US Fiscal gap: $222 Trillion. No big deal, right?

Just in case you had forgotten the financial straits the country as a whole is in, here's a bit of info gleaned from the latest CBO (Congressional Budget Office) report by economists Laurence Kotlikoff and Scott Burns (via Hotair):

In the course of that year, the U.S. government’s fiscal gap -- the true measure of the nation’s indebtedness -- rose by $11 trillion.

The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.

Wait! Before your head explodes when you see the $11 trillion number, read this to calm you down: That's only an increase of 5.2%. See, it's not really that bad!

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast -- the Alternative Fiscal Scenario -- is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference -- this year’s true federal deficit -- is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

This fantastic and dangerous growth in the fiscal gap is not new. In 2003 and 2004, the economists Alan Auerbach and William Gale extended the CBO’s short-term forecast and measured fiscal gaps of $60 trillion and $86 trillion, respectively. In 2007, the first year the CBO produced the Alternative Fiscal Scenario, the gap, by our reckoning, stood at $175 trillion. By 2009, when the CBO began reporting the AFS annually, the gap was $184 trillion. In 2010, it was $202 trillion, followed by $211 trillion in 2011 and $222 trillion in 2012.

$220 Trillion. With a big fat T.

Just Social Security alone will be enough to absolutely crush the economy. Once the Baby Boomers all retire, they'll be collecting a whopping 85% of the GDP annually.

Holy sweet cyborg pirate Jesus.

The solution recommended by the economists? Raise taxes by 65% or lower spending by 40% immediately, right effing now, or it'll only get worse.

Naturally, neither party wants to touch the issue of the Baby Boomer retirement, because they see it as political suicide. The unfortunate truth, though, is that we cannot sustain this kind of spending. This goes beyond the argument of Keynesian vs. non-Keynesian policies. There's no amount of benefit to be gained from deficit spending that could make up for the debt incurred.

The solution to this won't be pretty, but it'll only get worse the closer we get to the brick wall. Here's my idea: Raise the age that you receive social security to 83 immediately (5 years older than the average life expectancy), which will apply to anyone who is currently 60 or younger. If you're 50 or younger, you don't get Social Security. Ever. Sorry, buddy. Life sucks.

Don't go thinking your paychecks are getting any bigger, though. That money you pay into SS still gets paid, but instead of going towards the "Support retired Americans" fund it goes into the "Prevent America from becoming a third world country" fund.

That's only one of many steps that would be necessary until we got our debt back under control, but at least it'd be a start.

Obama moves to discourage domestic investment, calls it "reform"

The Obama White House has released a plan to "reform" corporate taxes. As I've said repeatedly in this blog, the United States has the dubious distinction of being second highest in corporate taxes (behind Japan). Fortunately, Obama recognized this problem and is moving to correct it. He's lowering our current rate of 35% all the way down to 28%, which moves us from second highest all the way to the coveted spot of...fourth, and still way above the OECD average.

Fantastic!

If that wasn't good news enough, get this. The tax plan also introduces a new "global minimum tax" on earnings overseas. That means that companies that earn money globally would have to pay a tax on that money. That's right, those darn evil corporations won't be able to hide their money overseas anymore! We'll really stick it to them!

Except taxes like that affect money when it is repatriated. It taxes money that comes back into the states. In other words, this global minimum tax actually discourages the repatriation of funds back into the states. That means less money made overseas being invested here at home.

But don't take my word for it! Why don't we hear from Obama's own economic counsel?

While most other developed nations have adopted territorial systems that exempt most or all foreign income from taxes when they are repatriated, the U.S. subjects all worldwide earnings to the corporate income tax when they are brought home to the U.S. This approach actually encourages U.S. companies to keep their earnings abroad rather than investing them here at home. Adopting a territorial tax system would bring us in line with our trading partners and would eliminate the so-called “lock-out” effect in the current worldwide system of taxation that discourages repatriation and investment of the foreign earnings of American companies in the U.S.

James Pethokoukis analyzed the plan.

4. Obama and Geithner apparently still don’t understand how harmful corporate taxes are. Here’s the OECD: “Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.

5. Obama and Geithner apparently still don’t understand who bears the burden of corporate taxes. It’s workers. AEI economists Kevin Hassett and Aparna Mathur have found that “corporate tax rates affect wage levels across countries. Higher corporate taxes lead to lower wages. A 1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.”

6. Obama and Geithner apparently don’t understand that “corporate income taxes have a highly significant and negative effect on long-term growth,” according to the Tax Foundation:

That graph shows a pretty clear correlation between higher taxes and low economic growth.

"But what about revenue? We need that money so that the government can function!"

I'm glad you brought up that point. We are in luck here; our pals the Brits just raised the taxes on the wealthiest citizens dramatically (to 50%) in order to produce more revenue. The result? Revenues went down by more than 500 million pounds!

So, higher taxes on corporations and the wealthy slow economic growth, produce less revenue, and cost money out of each and every citizen's pockets in the ends...

But hey, at least it's fair, right?

Gingrich Vs. Romney (Taxes): Point to Newt

Since the current front runners of the race are Newt Gingrich and Mitt Romney, I suppose I ought to do something comparing the two of them. Really, the desire those two inspire in me is complete apathy, but I feel I owe it to Fluffy to inform him on the choices that are before him. Of course, with how intensely the primaries have fluctuated, it's entirely possible we'll be seeing a "Obama/Fluffy the Imaginary Monkey 2012" news coverage in the near future.

Fluffy for President

So, on that note, let's go into issue #1 of Mitt vs. Newt. Taxes.

First, we'll look at Romney. He has some good points:

• Lowers corporate tax rate to 25% (Believe it or not, that is lowering it)
• Transitions from worldwide to territorial taxation. Easier tax code to comply with makes America a more attractive place to do business.
  
• Eliminates the estate tax. Double taxation is a bad thing. Why should someone be penalized for dying, for Christ's sake?

Of course, he also has some bad points, most glaringly that it keeps the same basic, convoluted tax structure we have now; a punitive tax code that taxes the rich at a higher rate than the poor.

