Do CEOs Make 335 Times More Than Average Workers? by Mark J. Perry

Manufacturing Ammo for Class Warfare.

The AFL-CIO released its annual report on CEO pay last week (see details here and here), and has calculated a CEO-to-worker-pay ratio of 335-to-1 for 2015, based on the average total compensation package for S&P 500 CEOs of $12.4 million last year, and average annual pay of $36,875 for America’s 99 million rank-and-file workers.

Here are some observations on the AFL-CIO’s questionable methodology that is uses every year to calculate an inflated CEO-to-worker pay ratio (see this related CD post from last May), and an analysis of how a complete confiscation of CEO pay would affect average worker pay.

Dubious Math for Worker Pay

In its 2016 report, the AFL-CIO reports that the average nonsupervisory rank-and-file worker made $36,875 annually in 2015 based on “average nonsupervisory worker pay according to Bureau of Labor Statistics’ 2015 data.”

No other details are provided, but the $36,875 annual average worker pay calculated by the AFL-CIO is apparently based on an hourly wage of $21.04 for the average nonsupervisory worker in 2015 (BLS data here), an average workweek of only 33.7 hours (BLS data here) for the average rank-and-file nonsupervisory worker, and an assumption of 52 weeks of work per year ($21.04 per hour x 33.7 hours per week x 52 weeks ≈ $36,875).

Here’s an important statistical issue: Every year the AFL-CIO does an apples-to-oranges comparison of: a) total CEO compensation for only 500 CEOs working full-time to b) the cash wages only for 99 million rank-and-file workers, who work less than 35 hours per week on average, and are therefore mostly part-time workers.

But you would never know that from the AFL-CIO’s website because the details of average worker pay are never really explained, and I guess nobody has ever bothered to check and find out that the AFL-CIO is using average annual worker pay for mostly part-time employees who only work 33.7 hours per week on average.

Questions: a) How would the AFL-CIO’s CEO-to-worker pay ratio change if we calculate average worker pay for full-time workers, b) how would the ratio change if we compare the average pay for a rank-and-file workers who work the same number of hours that a typical CEO works, e.g. 45, 50 or 60 hours per week, and c) how would the ratio change if we compare total compensation of both CEOs and rank-and-file workers working full-time?

 

The chart above summarizes how the CEO-to-worker pay ratio would change, here are the details:

a. Assuming a 40-hour workweek for a rank-and-file worker at an hourly wage $21.04 and average annual pay of $43,763, we would get a CEO-to-worker pay ratio of 283-to-1.

b. Assuming a 45-hour workweek for rank-and-file workers at an hourly wage $21.04 (and 5 weekly hours of overtime at $31.56 an hour) and average annual pay of $51,969, the CEO-to-worker pay ratio would be 239-to-1.

c. Assuming a 50-hour workweek for rank-and-file workers at an hourly wage $21.04 (and 10 weekly hours of overtime at $31.56 an hour) and average annual pay of $60,174, we would get aCEO-to-worker pay ratio of 206-to-1.

d. Assuming a 60-hour workweek for rank-and-file workers at an hourly wage $21.04 (and 20 weekly hours of overtime at $31.56 an hour) and average annual pay of $76,585, the CEO-to-worker pay ratio would be 162-to-1 (or less than half of the AFL-CIO’s reported ratio of 335-to-1).

e. Assuming a 40-hour workweek for full-time rank-and-file workers at $21.04 an hour, and adding the monetary value of employer-provided benefits of $9.59 per hour (based on the 45.6% average that benefits represent as a share of hourly earnings according to the BLS), and total compensation of $63,719, we would get a CEO-to-worker compensation ratio of 195-to-1.

If we further considered a 50 or 60 hour workweek and fringe benefits for rank-and-file workers for an even more accurate apples-to-apples comparison, the CEO-to-worker pay ratio starts approaching 100-to-1, which is a far cry from the AFL-CIO’s 335-to-1 ratio that will be generating sensationalized media coverage in the coming weeks.

Confiscation and Redistribution of CEO Pay

And what’s the whole point of the AFL-CIO’s annual reports on CEO-to-worker pay ratio? The sub-title of the AFL-CIO’s 2015 Executive Paywatch websitepretty much sums it up: “High paid CEOs and the low wage economy.” The AFL-CIO’s message seems to be that if CEOs weren’t being so generously over-compensated then the rank-and-file workers would be doing much better and making higher wages. For example, according to the AFL-CIO in 2014:

America is supposed to be the land of opportunity, a country where hard work and playing by the rules would provide working families a middle-class standard of living. But in recent decades, corporate CEOs have been taking a greater share of the economic pie while workers’ wages have stagnated.

The AFL-CIO has fallen here for the zero-sum, fixed pie fallacy, one of the most common economic mistakes that falsely assumes that one party can gain only at the expense of another. But let’s assume that there is a “fixed pie of wages” and do some confiscation and redistribution of CEO compensation to see how that would affect average rank-and-file worker pay.

Question: If the CEOs of the S&P 500 companies received $12.4 million on average last year, then as a group, those 500 CEOs received about $6.20 billion in total compensation in 2015. If the AFL-CIO could wave a magic wand and confiscate that entire amount and redistribute $6.20 billion to the current 99 million rank-and-file workers, what would each one get?

Answer: An annual increase in pay of about $63 for each rank-and-file worker before taxes, or about $1.20 more per week, or 3.5 cents per hour. In other words, complete confiscation and redistribution of S&P 500 CEO compensation would make almost no difference for the average rank-and-file worker.

Bottom Line

The AFL-CIO can only get a distorted and inflated CEO-to-worker pay ratio of 335-to-1 with an apples-to-oranges analysis that compares the total annual compensation of a small, select group of CEOs heading America’s largest multi-national corporations, who probably typically work 50-60 hours per week or more, to the average annual cash wages of part-time rank-and-file employees who work less 34 hours per week on average.

Once we make a more statistically valid apples-to-apples comparison, the CEO-to-worker pay ratio falls in half from the AFL-CIO’s 335-to-1 ratio to only 162-to-1 if we assume a 60-hour work week for the average worker (to be comparable to the workweek of an average CEO), and the ratio falls to less than 200-to-1 once we consider total compensation for both CEOs and full-time rank-and-file workers. Further, even if we could confiscate 100% of the compensation of all S&P 500 CEOs, the typical rank-and-file worker would probably get less than $1 per week in after-tax earnings. Big deal.

