Vail Daily column: A better course of action
May 16, 2014
Jack Van Ens is wrong on multiple counts. His glowing description of The New Deal and his statement implying that Roosevelt was following a Republican Hoover’s action are misleading. Hoover’s actions were driven by Hoover’s desire to do something even though his actions violated his principles and turned out to be wrong. Roosevelt’s were driven by a staff that had absorbed flawed socio-economic views from what was considered by many during the late ’20s and early ’30s to be a great experiment taking place in Russia.
In the aftermath of WWII, FDR gained almost mythic qualities as did his “New Deal.” However, analysis subsequently has demonstrated that his actions, as well as Hoover’s, contributed to increasing the length and severity of the Great Depression. The United States was pulled out of the Great Depression by WWII, and the primary factors which made us the postwar economic superpower were enforced savings (primarily through rationing) during the war and the impoverishment or destruction of economic competitors. Of course, in recent years, savings have not been a factor as interest rates have been kept so artificially low that one cannot even keep up with inflation with an ordinary savings account.
Van Ens also gives the impression that Republicans were the ones who raised the issue of the loss of 500,000 jobs in a manner dismissive of the loss. No, it was the Congressional Budget Office analysis that stated raising the minimum wage to $10.10 an hour would likely kill 500,000 jobs and even a more moderate increase to $9 would increase the jobless figure by 100,000.
Neither Sen. Bennet, who recently sent a letter out espousing the $10 raise, nor Van Ens feel it necessary to portray the full range of factors one should consider before deciding to raise the minimum wage. As for the farcical assertion that Republicans are insensitive to the minimum wage because they have well-paying jobs, it’s simplistic nonsense. What is important is that 500,000 is not an inconsequential figure and the loss of those jobs and wages must be considered far more carefully than Van Ens suggests. In fact, one should consider carefully why we should ignore the CBO’s recommended course of action below since nothing from this administration has really addressed the CBO’s assessment.
The CBO report did not concur with the president’s call for a $10 an hour minimum wage. It considered raising the minimum wage in line with inflation to $8.25 as the best course. As economist Peter Morici has noted, the minimum wage was last adjusted to $7.25 in 2009, and adjusting it now for inflation to $8.25 wouldn’t further raise the cost of labor relative to labor-saving machinery. Hence, the CBO findings infer that such an increase wouldn’t appreciably increase unemployment and would still provide benefits of additional income to the working poor.
Morici concludes “as most Americans seem supportive of additional measures to support the earning power of low-skilled workers, raising the minimum wage to $8.25 is the best compromise” despite his analysis that raising the minimum wage reduces overall productivity and economic welfare by distorting markets, ultimately destroying jobs. As for income disparity growth as well as the shrinkage of the middle class, I suggest interested readers examine the book “Russia: A Long View” by the brilliant Russian economist Yegor Gaidar, who transitioned the Soviet economy from a centrally planned (mis-planned?) economy to a relatively free market economy. Unfortunately he died before this last volume was published. Not only will you find an interesting overview of Marx, but you will become acquainted with some of the world’s leading economic thinkers not normally discussed in the mass media. Those of you who are really interested in why the middle class is shrinking and why income disparity is increasing will find much food for thought. The world certainly lost a brilliant mind with his untimely death.
John Valersky lives in Edwards.