On the other hand, we have Newt's plan. This plan was recently endorsed by Arthur Laffer in the WSJ. Laffer was an economist who was a member of Reagan's advisory board.

• Lowers corporate taxes to 12.5%. That would drop us instantly from one of the highest taxes in the world to one of the lowest. Combine that with everything else that makes America awesome, and you've got a recipe for investment flow back into the States.
• Creates an optional personal flat tax of 15%. This is cool, except for the optional part. But hey, gotta start somewhere. It means that everyone pays 15% on what they make, regardless of how much they made in wages. That is the very definition of fair.
• Unless of course they made their money investing. This is my favorite part. You wanna hear the tax rate on Capital gains? Get ready: 0.00%. Rounding up, of course. That's right, capital gains is not taxable income.

Now, before you completely mob me for wanting to make the "rich richer", remember two things. One, investment is exempt for everybody, so it could make you richer too. Of course, since most investment happens by the already rich, it does benefit them, which brings me to number two.

"You can't love jobs and hate job creators."

By show of hands, who has gotten long term employment from a poor person? Anyone? Anyone? Bueller?

It is investment that allows businesses to grow. If you want less of something, tax it more heavily. Washington knows this, which is why they have tax breaks out the ass for things they like, such as fuel efficient cars. Why not apply that same logic to something that puts more money in our pockets?

Also remember that Government creates nothing. As Mr. Laffer says "Jobs and wealth are created by those who are taxed, not by those who do the taxing. Government, by its very nature, doesn't create resources but redistributes resources." No amount of moving money from person A to person B by the Government is going to create a lasting job. To do that, you must grow the economy, and to do that you must plant the seeds of investment. Newt's plan, if it were to be implemented and survives to the general election, would do that.

So, point to Gingrich. Hooray.

"Reasonable Profits Board". You just can't make this up.

From thehill.com (I found the link on hotair.com, credit there):

"Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a "Reasonable Profits Board" to control gas profits."

Let that sink in for a moment. Really massage it into the lining of your frontal lobe. They wish to create a board who's express purpose is to control the profits of a private entity.

Seriously? Do I even need to write a blog about why this is a bad idea?

Naturally, I'll write one anyway, but let the record show it shouldn't be necessary.

The bill, HR3784 AKA the "Gas Price Spike Act", can be found in its entirety here. Its stated purpose is to "impose a windfall profit tax" on oil and natural gas. It will use this money to fund a tax credit for purchasing new fuel-efficient vehicles, and to bring down fares on mass transit.

Don't worry, though, no cause for alarm. The percentage of profits above a certain level to be taken is only a meager 50-100% . That's all, just all of them. No biggie.

Basically, any profits from 100-102% above the reasonable level gets stolen taxed at 50%, 103-105% at 75%, and 105%+ at 100%.

Now you may have had the same question I did: What exactly is a reasonable level for profit? See, I've labored under this crazy delusion that the reasonable level for profit was equal to the most you money you could possibly conceive. So, if you manage to run a successful business that follows all applicable laws and have a profit margin of one bajillion percent, then that is reasonable. And also awesome.

Au contraire, says Mr. Kucinich. It is up to the Government to tell us what the reasonable level is. Fortunately, they have a very fair mechanism to do this.

The bill creates a "Reasonable Profits Board" that will consist of three guys appointed by the President. These three guys are brought on for a term of 3 years, and they cannot have any "financial interest" in any of the companies they are to judge.

So these three Robber Barons set a level for "reasonable profit" on oil and natural gas, a level that is completely arbitrary and is tied to exactly nothing but their own whimsical fantasies. Also, since they can have no financial interest in the companies (which at face value seems logical), that practically guarantees that they will have no idea what they are talking about.

The rest of the bill is also silly. It creates a tax credit for buying fuel efficient vehicles (as long as those vehicles are made in the US, and not just by any US worker. Only those fashioned by unionized workers count. No joke, check Sec 25e, sub section (c) paragraph (1)C). This only serves to distort the market, creating artificial demand for a product that consumers don't really want. The same logic applies to the reduction in mass transit fares.

But forget all that. How about we examine the premise, that oil and gas profits are completely out of whack with reality? Let's check the board. Show me exorbitant oil and gas profits! Survey says!?

False.

In fact, oil and gas run at a healthy, but not outlandish, 10.2% margin. That puts them below financial data (11.6%) and railroads (12.6%), and it is completely dwarfed by internet retailing (19.4%) and network communications (20.4%). Where is the rallying cry to confiscate the profits of eBay?

But let's forget that too. Let's say for the sake of argument that the oil and gas companies made a profit of 1000%. What does that have to do with anything?

This Board would be given the authority to punish law-abiding companies. Companies which have done absolutely nothing illegal. Companies whose only "crime" is being too gosh darned successful! How DARE they provide a product that satisfies a demand of the private sector!? Those heartless bastards.

The message the government would be sending is "Invest your money but don't make too much now! We want you to be successful, but if you get too successful then by god we will crush your profits with a force like the mighty hammer of Thor!"

I could go on for days, but my brain might explode.

News Flash: Michael Moore, still a moron.

Michael Moore once again surfaced today to show what a deep respect he has for the rights of all people*, everywhere.

* - Note: Those with money aren't real people, and as such don't have rights like the ability to own property.

More GRITtv

This video is full of lovely gems of wisdom but here's the best one (Right around the 6 minute mark), which follows a question about the solution to Wisconsin's budget problem:

"To me the solution is quite simple. First of all, we are not broke. This country is not broke. State of Wisconsin is not broke. There's a ton of cash in this country...but it's a finite amount. There is only so much cash. What's happened is we've allowed a vast majority of this cash to be concentrated in the hands of just a few people...

They're sitting on the money, they're using it for their own -- they're putting it someplace else with no interest in helping you with your life, with that money. We've allowed them to take that. That's not theirs, that's a national resource, that's ours. We all have this -- we all benefit from this or we all suffer as a result of not having it...