Just like last year, the CEO-to-worker pay ratio reported by the AFL-CIO gets my annual “Biggest Blindly Accepted Statistical Fairy Tale of the Year Award.” Well no, it’s actually a tie with the gender wage gap myth and the incessantly repeated “77 cents on the dollar” statistical falsehood. What’s disappointing is that much of the mainstream media seem to blindly accept both of these statistical falsehoods without ever challenging the “statistical legerdemain” that are used to produce and perpetuate these statistical myths.

One exception was this excellent article last year by IBD’s John Merline (“Do CEOs Make 300 Times What Workers Get? Not Even Close“) who concluded:

What’s not understandable is why the mainstream press keeps repeating the massively inflated 300-to-1 number without noting the statistical legerdemain that produced it.

This article is reprinted with the permission of the American Enterprise Institute.

COLUMN BY

Mark J. Perry

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

RELATED ARTICLE: 10 Best Employee Compensation Management Software in 2021

BELOW ZERO: What does ‘negative interest rates’ mean and will the policy work?

A friend of mine sent me a video concerning negative interest rates and the positive and negative impacts they may have on the economy. There are six foreign banks that have adopted negative interest rates. European countries offering negative interest rates include Denmark, Sweden, Switzerland, Hungary and the European Central Bank (ECB). Japanese banks also offer negative interest rates. Taken together these countries and the ECB represent 1/4 of global economic output.

Question: Are zero interest rates good or bad? 

CLICK HERE FOR A INTERACTIVE GLOBAL MONETARY POLICY TRACKER

Here are two videos that answer the above question:

What does ‘negative interest rates’ mean and will the policy work?

Video on negative interest rates from Bloomberg:

RELATED ARTICLES:

Below Zero: The World Experiments with Negative Interest Rates

World’s Longest Negative Rate Experiment Shows Perversions Ahead

How Sweden’s negative interest rates experiment has turned economics on its head

Paul Krugman, Now Mistaking Less for More by David R. Henderson

This is from Paul Krugman, “Obama’s War on Inequality,” New York Times, May 20.

The other story was about a policy change achieved through executive action: The Obama administration issued new guidelines on overtime pay, which will benefit an estimated 12.5 million workers.

What both stories tell us is that the Obama administration has done much more than most people realize to fight extreme economic inequality. That fight will continue if Hillary Clinton wins the election; it will go into sharp reverse if Mr. Trump wins.

Step back for a minute and ask, what can policy do to limit inequality? The answer is, it can operate on two fronts. It can engage in redistribution, taxing high incomes and aiding families with lower incomes.

It can also engage in what is sometimes called “predistribution,”strengthening the bargaining power of lower-paid workers and limiting the opportunities for a handful of people to make giant sums. In practice, governments that succeed in limiting inequality generally do both. (Emphasis added.)

It is clear from the context that Krugman is claiming that the new Obama regulation on overtime pay is an example of “strengthening the bargaining power of lower-paid workers.”

He’s wrong. It does just the opposite.

Probably the best way to help him see the point — if, as I doubt, he wants to see the point — is to consider his situation with his employer, the City University of New York. Krugman is a salaried rather than an hourly worker, so he doesn’t have to punch a clock, and no one is keeping track of his hours.

He can work on his lunch break if he wants, he can work on an airplane, he can work any time and anywhere.

I don’t know the specifics of his deal with his employer, but I am virtually certain of the above claims.

Imagine that you are making between $40K and $45K — much less than Krugman’s $225K. You are salaried. You don’t want or need as much flexibility as Paul Krugman has, but you do want some flex. You want to be able to have an occasional long lunch hour some days and a short lunch hour other days. But this won’t always works out to 40 hours a week. Some weeks you will work 38 hours, some 42 hours, some 45 hours, some 34 hours. You ask your employer for that flexibility, and your employer answers, “Fine, as long as the work gets done. And, in return, there might be times — not often, but sometimes — when you need to come in on a Saturday morning.”

You think about that. You respond, “OK, as long as I can take a few hours off in a day, when there’s a lull, but I guarantee that the work will get done.” Your employer and you agree.

Is there anything in this story that sounds implausible?

What just happened?

You exercised your bargaining power.

Now someone who doesn’t know you from Adam comes along and says,

Your agreement with your employer means that some weeks you will work 45 hours. In the weeks that you earn 45 hours, the employer must pay you for 47.5 hours. (Overtime rules require that the employee be paid time and a half for any hours over 40 in a week.)

You may think that those cancel out so that your average is 40 hours a week. Tough. We don’t think the same way. Your deal is illegal. The employer must pay you overtime any week that you work more than 40 hours, no matter what happens in the other weeks.

Now the employer has to rethink his earlier agreement. Paying overtime wasn’t part of the plan. He can adjust by lowering your base pay so that some weeks you earn less than before and some weeks (the weeks with overtime) you earn more than before. And he must keep track of all these hours, whereas he didn’t before. He reluctantly goes along and cuts your base pay.

The arrangement has been altered. You might not like that. You have rent to pay in the 4-bedroom house you share with 3 other single people and you like the certainty of that weekly income. But now the employer, in response to that regulation, has removed that certainty.

Your bargaining power is now less. QED.

Cross-posted from Econlog.

David R. HendersonDavid R. Henderson

David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at econlib.org.

VIDEO: Venezuela’s Slow Motion Apocalypse by Mark J. Perry

Food, Medicine, Toilet Paper, and Electricity Are Vanishing…

Despite having more oil reserves than Saudi Arabia, and in fact more proven oil reserves than any country in the world (8 times more than the US), oil-rich Venezuela’s economy is imploding and collapsing under the burden of socialism, and economic conditions there have deteriorated so dramatically that they probably now qualify as the “economic apocalypse” that some left-leaning economists were predicting just a few years ago would never happen in Venezuela. Some links and updates about Venezuela’s economic apocalypse appear below:

1. Here’s an overview from Investor’s Business Daily back in February, when Venezuela was still “on the brink” of economic collapse:

Like a skyscraper crane about to topple in high winds, Venezuela is teetering on the brink of a horrific economic collapse. It was brought on by one thing: socialism, taken to the hilt. Yet incredibly, neither Bernie Sanders nor his voters make this connection.

Today Venezuela, with the world’s largest oil reserves is, believe it or not, importing oil. It’s a perfect illustration of Nobel-winning economist Milton Friedman’s well known saying that if the Sahara took up socialism, there would soon be a shortage of sand.

Socialism has also led to massive shortages of food, toilet paper, diapers and medicine, among many other things, all the result of state planning and currency controls and rampant inflation (see photo above of Venezuelans lining up for food).

After 18 years of socialist spending, inflation has hit 720%, the IMF says. And don’t forget that Venezuela also has the world’s highest crime rate, with Caracas rated the world’s most dangerous city by the Citizens’ Council for Public Security and Criminal Justice.

