. According to the bedroom clock it came on about 2:45 this afternoon. That's more than a day earlier than the electric company originally estimated. Yes, power was back before my cooking session with my friend and debate partner and before my evening in the library.

Alas, the outage trashed my saved browser tabs. So all those wonderful things I was going to tell you about before my travels have been lost. Well, there was one I remembered and found again.

Gary Glenn has been the head of the American Family Association in Michigan, meaning he is the state's top homophobe. He was instrumental in getting the 2004 marriage protection passed here and has been making life as nasty for us as he possibly can. There have been many times in the last dozen years that when Glenn spoke the GOP legislators here jumped to do his bidding. Thankfully, his influence is waning.

But back in the beginning of this month in the Michigan primary, Glenn won the GOP nomination for the state House for the 98th district. That includes Midland and small communities nearby.

I recently received an email (asking for a donation) that said there are several homophobes that won their primary in GOP safe districts. In Glenn's district, however, there is a belief that he can be defeated.

You don't know the answer

The Indiana and Wisconsin same-sex marriage cases went before the 7th Circuit Court yesterday. The attorneys for the state went before the 3-judge panel – and were grilled so thoroughly there were scorch marks. Yeah, they were made to look like incompetent idiots. Jim Burroway of Box Turtle Bulletin provides transcript excerpts from the courtroom audio.

These attorneys seem to believe that because straight people have such a problem with unintended children they need marriage to protect the kids. But same-sex couples don't have that problem, so don't need marriage. That argument is well toasted. So were the arguments about tradition, supremacy of voter wishes, and that society is helped when same-sex couples can't marry. These judges were brutal in the face of such non-logic. Quite a fun read. Want to guess how these judges rule?

Still in the dark

As of 12:30 today, when I was last home, the electric power was still out at the house. I spent some time with  my friend and debate partner to cook up some meals before the ingredients spoil. I may eat them cold until the microwave works. Thanks, friend, for the use of your kitchen.

I think there are at least 20 houses on my street with no power. Several of them are now running generators -- which are noisy!

I'm currently sitting in the library near my friend's house. I'm in this one because he could assure me wi-fi is available and it is open until 9:00. Tomorrow I might try the library closer to my house.