I think we need to go back to taxing these people at the proper rates. They need to -- we need to see these jobs as something we some, that we collectively own as Americans and you can't just steal our jobs and take them someplace else."

Those mean, dirty Rich people! How dare they have their money and spend it the way they wish! How dare they not give the money to the government who knows how to spend it better anyway?

Side note, completely and absolutely unrelated Michael Moore's net worth: $25 million USD.

To begin with, the idea that the Rich aren't taxed enough is absurd. From The American:

"The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare."

Second, economies are cyclical. That means that no matter how well run a business is, or how booming an economy, it will eventually have some sort of downturn. Provided that there is not a restrictive environment or some other outside influence, the natural greed of people will drive them to work through, find solutions, so that they can earn more money. It boils down to a simple principle, elucidated by Henry Ford:

"There is one rule for industrialists and that is: make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.

If I had a chicken that laid golden eggs, I would naturally wish to retain this chicken. If said chicken laid better eggs if I fed it higher quality feed, I would naturally wish to do this. Not out of any altruism or gratitude towards the chicken, but rather because I wished to have larger hunks of egg shaped gold. Greed motivates success for everyone involved.

Lastly, to have the supposed virtues of the poor working class extolled, and those of the rich vilified, by a man who is himself fabulously wealthy is a delicious irony. Let me be clear: I do not care how much Michael Moore is worth. If he can make a bajillion dollars by producing a product that some people, for reasons that I cannot understand, want to pay for then fantastic! More power to him. That money is his to spend as he likes, and if he believes the government can do such a great job with it I am positive the IRS takes donations.

Unfortunately, I also support the right of the other wealthy Americans to spend the money they have earned however they see fit. There is this strange belief that circulates at times that purports that because the Rich have so much money, they cannot have earned it, and even if they did, they have less right to it because they have so much. In Moore's terms, it's a "National Resource".

Let's analyze the condensed version of Moore's position:

The Rich are not choosing to spend their money in a way that benefits other people. Therefore, the government should take their money from them and spend it for the Public's benefit.

First, remember we are all citizens and hypothetically equal under the law. This is guaranteed by the Fourteenth amendment, which is pulled out of its dusty shelf by liberals whenever they wish to tout gay rights, among other things. What applies to one applies to all.

Second, the status of your citizenship does not hinge on the money you make. There are no "Upper Class" citizens in the eyes of the law.

Third, while the government has used its power of taxation in a graduated fashion which discriminates based on total wealth, these levels are not fixed. In other words, the definition of "Rich" is fluid.

This means that if we accept the principle behind Moore's statement, namely that the government has the positive right to dictate how people spend their own money and utilize their own property if it's not benefiting other people enough, then Moore's statement truly becomes this:

American Citizens are not choosing to spend their money in a way that benefits other people. Therefore, the government should take their money from them and spend it for the Public's benefit.

Beware, ye would be class warriors. The chains you give to the government to bring down the mighty above you today will be the same that bind you into servitude tomorrow.

Roseanna Barr: 0, Ted Nugent: 1

Take 6 minutes out of your day to watch this video. See as Ted Nugent, complete with camo cowboy hat, slashes Ms. Barr's arguments to shreds.



It's beautiful. Hearing Barr shrilly cry out "But what about the rich!", as if being rich were some terrible crime that ought to be punished, is music to my ears.

Let's face it: No person has ever gotten a job from a poor man. If you reward behaviour through money or subsidies, you get more of it. Therefore, when you tax productivity and reward non-productivity, bad things will happen. It's simple human nature.

House passes "tax cut" deal

Moving with "uncommon speed", the House passed along, unaltered, the Senate bill which extended the "Bush" tax cuts. It extends the lower tax rates for another two years for every American, even those super evil rich people. It even keeps the estate tax lowish, allowing all estates under $10 million to be passed along tax free and taxes everything above $10 mill at a "meager" 35% (Because the person who has that much money doesn't deserve to give it all to his children. Thanks for saving his descendants from all that hard earned money, Big G!).

The bill contains a fair amount of sweeteners for the other side, including extending unemployment benefits for an additional year.

Of course there were many detractors. Most, including Rep. Anthony Weiner (D-N.Y), complained that we just couldn't afford the lower taxes on the rich. Even if we allow that tax revenue would go down with the lower tax rates (it doesn't), the problem we have with the budget is one of spending, not income.

The government needs to run it's budget like every other budget is run on the planet. Start with the amount of money you have, or can expect to receive. Then, spend that money based on your priorities and not a cent more. If the money runs out, guess what: You can't spend any more! Something has gotta give.

Until that day Congress will always find a way to rationalize more and more spending. It's easy to say "Well, all this stuff is awfully important, so let's raise taxes." It's not so easy to say "This function of government is more important than that one. So, we're going to stop doing that one to pay for this one."

Now the government can get back to other things. Like blatantly ignoring the opinions of combat soldiers.

National Pay Equity Day: Mountain, meet molehill

According to the National Committee on Pay Equity, April 20th was National Pay Equity Day. Their website and many others abounded with articles bemoaning the disparity in wages between men and women in the workforce. Even our legislators found time to speak out, with Senator Chris Dodd (D-CT) writing an article for the Huffington Post. He states that the fact that women make “77 cents on the dollar” compared to men is ridiculous because “it’s 2010 already, for pete’s sake”.

Unfortunately, while discrimination has become a bad word, just because women are paid less does not necessarily mean it is unfair.

Okay, you can stop throwing things at me now. No, really, stop it. Bear with me.

The NCoPE linked to a study by the AAUW Educational Foundation entitled “Behind the Pay Gap”. This 40+ page document sets out to show us the enormity of the problem we face. What it actually does, if you take the time to do something silly like actually read it, is show that the sound bite wisdom of Sen. Dodd and the NCoPE dramatically exaggerates the issue. According to the one liner statistics we are supposed to believe that a man and a woman who make identical choices will have a 23% difference in their wages, and that this disparity is due to the grossly unjust discrimination against women by corporate fat cats. Now, I understand it may be a little silly of me to expect Sen. Dodd to take the time to skim through a 40 page study when he, and the other great men and women of Congress, can’t be bothered to read the legislation they vote on. I mean, it’s only their job and all. It’s not like we’re paying them to be informed.