2. According to a news report from PanAm News: “Hungry Venezuelans Hunt Dogs, Cats, Pigeons as Food Runs Out: Economic Crisis and Food Shortages Lead to Looting and Hunting Stray Animals.”

3. BBC reports that Venezuelan President Nicolas Maduro has threatened to seize factories that have stopped production and jail their owners. Atlas Shrugged playing out in real life. (HT: Hit Squad.)

4. From a Sunday New York Times article, “Dying Infants and No Medicine: Inside Venezuela’s Failing Hospitals“:

The economic crisis in Venezuela has exploded into a public health emergency, claiming the lives of untold numbers of Venezuelans. It is just part of a larger unraveling here that has become so severe it has prompted President Nicolás Maduro to impose a state of emergency and has raised fears of a government collapse.

Hospital wards have become crucibles where the forces tearing Venezuela apart have converged. Gloves and soap have vanished from some hospitals. Often, cancer medicines are found only on the black market. There is so little electricity that the government works only two days a week to save what energy is left.

5. Bret Stephens describes socialism in his WSJ column today (emphasis mine):

Socialism is a mental poison that leads to human misery of the sort you see in the wrenching pictures [that appeared in the SundayNew York Times article above] of filthy operating rooms, broken incubators and desperate patients lying in pools of blood, dying for lack of such basics as antibiotics.

Democratic socialism — whether Chavez’s or Sanders’s — is legalized theft in the name of the people against the vilified few. It is a battle against income inequality by means of collective immiseration. It is the subjugation of private enterprise and personal autonomy to government power.

6. Here’s another part of the health care apocalypse in Venezuela, from an April article in Reason:

Over the past decade, an estimated 13,000 physicians fled the country in search of greener pastures. Cuba dispatched some of its own physicians to fill the gap, only to see them defect in turn. That’s no shock, considering that the physician father of a Venezuelan friend of mine has been reduced to accepting payment in cooking oil and other groceries.

7. As Bloomberg reported recently, Venezuela doesn’t even have enough money now to pay for the paper to print more money to keep up with its hyperinflation(which will reach 720% this year according to the IMF).

8. Looting of grocery stores has become increasingly common in Venezuela, as a result of the food shortages (watch video here).

9. In the CNN video below “Food, medicine scarce as Venezuela crisis deepens,” we learn that even though Venezuela is sitting on the world’s largest oil reserves, it can’t stock the nation’s refrigerators and can’t provide the life-saving medicine that many Venezuelans need to survive.

10. Even the New York Times editorial board today blames socialism for Venezuela’s downward spiral and economic apocalypse:

This crisis has exposed the hollow promise of the socialist policies Mr. Maduro and his predecessor, Hugo Chávez, have peddled since the late 1990s. While many Venezuelans got a taste of prosperity in better housing, subsidized food and higher wages when oil prices were high — oil accounts for roughly 96 percent of Venezuela’s exports — the government failed to build anything resembling a sustainable economy. It also failed to save when money was flowing in, which would have softened the impact of the recession that began in 2014.

The New York Times also points out that Venezuela’s apocalyptic murder rate is now about 52.2 Venezuelans per day, or one murder about every 28 minutes.

Despite what maybe should have been an obvious outcome and end-game of the socialist policies of Chavez and Maduro, it’s interesting to look back at the cheer-leading being peddled by some on the left as recently as 2013 for Chavez and Venezuela’s socialism, here are two examples:

11. Writing in Salon in March 2013, David Sirota extolled “Hugo Chavez’s economic miracle.”

12. In November 2013, left-leaning economist Mark Weisbrot scolded “Venezuela haters” by claiming that “this economy is not the Greece of Latin America,” and warning the haters (aka sensible adults) that “predicting a Venezuelan apocalypse won’t make it happen.”

Reprinted with permission from the American Enterprise Institute.

Mark J. PerryMark J. Perry

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

Telsa Motors Misuses B-1 Visas to Import Cheap Labor

NumbersUSA reports:

2016.05.17_TeslaMotorsA new investigative report showed that Tesla Motors’ contract company, Eisenmann, paid a smaller Slovenian company, Vuzem, to hire foreign workers through the B-1 visa program. The companies misrepresented the foreign workers in order to obtain the visas so they could import cheaper, foreign labor instead of hiring American workers.

The B-1 visa allows foreign workers to enter the U.S. for temporary and limited work purposes, such as to join a conference or to supervise or train U.S. workers in a specialized skill. The visa does not permit the worker to perform hands-on jobs that U.S. workers can do and under this visa a worker cannot receive payment from a U.S. company. The visa can last up to six months and there is no set cap for the number of visas allowed each year, 6.2 million B-1/B-2 visas were issued in 2014.

The B visa, along with the L-1 visa, could displace thousands of American workers and depress wages if the United States ratifies the Trans-Pacific Partnership free trade agreement.

Gregor Lasnik, a Slovenian worker hired by Vuzem, has a pending lawsuit against Tesla Motors, Eisenmann, and Vuzem after being injured while helping to build Tesla’s new Fremont plant.

According to court documents Lesnik’s visa application included a letter written by Robert Keller, Eisenmann’s Chicago area-based U.S. purchasing manager, to the U.S. consulate stating that Lesnik would be working for a European subcontractor and had “specialized knowledge” to help build a new paint shop for BMW in South Carolina. The letter also assured that that Lesnik’s employment would “in no way adversely affect the employment of citizens of the United States.”

The visa application also included a hotel reservation in a South Carolina and titled Lesnik as a, “supervisor of electrical and mechanical installation”, even though he had been an unemployed electrician in his country and spoke only a little English. After being approved for the B-1 visa Lesnik was told he would actually be going to California and helping to build Tesla’s new plant.

This misrepresentation on B-1 visa applications has become a common problem, Infosys, an IT firm, was fined $34 million in 2014 for circumventing B-1 regulations among other offenses.

Overseas contractors use the B-1 visa to import foreign workers that will work long hours for low wages, even though it violates visa and labor laws. Lesnik says he was making the equivalent of $5 an hour while working on the Tesla plant. An American company had lost the Tesla contract bid due in part to higher labor costs.

“We have concluded that there is widespread abuse of the B-1 visa in the Bay Area,” said Michael Eastwood, assistant district director of the San Jose area office of the U.S. Department of Labor.

“It’s the wonderful world of unregulated visas,” said Daniel Costa, an immigration law and policy researcher at the Economic Policy Institute.

