Wednesday, August 02, 2006

Sirota and Me: Part I - Lies, Damned Lies, Statistics

I hate disccussing economic policy.

Yeah, I said it.

Social policy is easy. I'm not particularly religious therefore I am not beholden to some weird 2000 year old code written by shepherds. I go by the rather simple theory that if you are adults and you aren't hurting anyone else, then it's probably okay. Of course people want to argue around the edges about the definition of hurt. But that's not why I am here.

I'm here to talk about economics, dammit. Ugh.

Might as well start with a bombshell.

I don't believe in the minimum wage.

That alone may be enough to get me tarred and feathered at Georgia For Democracy's David Sirota book signing tonight.

But back to economics for a moment. Economic policy in America is a glacier. Since the radical reforms of the early 20th century (including that minimum wage I mentioned), particulary the speculation reforms following the 29 crash, the American economic behemoth has lurched about, occasionally tilting towards falling over, but never in any real danger of the bottoming out.

I say that despite living in the stagflation days of the late 70s and actually working on the front line of unemployment policy during the recession of the 90s. Sure, things have been occasionally bad, but I am reminded of something I recently heard from a Civil War historian: "The good and the bad is no matter how bad people think things are, we know once they were far worse".

So are we just arguing around the fringes of economic policy that has been relatively stable? Or does that just lead to more incremental barnacles on the ship that will eventually cause it to sink? Do we need radical change? Or a holistic solution?

Which leads me back to David Sirota. As I read this book, I found myself twitching. Warring within my soul were a myriad of thoughts. I believe the underlying principle of economics should be fairness. But what is fair? According to Sirota, it is the social responsibility of corporations to their workers and their communities? My conservative friends would argue that fairness is letting the market decide the winners and the losers. My libertarian friends would say there is no such thing as fairness.

Is it fair, as Sirota argues, to tax profits above a certain level? Is it fair for lax regulation to allow an Enron to scar an entire community? Should there be fair at all?

This is why I don't really like economics. Everyone if wrong. Everyone is right. No one is even sure if it any of it matters. It's one big steaming pile of vague goo.

I believe what ultimately bothers me is that I don't like to hurt people. But the rational part of my mind keep screaming that sound economic policy sometimes results in people being hurt. That's just the fact, jack.

I doubt that attitude will play well tonight. I will go with the knowledge that I agree with Sirota on some solutions (particularly corporate tax policy). I will go with an open mind. Maybe he will even convince me that the minimum wage should be raised. (I doubt that and in the future when I am feeling less waffly, maybe I will tell you why I think it should be abolished.)

But if I see tar and feathers, fairness will dictate I get the hell out of there.

David Sirota speaks tonight at 7:30 tonight at Manuel's Tavern. If you can't make it look for a podcast from Georgia Podcast Network in the near future.


Anonymous said...

I've gone round and round on this who minimum wage issue. Since first reading "Economics in One Lesson", I thought of efficient markets and the whole "by having a minumum wage you are denying people work" as pretty sound arguments against it. However, there are two things that stick in my side and make me agree with a minimum wage.

1) (The liberal in me) Can you think of any laborous activity that is worth less than $5.15 an hour to you?

I would argue that any activity that is worth less than 5.15/hr should not be completed and that anybody willing to work for less than 5.15 an hour is desparate and being taken advantage of.

But hey, give me a concrete example of work that is not being done because of our min wage laws and I'll reconsider this point.

2) (The conservative in me) With our (admittedly overly) complex system of subsidies (food stamps/housing/school lunch/emergency room care for uninsured/etc) anybody making 5.15 an hour is really being subsidied by the state and has a higher "real" income. So a low minimum wage simply transfers responisbilty for that "gap" between actual wage and "real" wage from the capitalist to the tax payers. The capitalist gets labor and the tax payer subsidizes it. Now, you can say, "end all subsidies" but that's not going to happen in the real world. So since we aren't going to let everyone live 12/room in an apt, starve in the street, have their kids go hungry/ and bleed out next to the ER because they don't have insurance, we better keep minimum wage as close to the "real" wage as possible. Otherwise tax payers are disadvantaged.

I think of it a little like the fed bank setting interest rates... what everyone wants is a "true" rate, and the Fed strives to deliver. When the fed misses in either direction, the economy gets "distorted". Same thing here... give me a "true" wage and I wont have to think about the distortions.

griftdrift said...

Interesting thoughts. And this is why I loathe economics. Every time I try to wrap my brain about all the permutations I feel like I've been twisted up by a voodoo priest.

But let me throw two things at you.

How many jobs are actually at minimum wage?

And given that minimum wage law was conceived 70 years ago, doesn't the information age have an effect? In other words, if someone was paying desperate people 2.00 an hour, how long before they are found out and we are outraged?

My bottom line is that it's like Linus security blanket. It makes us feel better but does it really protect against anything?

Anonymous said...

Number of jobs at minimum wage? My gut tells me entry-level walmart, but I don't have any real data.

My gut also tells me that there must be jobs at minimum wage, or why are states taking the initiative to raise it?

Availability of information? Has "our outrage" caused WalMart to offer health insurance or raise it's wages?

Perhaps our "outrage" is fake because we continue to shop there despite the information.

I believe that it does make us feel better (as evidenced by how badly I feel that it hasn't been raised in 10 years). But I also believe that it does protect the most desparate among us. And if you think it's just window dressing, and that everyone makes more than min wage, then there shouldn't be any resistance to raising it.

But really, the conservative in me is where my real argument is. My goal is to eliminate artificial distortions in the economy. They end up favoring one group over another (bizowners vs taxpayers here) and are usually hard to detect (how much higher are your taxes because min wage is too low?). I believe that removing the min wage would cause this imbalance to increase, and that "outrage" would be no match for it.

Which president said: "Give me a one handed economist"? Very astute.

griftdrift said...

Fair points.

And it was Harry S. Truman.

Maybe instead we should tranq all the economist, tag them on the ear and monitor their migratory habits.

Amber Rhea said...

Thanks for the link but it's screwed up!

And, it was nice meeting you tonight and hanging out. Even if you don't believe in the minimum wage.

griftdrift said...

My C key is sticking. It's because I have a real computer.