Page 10 of the study plays up the fact that many women go to four year colleges, and in fact perform just as well or better than their male peers in every way imaginable. This may seem to support Sen. Dodd’s argument…unless of course you keep reading all the way to page 11, which says in big, bold letters: ”Women and Men choose different majors”.

”…the average full-time employed
female education major earns just 60 percent as
much as the average full-time-employed female engineering
major earns ($520 versus $872 per week). Men who majored
in education also earned only 60 percent as much as men
who majored in engineering ($547 versus $915 per week).

THIS JUST IN from the desk of Captain Obvious: Engineers make more than teachers, regardless of gender!

Page 12 of the study breaks down majors by gender percentages, which reveals an obvious trend: Men tend to gravitate towards business and technical majors, while women gravitate more towards majors such as education, nursing, and more social majors.

This of course does not explain the data on page 14, which Sen. Dodd and friends clearly read. This is another bar graph which shows the wage gap of multiple professions. We’ll disregard the examples like education (Women make 95% of men’s wages) or history (women make 112% of men’s wages) and move right to Mathematics and Other Sciences. Here, women make 76% as much as men. The Justice League has their proof!...Right? Actually, what they appear to have is a severe case of narcolepsy, because if they had just managed to tough it out to page 15, they would’ve seen yet another big, bold headline: “ Men report working more hours than women
report working.” Page 17 shows that men are far, far more likely to work 41+ hours than women, who are most likely to be employed for less than a 40 hr work week.

On page 20 of “Behind the Pay Gap”, we see that “Women are more likely than men to take time off to care for children”.

”Ten years after graduation, 81 percent of men are employed full time, while only 61 percent of women are employed full time. When parents are considered, the gender difference is stark. About one-fifth (23 percent) of mothers are out of the work force and another 17 percent work part time, while only 1 percent of fathers are out of the work force and only 2 percent work part time.”

It also alludes to the fact that women are more likely to leave the workforce and then reenter it later. Because they have been gone and not gathered experience and tenure they are paid far less than their male peers upon reentry.

According to the study:

“ after controlling for all the factors known to affect earnings college-educated women earn about 5 percent less than college-educated men earn”

Maybe I’m naïve for thinking that little things like facts will get in the way of spirited rhetoric, but if the Sen. Dodd and the NCoPE wants to remain intellectually honest they ought to read their own published studies and realize that the pay inequality they are trumpeting is 80% explained away simply by career choices.

What about the last 5 cents on the dollar? Isn’t that discrimination? Aren’t women being paid less than men, even it is just 5% less? Shouldn’t Congress act!?

I agree that if two employees are exactly the same in every way excepting their genitalia, they ought to be paid the same. Doing this only makes good business sense. Paying employees competitive wages is an incentive get and to keep good employees. I disagree that Congress has the authority or the capability to do anything about it.

Men and women are different. They excel in different areas. Consequently, they are paid differently. If there is any “problem” it is a societal one, not a legislative one. Women are the primary caregivers in our society. Men are the primary breadwinners. If proponents of supposed “wage equity” truly wish to fix the “problem”, they need to target this fact and look to change it through education and convincing women to make different choices. They would have to convince women to choose careers that require longer hours, more time away from their family, and possibly not raising the family at all. In short, they would need to change the traditionally societal role of women as caregivers into a more masculine role.

Personally, I believe this would be a mistake. It seems to me that of the two roles, caregiver or breadwinner, women have one that is just as important, if not much more so. The work I do in the office is temporary and fleeting. I do it to put bread on the table to feed my family. I do it to fuel the engine, because that is my place as a man.

The work women do in the home is to raise the next generation of humanity.

Ponder that for a moment.

They are entrusted with making sure that the fate of our entire race is kept in good hands. They are responsible with teaching our children, our only true lasting legacy, how to be productive members of our society. Such a job is not valued in dollars and cents, and to attempt to frame it as such is demeaning.

I would say to women at large, fulfilling the traditional societal role of a mother: Keep on. The future of the planet rests in your hands, and feeds at your bosom.

Net Neutrality: The proper role of government?

Every once in a while there comes an issue on which I am undecided. Yes, as hard as this may be to believe, even someone as opinionated as me is stumped on occasion. One such occasion occurred today. From the AP:

”A federal appeals court ruled Tuesday that the Federal Communications Commission lacks the authority to require broadband providers to give equal treatment to all Internet traffic flowing over their networks.

The ruling by the U.S. Court of Appeals for the District of Columbia is a big victory for Comcast Corp., the nation's largest cable company. It had challenged the FCC's authority to impose so-called "net neutrality" obligations on broadband providers.”

Normally I am against government interference in the market by default. To see the words “big victory” attached to an entity whose name ends in “corporation” is usually enough to send tingles of glee down my leg. The roles of government in the market ought to be limited and confined to protecting on person from another. Legitimate examples would include fraud, monopoly, and trafficking.

Unfortunately in this instance my instinct for the Free Market runs headlong into my desire for freedom of information. In case you are unfamiliar with the net neutrality debate, the argument is whether or not companies have the right to regulate what data you can access using the bandwidth that you pay for. In other words, does Comcast have the right to censor your internet usage? Should they be able to stop you from visiting competitors?

The internet is the holy grail of free, somewhat accurate, and usually filthy, information. The arguments to keep it this way are self evident. If you give some CEO the right to say what you can and can’t see on the internet, it would give corporations enormous influence that could very well be used inappropriately.

On the other hand, the corporations contend that not all content is equal. Some sites eat up far more bandwidth than others, and simply allowing anyone to access anything they want whenever they want will cause the bandwidth available to dwindle until everyone is forced to get their daily Cyanide & Happiness comic via dinosaur.