All three companies refused to comment on the pending legal case. Tesla and Eisenmann deny responsibility since Lesnik was directly hired by Vuzem.

Read more on this story at The Mercury News.

Affordable multifamily housing loans need rethinking: The ‘Blight Preventer’ Loan

Ten to twenty years after their original development many affordable multifamily properties face two common shortcomings: an inability to fulfill their long-term affordability commitments without additional public subsidies and insufficient funds for proper maintenance and avoidance of blight.  The propensity for blight, leaves public funders with bad choices: accept blight or throw good money after bad. Because most affordable multifamily housing is located in lower-income neighborhoods, current financing practices concentrate this blight risk in vulnerable neighborhoods.

Tom White and Charlie Wilkins, fellows at AEI’s International Center on Housing Risk, explain in how the new Blight Preventer Loan is specifically designed to address this problem:

…One part of the solution (for affordable multifamily) is to exchange the industry standard 30-40 year loan for a 15-20 year loan; using this approach, the property is free (or nearly free) of first mortgage debt at the time of the first capital needs shock (around year 15-20). If the property is then refinanced with another 15-20 year loan, it will again be free (or nearly free) of first mortgage debt at the time of the second capital needs shock (around year 30).

The second part of the solution is for public funders to require – at the time a property is proposed for financing or refinancing — a more careful analysis of long-term reserve adequacy, taking into account likely refinancing proceeds. This analysis may well lead to a requirement that the owner increase the initial reserve deposit and/or annual reserve deposit during initial underwriting, or to a requirement that the owner increase the annual reserve deposit after the property is leased-up and stabilized. The effect of such requirements is to keep needed cash in the property rather than allowing it to be distributed out to the owner…

Read about the Blight Preventer Loan in their full report.

RELATED LINKS

INFOGRAPHIC: Blight Preventer Loan

Moving toward a viable multifamily debt market with no ongoing federal guarantee

No federal guaranty for multifamily

One Company Proudly Bringing Back the ‘Made in America’ Label

“The American manufacturing industry has been an icon for over a century – accounting for nearly 35% of the American economy and nearly $6 trillion dollars of GDP. Recently, we put together a video over at Liberty Tabletop that highlights many of the environmental and economic statistics American manufacturing has to offer,” states Phoebe Parlade, content manager for Liberty Tabletop.

Is it again time for consumers to buy only Made in America products?

Here is the video Parlade refers to which tells a chilling story that Made in America is not what it used to be:

Liberty Tabletop website notes:

Cheap products, imported from overseas, which so many Americans have bought in recent decades have not only cost jobs, and seen millions of overseas workers slave away in horrific conditions on unlivable wages, but are a big factor in the the shipping industry contributing to almost 5% of the whole world’s pollution.

Every time an American citizen buys an imported product, our trade deficit widens. Forbes calls it the ‘destroyer of jobs’. Every year, because we import more than we export, 3% of our economy and wealth is lost overseas. That doesn’t sound like much, but it soon adds up. Over the last 39 years we’ve lost 8 TRILLION dollars. All of that translates into lower wages, lower profits, weaker markets and more unemployment at home when we don’t support American made products.

There’s more than just the money we’ve lost forever, though. The health and safety of foreign workers is much less of a consideration in many developing manufacturing economies. Not only the health and safety of the workers though, your health and safety is put at risk too. We’ve seen radioactive steel and poisonous drywall as well as poisonous flooring imported to the US in recent decades. Our home-grown manufacturers share your values, and obey our laws, and are subject to some of the strictest, and most rigorous rules in the developed world. I know which spoon I’d rather feed my baby with!

Read more.

RELATED ARTICLE: Resource Guide: Buy American, Buy Union-Made

The Cruelty and Carnage of the Minimum Wage: The Case of Tad by Jeffrey Tucker

Not having a job means not participating in the fullness of life.

If your goal is to ruin the lives of young and marginalized population groups, raising the wage floor to $15 an hour is a good plan. Already, much of the current problem with youth unemployment is due to the high minimum wage increases we’ve seen over the last eight years.

After all, the original purpose of the minimum wage was to disemploy undesirables. Not having a job means not participating in the fullness of life. It’s a big deal.

A wage floor of any sort traps people in the economic basement. The higher the floor, the larger the basement. Today, millions are rattling around down there, unable to find their way out. Millions more will find themselves there once all this legislation goes through.

I feel a particular frustration with this issue, and it’s not only because of the economics texts I’ve read.

My first real job was working maintenance at a department store. I was 15 (yes, I lied about my age; you could get away with that back then). My job was to clean toilets, crush boxes, pick pins out of the dressing room closets, wax the floors in the china shop, vacuum the place, and shine the glass.

It was a great job. I mean, truly great. I loved it because it was a hugely important job. If I didn’t clean the bathrooms well and replenish the toilet paper and towels, customers the next day might be grossed out and never come back. I played a big role in ensuring the profitability of this store.

My Coworker Tad

I especially loved my co-worker. His name was Tad. The department store would close, leaving just the two of us to have so much fun doing all this wonderful work. We would sing together, thrill to the danger of the wax machine, gross out at the mucky bathrooms, and just have that wonderful feeling that comes with having a real work partner.

You see, Tad was not a normal kid. He had some physical deformities. His face was oddly shaped and had what looked like a large stain on half of it. He couldn’t move around that well, really. I had to help him and assign tasks carefully. He was also mentally retarded. He spoke in a muffled way, and you had to be very clear about instructions.

But I tell you what, when he was happy, it made me happy. To see that big smile come across his face when I would praise the way he shined up a counter just gave me a huge lift. Every day I would try to find ways for him to be both delighted and productive. We were a wonderful team. I wanted it to stay this way.

One day, a poster appeared in the workroom. It was from the Department of Labor. The minimum wage was going up by 40 cents. Tad pointed the sign out to me. He said, “Look, we are getting a raise!”

I was a bit suspicious. I was pretty sure that the boss was the one who set the wage, not some weird distant government thing. I didn’t quite believe it was true. Still, I was happy that he was happy.

The next day, I showed up at the usual time after school. I was getting the mop ready, running hot water in the pail and prepared to do my thing.

Tad wasn’t there. I asked the boss, “Where’s Tad today?”

Well, he explained that he had hired Tad only because he was a boy he knew from church. He needed work. He knew that he would require a lot of help, which was one reason he was excited that I was able to work with him. In the end, he said, this was charity, because he knew that I could do the job by myself. It worked for us to be together so long as he could afford it. But this new minimum wage changed things. The store’s profit margins were very thin, and the wage requirement applied to the whole staff. So he had to make a hard decision.