Should companies start charging per MB of data usage, causing the free ride of the internet to turn into a bean counting nightmare? Should the government force the companies to allow anything and everything through their gateways to paying customers, causing the internet to grind to a halt when the bandwidth is eaten away by BitTorrent and Everquest?

What do you think, my loyal readers? Leave your comments here. Of course, if you are among the 99.999% of my readers who access this site via facebook, you’ll probably leave all your comments there so that if anyone else who might stumbles on my blog it’ll look like I’m talking to myself for page after page of content.

But hey, whichever works for you. No pressure. It won’t be the first time I looked like I was talking to myself.

Fmr. Secretary of Labor: Government should break up the banks!

If you are 1) Over twelve years of age, 2) Have a pulse, and 3) Are not a vegetable, then you are probably aware that the government gave huge bailout packages to struggling banks in the recent past. The argument we were pitched, the same argument used to socialize bailout the auto industry, is that these banks were “too big to fail”.

The idea that any private entity should be safe from failure is an affront to any red blooded capitalist. Strangely enough Robert Reich, a professor at Berkeley, agrees with me that this is a bad thing, and what’s more he has a plan. Because he is so much intelligenter than little ol’ me, I’m sure this plan will involve elegant sweeps of logical thought that move with breathtaking precision. Here it is:

The government should break up the banks.

Wait, what? Once I stopped projectile vomiting on my monitor I read on.

” A fight is brewing in Washington -- or, at the least, it ought to be brewing -- over whether to put limits on the size of financial entities in order that none becomes "too big to fail" in a future financial crisis... the danger of an even bigger cost in coming years continues to grow because we still don't have a new law to prevent what happened from happening again. In fact, now that they know for sure they'll be bailed out, Wall Street banks -- and those who lend to them or invest in them -- have every incentive to take even bigger risks. In effect, taxpayers are implicitly subsidizing them to do so. (Haldane figures the value of that implicit subsidy to be about $60 billion a year for each big bank.)" [Emphasis mine]

In case your brain was still trying to crawl out of your ears after reading the title of his argument, I’ll break it down for you.

Issue: Government bailed out banks that were failing because they were “too big to fail”.

Note there are two components to this issue. One: The government bailed out banks. Two: The banks were supposedly “too big to fail”. Nobody argues these two points. Enter the assumption, and exit all logical and reasonable though:

Assumption: Banks can be certain of future bailouts, because the government will always do this in future. In other words, Issue part 1 is an immutable Law of the Universe.

Solution: Therefore, we need to stop the “too big” part by making banks smaller.

As with many arguments the fault is not necessarily in the argument itself, but in its assumptions. Simply having assumptions is not necessarily a bad thing. Indeed, it is very difficult to have any sort of opinion on anything without throwing an assumption or two in there somewhere.

So much of what Robert has to say could be coming out of my own mouth. The bailouts have encouraged terrible behavior by essentially subsidizing companies that performed badly. The failure of large banks is difficult to swallow for the economy. What Robert proposes to fix the problem, however, is sort of like this:

Dr. Reich says our patient, who for the sake of the story is named The Econ Omy, has an iron deficiency, and is suffering fatigue as a result. Dr. Reich tells Mr. Omy that his solution is to pump Mr. Omy with caffeine to eliminate the fatigue. This makes sense if you assume the only treatable problem is the fatigue, and that the iron deficiency is impossible to rectify. Fortunately you, the witness to this discussion, are not a moron, so you do what any reasonable person would do and punch the doctor in the throat.

The reason bankers are now licensed to be even more reckless is because they can rest assured that more bailouts are coming. The easiest, most simple, and least expensive method of stopping this bad behavior is for the government to get the #$^% out of the way and let the market work by killing bad businesses! If the bankers saw that bailouts were not, in fact, forthcoming and that risky behavior would lead directly to them being broke, they will either A) Fix said behavior, solving the problem, or B) Go bankrupt, no longer influence events, which solves the problem.

The market is designed with an excellent safeguard against poor decisions: The very real certainty of failure. Of course having a titan of any industry fall to the ground will cause earthquakes throughout the market. It will be painful. But more importantly, it will be temporary.

Would such a failure cause people to lose jobs, lose money, lose homes, etc.? Of course. Those are facts of life. Not everyone can succeed all the time. Losses are going to happen. These losses are something like small wildfires in forests. They clear out the dead growths, the weak plants, which otherwise would choke out all life around them. They burn early and often, so while every fire is painful, no one fire can kill the forest.

Forget the fact that to grant the government the authority to determine when a private entity (that is not a monopoly) should stop growing is a reckless maneuver that pisses away liberty. Forget that granting them this power is a dangerous precedent that points directly towards the government determining how much money Microsoft, Wal-Mart, and Mom & Pops Widget Store should make. If we do not allow the burning to happen periodically, if we step in and save every Tom, Dick, and Larry who falls on his face, then all we do is allow the dead brush to build to dangerous levels so that when the inevitable failure does happen, and there is nothing to we can do to stop it, it unleashes an inferno that will consume everything in its path without mercy.

Sometimes, you just have to let it burn.

You owe: One (1) 2010 Ford Mustang

National debt (n): Borrowings by governments to finance expenditures not covered by current tax revenues.

In America the government is (supposedly) an extension of the power and will of We The People. Therefore the government's decisions, including its spending decisions, are ours.

Our National Debt is currently: $12,590,461,291,178.68. (This and other figures from the National Debt Clock.) If you're like me that many commas is quite confusing. Add enough commas and any number lacks reality. Here's how you'd say it: Twelve trillion, five hundred ninety billion, four hundred sixty-one million, two hundred ninety-one thousand, one hundred seventy-eight dollars and sixty-eight cents. Even when you break it down that way it lacks reality. What does a trillion dollars look like, really? As I posted in my blog a while back, this is what a trillion bucks looks like. We've got 12.5 of those in debt.

There are approximately 308,018,536 Americans today. That means your share is: $40,875.66. That's breaking it down evenly for every man, woman, and child. When you put it that way, it doesn't seem so bad, does it? I mean, who doesn't have the equivalent of a brand new 2010 Ford Mustang just lying around?