The long and short of it: Tad had to be let go.

The Death of Tad

I was devastated. I stared at the Department of Labor sign again. Cursed thing! That sign just ruined a kid’s life. It stopped a great act of charity. And look what it did to me. I now had to work alone.

I suddenly felt guilty about my own job. I kept mine at his expense. And why? It was pure accident of birth.

Management left, the lights dimmed, and I heard the familiar click of the doors leading outside. I would have to clean alone today. I did all the tasks I had to. But there was no more music, no more laughter, no more clowning around, and no more beautiful smiles. Tad was somewhere else, probably at home, confused and sad.

I didn’t call him. I was too embarrassed and I didn’t know what to say. So I let our friendship go.

He died a few years later.

This is what the minimum wage means to me. So you can say that I have a vendetta. When the president announces that he is raising wages to make everyone better off, I can’t help but think of the millions of Tads that will lose that opportunity to do wonderful things in this world and with their lives.

Jeffrey A. TuckerJeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email.

RELATED ARTICLE: The Minimum Wage Should Be Called the Robot Employment Act – Wall Street Journal

Trump Actually Isn’t the First to Threaten Default on U.S. Debt by Caroline Baum

Who’s the Real “King of Debt”?

The outrage was palpable. Here was Donald Trump, l’Enfant Terrible of the 2016 presidential campaign, who has offended everyone from women to Muslims to Mexicans, going where no candidate had dared to go, threatening the unthinkable: a default on the national debt.

“I would borrow, knowing that if the economy crashed, you could make a deal,” Trump said in a CNBC interview last week.

Alternatively, he said the U.S. government could make a Trump-type deal with its creditors to repurchase outstanding debt at less than face value, the equivalent of default.

No one took him seriously, of course. When the U.S. government was late in redeeming Treasury bills in 1979, the result of a back-office glitch, yields shot up 60 basis points. With $19.2 trillion in debt outstanding, of which $13.8 trillion is held by the public — foreigners hold about 45 percent of publicly held debt — the last thing a potential president should intimate, even in jest, is default.

“Such remarks by a major presidential candidate have no modern precedent,” the New York Times tut-tutted in a May 7 article.

What about remarks by an actual occupant of the White House? On several occasions over his two terms in office, President Barack Obama and his Treasury secretary — both Tim Geithner and Jack Lew — have used the threat of default to pressure the Republicans to raise the statutory debt ceiling. I have arguedthat the leader of a debtor nation, proprietor of the world’s reserve currency, should never throw the “D” word around lightly. The president of the United States of America should assure holders of Treasury debt that the nation will make timely payment of principal and interest under any and all circumstances.

During the 2013 debt-ceiling showdown, Obama and Lew skillfully used the threat of default to turn public sentiment against the GOP, which was holding the debt ceiling hostage to other priorities. Yields on very short-term T-bills shot up as much as 30 basis points. Where was Paul Krugman’s “horrified amazement” — his description of the cognoscenti’s reaction to Trump’s default ruminations — back then? (Blaming the Republicans, of course.)

In any given month, the Treasury takes in far more in tax receipts than it owes in interest. Yes, Treasury would have to stiff Social Security recipients and other beneficiaries of government programs, but that doesn’t qualify as a default as far as Moody’s and Standard & Poor’s rating agencies are concerned.

Treasury has said publicly — in 2011, 2013 and again in 2015, when the U.S. was up against its borrowing limit — that it cannot prioritize payments. In other words, it does not have the authority to decide to pay bondholders and not military salaries; to pay interest to the People’s Bank of China and not make disability payments. What’s more, the department claims its computers would have to be re-programmed in order to select which of some 80 million monthly payments to process.

However, in a 2014 letter to Jeb Hensarling, Chairman of the House Financial Services Committee, an aide to Secretary Lew admitted that it was technically possible for the Federal Reserve Bank of New York to make principal and interest payments on U.S. Treasury securities while the Treasury halted other payments. The aide stressed that any such protocol was untested.

The Government Accountability Office, formerly known as the General Accounting Office, has a different interpretation on prioritization. Asked by Congress in 1985 about the Treasury secretary’s authority to prioritize payments absent the authority to borrow, the GAO said Treasury was free to determine in which order the outstanding obligations should be paid “to best serve the interests of the United States.”

If late payment of interest due to a computer glitch can send T-bill rates soaring, imagine the damage an actual default could do. The U.S. would have to pay substantially higher rates to borrow, which would make future deficits an even bigger burden. When it comes to debt markets, confidence lost is not confidence easily regained.

Trump’s latest verbal escapade on a U.S. debt deal with creditors has even less chance of coming to fruition than making Mexico pay for that wall he plans to build. What I don’t understand is, where were the economists, pundits and journalists when Obama used the threat of default, even if he didn’t mean it, to his own political advantage?

OK, you say, it’s not the same thing. Trump was just being Trump, after all, unwittingly demonstrating his policy ignorance and his complete disregard for the system.

And what about Obama’s insincere threats of default? That wasn’t reckless? Before a sitting president threatens the unthinkable, he should consider how it might translate into Chinese.

This article first appeared at E21.

Caroline BaumCaroline Baum

Caroline Baum is an award-winning financial journalist and contributor to e21 and Market Watch.

California’s Statewide $15 Minimum Wage Will Horribly Backfire for Poorer Cities by Mark J. Perry

I wrote earlier this month about one of the potentially fatal flaws of California’s recently enacted $15 an hour statewide minimum wage: a one-size-fits-all uniform $15 minimum wage for the entire state of California is really a “one-size-fits-none” minimum wage, given the huge variations in the cost of living around the country’s most populous state.

While a high-wage, high cost-of-living city like San Francisco might be able to absorb a $15 minimum wage without experiencing significant negative employment effects, that same $15 wage could inflict serious economic damages and result in job losses for many of the state’s 500 cities that are in low-wage, low cost-of-living areas.

To help understand how the “one-size-fits-all” approach of a $15 an hour state minimum wage will have a disproportionately adverse impact on low-cost communities in California, the table below displays the “living hourly wages” for California’s 26 metropolitan statistical areas (MSAs), based on data from MIT’s Living Wage Calculator for the year 2014 (most recent year available).

According to the MIT website, the cost-of-living adjusted living wages are the “hourly rates that individuals must earn [in a given MSA] to support their family [and cover basic family expenses], if they are the sole provider and are working full-time (2,080 hours per year).” Living wages for adult workers with 1 to 3 children are also displayed in the table.

The living wage data shown above reveal huge differences in the cost-of-living between low-cost California MSAs like Yuba City, El Centro, Chico, and Merced (living wages are below $10 an hour) and high-cost cities like San Francisco and San Jose, where the cost-of-living adjusted living wage is 38% higher.