This might come as a surprise to you. How did this happen? Where did all this debt come from? If you enjoy watching paint dry, or find curling riveting, you might also enjoy looking at the numbers here. I, like approximately one full dozen of my American fellows, do enjoy curling, so I checked it out for you. Our debt, prior to the 20th century, rose and fell periodically. It would climb, we'd pay it off, it would climb, we'd pay it off. After the turn of the century it began to just climb. Then the New Deal happened.



See that sheer point that rises majestically over the plains like Kilimanjaro? That would be FDR's debt as expressed as a percentage of GDP. Note: It goes to almost 120%. From Wikipedia: "The buildup and involvement in World War II plus social programs during the F.D. Roosevelt and Truman presidencies in the 1930s and 40's caused a sixteenfold increase in the gross debt from $16 billion in 1930 to $260 billion in 1950." After that, debt "closely matched the rate of inflation" (in other words, constantly climbed).

It is easy to point fingers and lay blame. Sometimes, in the case of the New Deal and FDR, it may even be appropriate. The blame, however, does not rest solely on one side or the other. Saint Ronald and Bush I saw the debt quadruple. Under Dubya, "the increased [debt rose] from $5.6 trillion in January 2001 to $10.7 trillion by December 2008, rising from 58% of GDP to 70.2% of GDP". In March 2009, the CBO estimated that debt will rise from 70.2% in 2008 to a whopping 100.6% in 2012! I can only imagine the Magic O's policies are causing that number to rise dramatically.

Perhaps none of this is enough for faze you. "Your squiggly lines don't scare me!", you say? If so, brace yourself. I've got...a pie chart.


That is a little hard to read, but fortunately the two most important pieces are also the largest. The big blue monster is "Federal Reserve and Intragovernment holdings", at 49.37%. Note a lot of that is the bankrupt Social Security system. The next one is where it gets frightening. Orange = Foreign and International, 27.9%. Of course, our leaders in their infinite wisdom would only deal with those who are our friends. They would never deal with people who might wish us harm! That would be just silly. Right?

Correct you are. Rest easy, comrades, because the single country who owns the largest share of that debt is...You guessed it. Our best buddies, the Communist Dictatorship People's Republic of China!

What's the big deal, though? Sure the government is spending money faster than a pirate in a liquor store, but why is this a problem?

Because debt doesn't just sit there. It earns interest. The more debt, the more interest. Breaking it down into crayons:



Medicare, Medicaid, and Social Security suck up more money than even the catchall "other government programs" category, which is bad enough in itself. See that block in the middle? The one that's the same color as the lifeblood that's being leached out of your wallet? Leave the debt long enough, and it begins to grow to gargantuan proportions. Eventually, the government will be left with only two choices. Cut spending in other areas, or raise taxes dramatically.

The bottom line is this. You can only spend more money than you make for so long. That is true for all entities, whether you are an individual, a business, or a government. Eventually, fiscal irresponsibility will catch up with you.

The solution, of course, is ridiculously complicated. It's so complicated I couldn't possibly express it in words. I'm sure I'd need a dozen law degrees and years of political experience in order to grasp it, which leaves it way out of reach for a peasant like me. I'm going to try though. Ready? Congress:

Stop spending so much!

Strange. That didn't seem so complicated after all. Cut Medicare, cut Medicaid, cut Social Security, go back to that silly old document called the Constitution, and you'll be halfway there. None of this will ever happen, though, unless the real culprits are caught. It won't happen until the true scoundrels, the no-good scallywags who have allowed this to go on for decades are brought to justice. I'm sure you're itching to get your hands on the bastard who has spent your children into oblivion. Fortunately, he is within your reach. Simply go into your bathroom. Look over the sink.

No, not the lights. Lower. Not the pipes either, he isn't that skinny (statistically speaking). Yes, right there in the middle. That, my friends, is the mirror. It is reflecting the image of the person responsible for this mess: We The People.

So how about it? Are We The People going to arm ourselves with knowledge, get informed, get active, and hold our politicians accountable? Are we going to force them into responsibility by firing those who don't bend to our will? Or will we do as we've done for generations, bury our collective heads in the sand and allow the political class in Washington to buy us off with social programs and tax incentives?

The choice, and the fate of our beloved country, lies where it always has: With you.

CBO, now with Chuck Norris deadliness!

I’m not quite sure when the transformation took place. Were they there all along? Did they just get hired? Did they experience a sudden uptick in their consumption of Holy Ambrosia (AKA Dr. Pepper)? Regardless of the cause, the end result is the same: The CBO (Congressional Budget Office) is officially a BAMFs. They recently delivered a Chuck Norris strength roundhouse kick to the collective face of the Galactic Healthcare bill, and by extension, President Obama.

I took it upon myself to read the 18 page report published by the CBO. As you can imagine, it is about as thrilling a read as the instruction manual to your toaster. Fortunately, I also found this analysis by Keith Hennessy, which is a much easier read.

I’ll start with my impressions from the toaster manual. They begin tamely, by analyzing the effect on private coverage. It starts to really heat up around page 12. Check out these bullet point impacts on the labor market (Emphasis mine):

• Requiring employers to offer health insurance – or pay a fee if they do not – would be likely to reduce employment, though the effect would probably be small.
• Providing new subsidies for health insurance that decline in value as a person’s income rises could discourage some people from working more hours.

The first one is pretty self explanatory. Higher cost of employment = Less employment! The following paragraph states that this would be an “8% increase in the cost of hiring a worker making the minimum wage”. That’s right. All those poor working mothers we’re supposed to feel sorry for are hereby getting the shaft. Thanks, Uncle Sam!

The second one is clearly bad, but how bad? It functions off a principle they call the “implicit tax”. Basically, the subsidies you get for working decrease the more you make. The withdrawal of those benefits increase your costs, effectively “taxing” you the difference. How much is this implicit tax? Roughly 20%, they say. This means that every extra hour you work is effectively “taxed” at an additional 20% rate, because that same hour is causing you to lose healthcare benefits.

Of course our friends at the CBO save the best for last: Budget deficits! This is where Keith Hennessy focuses his article. Rather than throwing numbers at you, here’s a handy graph so you can see it all at once.


From the blog: “The House bill raises $87 B of taxes in 2019, compared to the $151 B net spending increase in that year. The area between the light blue and yellow lines is the deficit impact. Up to 2013, the bill collects more in taxes than it spends, so the bill actually reduces budget deficits in the early years. After 2013, the light blue net spending line is above the yellow tax line, so the bill adds to the deficit. In 2019, the bill increases the deficit by $151 B – $87 B = $64 B. The net of the deficit-reducing and deficit-increasing areas is the $239 B deficit increase over 10 years from the first table above. Again, all of these are CBO and Joint Tax Committee numbers.

Now we turn to the long run, relying on that key CBO paragraph. Here are the key numbers:
The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade. … Revenue from the surcharge on high-income individuals would be growing at about 5 percent per year in nominal terms between 2017 and 2019; that component would continue to grow at a slower rate than the cost of the coverage expansion in the following decade.”

What happens when your spending grows faster than your revenue? You get this:

Did you hear that sound? That’s the sound of the CBO curb stomping the Obamacare plan. Of course, there is a simple solution to the entire problem. We can just tax the rich into oblivion! They won’t mind, they’re evil anyway. They certainly would never see such taxes as an incentive to leave America and do business elsewhere.

The plan was terrible because it attacked your liberty. The plan was horrible because it expanded government. Now the plan can be shown to be ridiculously expensive. Think on that, and then ponder this: We were told by our Commander-in-Chief that the plan you saw above had to be passed by August. Be warned if it is tried again: You will need this knowledge to defend your liberty from an ever growing power hungry Federal government, hell bent on mortgaging our futures.

GM is too big to fail. Newsflash: Failed anyway.

Remember all the shouts we heard way back when, how the US Auto makers were too big to fail? "They can't go bankrupt!" they screamed. "We must give them money to save jobs!" they pleaded. All would be well if Uncle Sam (a.k.a. You and me) just gave them a little bit of cash to see them through. Well, I for one am sure glad we listened. Boy, it would've been terrible if they had gone bankrupt and restructered into a leaner GM! I can admit when I was wrong, and here goes: You were right, Big Government. You were right, Super-CEO Obama. GM cannot be allowed to go bankrupt.

Whew. This just in: Government pushes GM into bankrupcy.

Wait, what?

General Government Motors will now have owners in the following percentages:

1. US Government: 60%
2. UAW (United Auto-Workers Union): 17.5%
3. Canadian Government: 12%
4. Bondholders: 10%

Ouch. Kinda sucks to be a private investor, huh? That's right, GM will now be 10% owned by private enterprise. Now that's just plain good old fashioned fascism socialism Capitalism!

HotAir did a good analysis of how much private investors were getting shafted. Read it here. In short: US government gets ownership for $834 million per percent of ownership. UAW: $629 million per percent of ownership. Private investors: $2.7 billion (with a B) per percent of ownership.

Ouch.

Administration to Take Charge of Bank Payroll

In yet another astoundingly socialist brilliant move, the Obama Administration "has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter...

...Among ideas being discussed are Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank -- such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing "best practices" to guide firms in structuring pay."

Holy Marxism Batman! Are they saying that they want to determine how private banks pay their employees? This can't possibly be! This is America! Fortunately, Ben Bernanke clears things up. No need to panic.

"During a recent congressional hearing, Chairman Ben Bernanke said the Fed was working on rules that will 'ask or tell banks to structure their compensation, not just at the very top level but down much further, in a way that is consistent with safety and soundness -- which means that payments, bonuses and so on should be tied to performance and should not induce excessive risk.'"

They just want to tell the bank how to pay everyone from the CEO to it's tellers. No need to panic, nothing to see here folks.

Now I know what you're thinking. This kind of policy could spread beyond the banks, and spill into a full blown government controlled market! Silly hatemongering conservative. They wouldn't do that. They're the government, we can trust them! Only the banks will be affected. Look at what the FDIC Chairman said.

"Federal Deposit Insurance Corp. Chairman Sheila Bair said regulators need to examine compensation practices in the mortgage industry, suggesting new limits could stretch beyond banks."

Huh. Well, I'm sure they'll stop at the mortgage industry.

The real question, though, is is this socialism? Let's check with Uncle Sam...

Whew! No socialism here after all. That's a relief.

(Thanks to Ace of Spades for the story)

How do you attract business? Higher taxes!

That's the plan, at least, that Obama set out on May 4th. Touting the collection of measures as loophole closing, it basically makes it more difficult for US based companies to "hide" money overseas, by producing products in areas that are cheaper to run in and then selling them here. Moneys made overseas by US based businesses are not taxed at the American rate, so the Feds "lose" that tax money and the companies have an incentive to produce things overseas.

The American Thinker has an excellent article that explains it quite well. An excerpt:

"America's 35% corporate tax rate is the second highest in the world. Emerging markets have much lower rates. Ireland's corporate tax rate, for example, is only 12.5%. If an American corporation produces in Ireland, it only pays 12.5% tax on its income, while if it produces in America it pays 35%.

President Obama is correct that current tax policy creates inefficient incentives for outsourcing. Suppose that the US-based Widget Corporation is trying to decide whether to build a factory in the US or in Ireland. Based on the cost of production, distribution, and shipping, producing widgets in the US will earn a profit of $10 per widget. Producing in Ireland will earn a profit of only $8 per widget. The economically efficient thing to do is to produce widgets in the US. Except for the tax consequences! Ireland has lower corporate tax rates. Consequently, the after-tax profits in Ireland are $7 while the after-tax profits in the US are $6.50. "

By enacting this plan of his, he will effectively make the tax rate of, say, Ireland, the same as the US tax rate by taxing the companies the difference. That will mean it will become cheaper to produce in the US again, so the Widget corporation will move all the jobs back here. Hooray! Problem solved! Let's get some ice cream.