If $15 an hour is an appropriate minimum wage for San Francisco, it should be less than $11 an hour in MSAs like Yuba City and El Centro, where the cost-of-living is significantly lower. It’s also important to note that all four of those low-cost MSAs had jobless rates above the state average in February, and three of them (all except Chico) had double-digit unemployment rates in February, with El Centro having the distinction of once again being the MSA with the highest jobless rate in the entire country at 18.6%.

Therefore, many MSAs in California (like Yuba City, El Centro, Chico and Merced) not only have costs-of-living way below the state average, but they also have jobless rates that are way above the state average, and it’s those MSAs that will be adversely impacted by the imposition of a uniform state minimum wage of $15 an hour.

Bottom Line: As I concluded before, even supporters of a $15 an hour minimum wage in California would have to concede that a one-size-fits-all, uniform $15 an hour state minimum wage, without any adjustments for the significant differences in the cost-of-living across the Golden State, will disproportionately affect unskilled and limited-experience workers in low-cost MSAs like Yuba City and El Centro, and also in hundreds of other low-cost, low-wage cities (that are not part of an MSA) throughout the state.

In other words, a one-size-fits-all minimum wage for all 500 cities in California is really a “one-size-fits-none” minimum wage, and will inflict very serious and long-lasting economic damage in most parts of the state outside of the large metro areas on the coast (LA, San Francisco, and San Diego).

The clumsy, top-down, ham-handed approach of government imposed wage controls like a $15 an hour statewide minimum wage in California, without allowing for any adjustments to accommodate the significant differences in cost-of-living and labor market conditions, is one of the main reasons the Golden State’s risky experiment with a $15 wage will likely backfire and be “not-so-golden” in practice.

In contrast, one of the significant advantages of market-determined wages is that they can naturally and automatically adjust to the market conditions of local areas. For example, we might expect that the starting wages for national chains like McDonald’s (1,165 stores in California) and Starbucks (2,000 locations) would vary around the state of California based on local labor market conditions and the local cost-of-living, and would be higher in San Francisco than in cities like El Centro.

But a government mandated price control like the $15 an hour uniform minimum wage in California that outlaws adjustments to fit the customized needs of the 500 individual city-level labor markets in the state is a public policy destined to fail — especially in the state’s low-wage, low cost-of-living cities with high jobless rates that are the most vulnerable to the “one-size-fits-none” awkwardness and clumsiness that is the $15 statewide minimum wage in California.

Related: See my article with AEI colleague Andrew Biggs titled “A National Minimum Wage Is a Bad Fit for Low-Cost Communities.

Bonus Question: I included the living wages above that MIT calculated would be necessary to support an adult-headed household with either one, two or three children so that I could feature the question posed below by Georgetown University professor Jason Brennan at the Bleeding Heart Libertarians blog in his post titled “Some Questions for Living Wage Advocates” (h/t Don Boudreaux):

If you believe employers owe employees a living wage, do you think that an employer has a moral duty to pay an employee more just because [he or] she has more children?

Reprinted with the permission of the American Enterprise Institute.

Mark J. PerryMark J. Perry

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

The Congressional Budge Process: ‘The Fiscal Equivalent of Chutzpah’ [Video]

WASHINGTON, D.C. /PRNewswire-USNewswire/ — Stan Collender, nationally recognized expert on the federal budget, author of Forbes blog “Capital Gains and Games”, and Executive Vice President at Qorvis MSLGROUP sat with Chuck Conconi on this week’s episode of Focus Washington. Collender discussed the ins and outs of the budget process and prospects for compromise under the next administration.

As general election season approaches and the country hones in on the two likely nominees for the race, the differences between a Trump budget or a Clinton budget merits discussion. Collender pointed out that, however, that regardless of who will next sit in the Oval Office, the process goes beyond the total authority of the President; Clinton or Trump, the responsibility of passing a budget will still be with a split congress, making the chances of four more years of budget stalemate high.

Collender recently testified in a Senate Budget Committee hearing on just this subject. As he recounted to Chuck, “I told them this process is broken down and it’s broken down because you have refused to implement it, so the idea you’re holding a hearing now to talk about better ways to implement it is crazy. I called it the fiscal equivalent of chutzpah.”

The failure of the budget process reflects the highly partisan nature of politics today. As Collender pointed out, a lack of coherent priorities or decisions by the legislative branch paralyzes the fiscal policy of the nation – and this is a fact that is not likely to change in the coming four years.

To watch the full interview:

About MSLGROUP

MSLGROUP is Publicis Groupe’s strategic communications and engagement group, advisors in all aspects of communication strategy: from consumer PR to financial communications, from public affairs to reputation management and from crisis communications to experiential marketing and events. With more than 3,000 people across close to 100 offices worldwide, MSLGROUP is also the largest PR network in Europe, fast-growing China and India. The group offers strategic planning and counsel, insight-guided thinking and big, compelling ideas – followed by thorough execution.

About Publicis Groupe

Publicis Groupe [Euronext Paris FR0000130577, CAC 40] is a global leader in marketing, communication, and business transformation. In a world marked by increased convergence and consumer empowerment, Publicis Groupe offers a full range of services and skills: digital, technology & consulting with Publicis.Sapient (SapientNitro, Sapient Global Markets, Sapient Government Services, Razorfish Global, DigitasLBi, Rosetta) – the world’s largest most forward-thinking digitally centered platform focused exclusively on digital transformation in an always-on world – as well as creative networks such as BBH, Leo Burnett, Publicis Worldwide, Saatchi & Saatchi, public affairs, corporate communications and events with MSLGROUP, ad tech solutions with VivaKi, media strategy, planning and buying through Starcom MediaVest Group and ZenithOptimedia, healthcare communications, with Publicis Healthcare Communications Group (PHCG), and finally, brand asset production with Prodigious. Present in 108 countries, the Groupe employs more than 76,000 professionals.

It Wasn’t Broke, so they Shouldn’t Have Fixed It

The United States of America used to be a nation where things got done.  No matter what the challenge, everything from natural disasters to overcoming negative civic and political issues, the normal inclination was to start over and get it right.  If something was working just fine, usually common sense dictated it was to be left alone, at least until a superior method of operation was developed.

Take the United States of America for example.  She was founded upon superior values and principles.  Some of which included the supreme right of sovereign individuals to live according to their own God or self-directed path.  For the first time in human history, the United states was comprised of a set of economic principles and personal liberties that obliterated the worldwide concepts of government domination, or an equally abusive caste system.  Those dominated by cradle to grave government or a monarchy simply existed from day to day and were under the strain of not having enough to eat. That was only one of many problems people suffered with no way out.

Venezuela is a nation that at one time was fairly prosperous and the citizenry usually had more than enough to eat.  But in more recent years, cruel communist dictators with no respect toward individual rights have enacted brutal economic, property, religious, healthcare, agricultural, education and media controls brought that onetime prosperous to a screeching halt.  In fact, Venezuela has not only been halted, but in actuality, she is hurtling backwards.  People have been rioting in the streets, seeking the last vestiges of food supplies to raid do to abusive government induced starvation.

Venezuela is a perfect text book case of what the United States should not be doing.

America the beautiful has been generally blessed with a system of market based economic principles that favored equal opportunity for those willing to work for it.  Unfortunately, in more recent decades, the already difficult job of creating opportunities and benefiting for your labor has been hampered by brutal government intrusions via regulations. So now they make it impossible for America to win on the world economic stage.

Either purposely or through sheer ignorance, America’s course of direction has steadily drifted from a free market economy based upon reward for effort, into punishment for trying.  At every turn, small business owners are treated by government like they are criminals for simply attempting to be successful.  Many local and state governments throughout the union are horrendously hard on small business owners.  They often enact unfairly high taxes or fees on everything from waste baskets, to needed equipment.

Even the big boys are being choked out of the American economy.  Eaton Corporation of Cleveland recently announced a world headquarters more to Ireland.  Carrier, the giant air conditioning manufacturer will soon leave business friendly Indiana and move to Mexico.  The reason being, the highest corporate tax rate on earth and regulations that are much to oppressive.

The government goal of forcing equal results through redistribution of wealth and artificial increases in the minimum wage will continue to cause reductions in the number of entry level jobs.  Unfortunately, those are most needed by both teenagers just starting out and lower skilled older adults.  These efforts to fix what was not broken help drastically affected America.  She evolved from being the world’s manufacturing floor and most innovative economy into an increasingly undesirable place to conduct business activities.

As a result of fixing what was not broken, America is now broken financially, morally, economically, militarily, educationally and racially.  She can only be truly repaired now, by a concerted effort reestablish the enormously successful principles the Founding Fathers enacted long ago. They include a firm recognition of the unalienable God given rights of Life, Liberty, and the Pursuit of Happiness and or Property.  There also has to be an immediate working plan to reduce the enormous economic and Constitution violating federal government.

For the good of the future of our republic and to truly fix America, now that she has been broken, the importance of real education must not be overlooked.  What is taught to one generation dictates what direction the nation takes in the next.  Our current broken state can be fixed with a genuine return to high quality education, critical thinking, and true American history.

Last but not least, America’s first president George Washington along with the majority of the Founding Fathers had an unyielding faith in the God who shed his grace upon the United States.  They left warnings of the negative consequences we are witnessing today, if our republic turned away from the ways of God.  However, I firmly believe that if America (We the People) wisely seeks God’s forgiveness and repent of her wayward ways, she will once again be the glorious shining city on a hill nation under God, Indivisible with Liberty and Justice for all.

RELATED ARTICLE: How Washington Politicians Wasted Billions Trying to ‘Invest in Our Future’

“Creating Jobs” Will Hurt the Economy by T. Norman Van Cott

How many jobs would the Keystone Pipeline project create? Political reporter Tom Murse points out that the answer is a matter of dispute. “Supporters argue that the Keystone XL pipeline would create tens of thousands, if not hundreds of thousands, of new jobs.” But critics “claim those numbers are wildly inflated,” Murse writes.

Both sides assume a higher number would make the project better for the economy. Both sides have it backwards.

Home Economics

The value of work is easy to grasp at the most domestic level: your own home.

Being a homeowner isn’t easy. Among other things, you always seem to have more chores to do than time to do them. The chores are not ends in themselves. Rather, they are means to an end — in this case, making a home and yard more livable or aesthetically pleasing.

Opting to do a chore yourself — “insourcing” in current parlance — isn’t costless. You lose the opportunity to enjoy the fruits of your other labors. For example, you could tackle different chores, spend more time with your family, or work extra hours in the marketplace, increasing your income. Hiring someone else to do the chore — that is, “outsourcing” — isn’t costless, either. It means you can’t buy other things. Costs represent sacrificed alternatives.

The rule when it comes to home ownership isn’t rocket science. Tackle those chores whose ends you value more than their cost. If your water softener breaks, and you value having softened water more than what it would cost either you or the plumber to repair it, then hire the plumber if his cost is less than what it costs you to fix it yourself. (Don’t forget to count the work time you’ll be giving up to act as your own plumber.)

By outsourcing the repair work, you will have “lost a job,” but your standard of living will be higher. By how much? The difference between your cost and the plumber’s cost.

Added household chores — that is, “gaining jobs” — are anything but a blessing. Chores represent hurdles between you and that more livable, aesthetically pleasing home and yard. Each job represents something you’re going to have to give up before your house is the way you want it. “Gaining jobs” to achieve a given objective is synonymous with worsening your situation, not improving it.

The Rule Writ Large — The Case of the Keystone Pipeline

What is rocket science for many is the ability to recognize that the rule for individual households extends to the national household, as we can see in the case of the Keystone Pipeline controversy. The project, which has been a political football for several years, would transfer oil from Canada to the Texas Gulf Coast. The project’s desirability is associated with the number of jobs required for the pipeline’s construction and maintenance. The more jobs created, the more desirable the pipeline, it would seem.

All involved in the discussion fail to apply lessons for individual households to the national household. Pipeline jobs are part of the cost of getting oil from Canada to the Texas Gulf Coast. They are not part of the benefits. The fewer jobs created, the better. Indeed, in the best of all worlds, there would bezero jobs required to transfer oil from Canada to the Texas Gulf Coast. That way, we could get the oil transferred without having to give up anything!

Pipeline proponents who note a large number of required jobs are unwittingly arguing against the project, just as opponents who cite a small number of jobs are unwittingly arguing in its favor.

Beyond the Pipeline

This failure to apply the simple rules for individual households is not restricted to the Keystone Pipeline issue. It pervades economic, business, and political discussions. Government programs come packaged with estimates of the number of new jobs the programs will supposedly create. The more jobs, the merrier. That’s the political refrain. Likewise, state and local economic development bureaucrats tout the number of jobs associated with business relocations or expansions.

One has to wonder whether those who peddle this more-jobs nonsense apply it to their own households. I bet not. Fewer chores, not more, make their homes more enjoyable. National households are no different. Or as Adam Smith put it in his classic, The Wealth of Nations, that which “is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.”