Wait, sorry. Got trapped in an alternate reality where that plan might work. As we travel back to Earth, let's review a basic principle: Every company exists to turn a profit, and will act in the manner that allows it turn the greatest amount of profit possible while expending the least amount of resources possible. Think of this kind of like the "Path of Least Resistance" principle (PLR). Any company that does not follow this principle will not remain a company very long.

Keeping that in mind, we understand that the US can only tax the earnings of a company who is based in the US. Tthis plan makes it uncomfortable for a company to be partially exported (produce elsewhere, based here), making sure that is no longer the PLR. However, it does not make being domestic (Produce and based in the US) any better, because all the plan does is raise taxes. What the plan, which American Thinker aptly labels the "The Outsource Corporate Headquarters Act of 2009", is make the cheapest and easiest option (The PLR) to leave America entirely. Then, they get to live it up with Ireland's cheap tax rate and all they have to pay here in the US are fees associated with exporting, which will end up not costing nearly as much as our outrageous tax rate.

If we alternatively sought to make it cheap and cost effective to run businesses in the US by completely removing the corporate tax rate (or at the very least slashing it to less than 10%), it would solve the problem of US companies exporting jobs and it would attract foreign companies to move to America.

We could also achieve the same thing by moving to a flat tax system, or a VAT (Value added tax) system. Either way, it would make it cheaper to run businesses.

But who am I kidding? I'm sure Super CEO Obama knows what he's doing.

Don't look back: Report says unemployment not to exceed 8.5%

According to the Department of Labor, unemployment has reached approximately 8.5% as of March. I think some kudos are in order, because this rate was predicted correctly by a report from the office of then President-elect Obama. You can read this work in its entirety here. This is the paper that spawned the statistic of 3 million jobs created. You may have heard that figure one, maybe two bajillion times. If you scroll down a bit, you get to this graph:

Sure enough, you see that light blue line there? It predicts this level of unemployment, sure enough. If only we had passed that stimulus package...Well, yes, it says we wouldn't reach this rate until early 2010, but still! You have you agree that...What's that? We did pass the stimulus package?!

I got this piece from Stu's Blog. He points out the following:

"1) By their own estimation, the stimulus isn’t working as planned: The administration’s own estimates said that if the stimulus would pass, the unemployment rate would never rise above 8%. Its peak would be around 7.9% around the end of the year. Well…It’s at 8.5% already, and most economists seem to it’s getting worse before it gets better.

2) By their own estimation, the stimulus might be making things worse: The administration’s report showed that the unemployment rate would be about 8.1% right now if we had done NOTHING. So, it’s either that the stimulus plan is actually making things worse, or the economy is significantly worse than they thought. Which brings me to #3 …

3) What does this do to their estimates?: If their economic prognosis was this far off, this soon, what does this do to their deficit estimates 6 or 8 years out? They already were very ugly, but doesn’t this make them far worse?"

Stu's points are valid. The paper also goes out of its way to point out how uncertain it is, due to the volatile nature of its subject. They never really publicized that part, did they?

I have one more observation that I think is possibly more important than the other three: The two lines (with and without stimulus) merge again in 2014. That means they admit, by their own numbers, that the economy will in fact recover all on its own without one ounce of government help.

They claim that it will take longer, and it will be more severe. I argue that those points may be true, but that recessions are to the economy what controlled burns are to a forest. Imagine if, during a controlled burn, the local FD (AKA The government) panicked and kept putting it out because it was killing plants and damaging trees. The choking undergrowth (AKA failing businesses) would never be cleared away. Eventually, you wouldn't be able to put out the fire anymore. That's when you'd have a blazing inferno (AKA Bad News Bears).

Barstool Economics

From an email a coworker sent me:

"BAR STOOL ECONOMICS Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go Something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day the Owner threw them a curve. 'Since you are all such good customers, he said, I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested be fair to reduce each man's bill by roughly the same amount,and he proceeded to work out the amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% Savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20, 'declared the sixth man. He pointed to the tenth man, 'but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I !'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

(The 10th man was originally paying $59 of $100, then $49 of $80)

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier."

NOTE: I deleted the authorship from the original email because it was inaccurate. According to snopes.com, no one is quite sure who wrote this (I dug around a bit on google and didn't see anything that popped at me either.) I can tell you that, based on what I know of our punitive income tax system, it is at least approximately accurate.

Higher minimum wage=Poor teenagers. A lesson in the obvious

News flash! Teenage unemployment reached 20.3% in July of 2007, a 15 year high. See this page for the chart. Fewer and fewer young people appear able to get jobs.

Well, on to something completely and absolutely unrelated. Congress raised the minimum wage in July of 2007, with further scheduled increases in July 2008 and July 2009.

There is no connection whatsoever between these two things, as this NCPA study shows (Warning: The previous sentence is dripping with sarcasm.)

Why oh why is this happening? Is it a secret conspiracy? Alien control? Global WARMING!? The answer is simple, but shocking. Businesses do not own money trees! (Except for Microsoft) Please, try to control your shock. This fact, completely unknown to the left, is nonetheless true and has serious consequences.

To demonstrate this, imagine you are a business. You are an evil capitalist, and therefore are in it to make money (also known as profit.) One of the things you need to do this is employees, and because slavery is unfortunately outlawed at the moment, you have to pay them. So, naturally, you pay the little tykes a rate low enough to keep you profitable, but high enough to attract good workers and keep you competetive.

Enter the federal government (Bum bum BUM!) who says you aren't paying them enough, you cold-hearted bastard. They say you now have to pay them x dollars more. This cuts into your profits, and threatens your money making potential. You now have two choices: A) Cut jobs, lowering the overall cost of employment back to it's original level, maintaining profits. B) Increase prices, to pay for increased expenses.

Note there is no choice C) Suddenly discover more money. Chances are you are going to go with A, because it is the least likely to piss off your customers. Thus, higher minimum wage=fewer jobs. So who are we really helping?

But what do I know?