T. Norman Van CottT. Norman Van Cott

T. Norman Van Cott, professor of economics, received his Ph.D. from the University of Washington in 1969. Before joining Ball State in 1977, he taught at University of New Mexico (1968-1972) and West Georgia College (1972-1977). He was the department chairperson from 1985 to 1999. His fields of interest include microeconomic theory, public finance, and international economics. Van Cott’s current research is the economics of constitutions.

How Important Is the DC Metro? Not Very! by Julian Adorney

Will Public Transportation Survive the 21st Century?

What if a major city’s rail system suddenly vanished?

Millions rely on rail-based public transportation, either because they can’t afford cars or because traffic is so bad. These trains and light rail systems alleviate congestion and pollution while serving the poor. Many consider them icons of 21st-century transportation and good government.

So if a city’s rail system disappeared, would that city be thrown into chaos and congestion, cars barely moving and horns blaring? Or would ordinary people innovate a solution?

That’s the question DC residents faced this past March. And the nation got to see the results.

When the DC Metro shut down for one day on March 16, most people feared disaster. The tag #Metrogeddon started trending on Twitter. The Washington Post’s Wonkblog opined that if the shutdown were made permanent, DC’s transportation scene would be dire: the city would need to add 1,000 lane-miles to its roadways and double its parking just to keep congestion at current levels. The alternative would be enormous gridlock or people drastically curtailing their commute, which would cause a shift toward a more localized economy — to everyone’s detriment.

But the shutdown happened and the world didn’t end. Instead, something occurred that Wonkblog, which relied on a study performed by the DC Metro itself to justify its costs, didn’t anticipate: people innovated.

Residents responded to the shutdown by telecommuting and sharing rides.Thirty-five percent of the Metro’s 700,000 daily riders are federal employees, all of whom were given the option to telecommute for the day. Other residents used ride-sharing apps. Thousands used Uber on Wednesday, and about one-fifth were first-time users of UberPool, the app’s new service that allows multiple customers to share rides.

Even the Post noted that while congestion was bad, these adaptations kept it from being much worse.

But with less than a day’s warning (the Metro announced its imminent shutdown late March 15), innovations were limited. Uber and Lyft didn’t have time to roll out new features or even advertise their existing ones. New companies didn’t have time to enter the industry, and new technology couldn’t be employed. Workers weren’t able to make long-term arrangements with employers.

If DC and other cities got rid of their metros permanently, within a year they would see much more innovation, as residents discovered novel congestion-busting options that wouldn’t rely on government.

Some workers might telecommute. Gallup notes that 37 percent of workers have telecommuted, and 24 percent of those (that’s 9 percent of the workforce overall) telecommute over half of their working days. Seventy-four percent of respondents, including employees and employers, say telecommuting is as productive or more productive than being in the office. In a city without public transit, telecommuting could become more popular, offsetting some of the congestion that the DC Metro projected without fracturing the economy. Boulder, Colorado, has already become a telecommuting hub, in part to offset its gridlocked traffic.

Increased adoption of the sharing economy might also reduce overcrowding on roads and in parking garages. Uber recently rolled out UberPool for this purpose, and other ride-sharing companies have done the same. By encouraging paid carpooling, these apps reduce congestion and the need for parking.

Car-sharing companies like Zipcar, which lets users rent cars by the hour, could also become more popular. Zipcar estimates that each shared car it offers replaces up to 20 private vehicles, alleviating street congestion and parking concerns.

Driverless cars are another possibility for reducing congestion long term without public transit. Experts suggest that driverless cars could improve traffic flow by 40–50 percent, in part by reducing accidents caused by human error. Driverless car lanes could also be narrower than current lanes, because driverless cars don’t swerve as much. This would enable more lanes to be packed into the same roadway real estate. Google’s self-driving cars are already on the road in California, Florida, and Nevada.

The problem right now is that metros crowd out these solutions. By reducing congestion (albeit at a high cost), they curtail demand for private services like Zipcar that could produce better and cheaper solutions to congestion. Additionally, competing with metros, which often have substantial funding and legal protections, is difficult for private companies.

Too often, people assume that a government-run service is vital because the market cannot come up with alternatives. But that only looks true because the government service crowds out competition. Left to their own devices, people come together in voluntary interactions to innovate better solutions than the government offers.

Government-funded public transit is an inefficient, top-down service. It’s unsafe and expensive. Rather than trying to “Make Metro Great Again,” we should let it fade away so ordinary people have a chance to build something better.

Julian AdorneyJulian Adorney

Julian Adorney is a Young Voices Advocate and a FEE 2016 Thorpe Fellow. He currently works at Colorado SEO Pros.

The ‘Best Alternative’ to Tax Day

“Our tax policy should reflect our economic ambitions, not be a millstone around the neck of the American economy. Our tax code can and should leverage our entrepreneurial spirit and reward our hard work… thankfully we have a clear alternative — the FairTax. Let’s make April 15 just another beautiful spring day.” – Rep. Rob Woodall (GA-07)

This year taxpayers were provided an extra three days to file their income tax forms with the IRS.

But whether it’s the 15th or the 18th of April, the fact remains: The IRS is currently ‘in charge’ when it comes to taxes, not the average American.

The good news is, you and I both know it doesn’t have to be this way.

U.S. Representative Rob Woodall

This week, U.S. Representative Rob Woodall (GA-07) offered a great and timely reminder that the FAIRtax is the very ‘best alternative’ to Tax Day out there.

“Some have proposed plans to reduce the complexity of your tax return and shrink the reach of the IRS,” writes Woodall, House sponsor of the FairTax Act of 2015, for the Gwinnet Daily Post. “But at a time when America is wasting millions of hours and billions of dollars on compliance, and the IRS is more dangerous than it has ever been, nibbling around the edges of a failed system is not the answer. My plan is the FairTax, which would eliminate your tax return entirely, put the IRS out of business for good, and mark the largest transfer of power from Washington back to the American people in our history.”

Rep. Woodall also notes that the FAIRtax would allow the American worker to keep his or her entire paycheck for the first time since World War II, and pay taxes only on voluntary purchases at the check-out counter.

I urge you to read and share Rep. Woodall’s excellent case for the FAIRtax today, right here.

The movement to promote and pass the FAIRtax is truly exciting. Grassroots Americans in all fifty states are becoming members of the 1040 Club, showing their support for the FairTax in a very real way.

For what equates to a few cups of coffee, you can support our campaign to make the FairTax law in a very powerful way.

Please consider signing up for the 1040 Club today.