Are Teenagers Helped or Hurt by Minimum Wage Laws?

By Gerard Francis Lameiro | Published: July 26, 2010

A recent Wall Street Journal article cites a new study that deals with teenage unemployment and the minimum wage.  About a year ago, the Federal minimum wage was raised over 40% to $7.25 per hour.  One year later, what’s the impact of that minimum wage rate increase?  Did it help or hurt teenagers seeking work?  Let’s talk about it now.

Two labor economists whose work was published by the  Employment Policies Institute have found a “significant drop in teen employment as a direct result of the minimum wage hikes.”  In fact, over 100,000 less teens are employed than last year!  That means the hike in minimum wage rates resulted in about a 2.5% decrease in teen employment.

From economics, we know that raising the price of a product or service tends to reduce demand for that product or service.  In this case, there is less teen employment (fewer teens are getting jobs) because the price of teen labor services is increased by the government.

Minimum wage laws and maximum pay laws both cause adverse disruptions in the free market.  Let’s eliminate these types of laws and let the free market set the prices for labor services that maximizes employment, especially during a period of high unemployment.  After all, which situtation is better for a teenager or any worker – no job or a job at a lower pay rate?

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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Posted in Jobs, Unemployment | Comments closed

Should Jobless Benefits Be Extended for the Eighth Time?

By Gerard Francis Lameiro | Published: July 19, 2010

An editorial in The Wall Street Journal this week discusses the proposal to extend jobless benefits for the eighth time since the recession started.  This extension would mean the unemployed can collect benefits for up to 99 weeks, nearly two years.  Is this a good idea from an economics point of view?  Is this compassion?  Or, are we creating a new, semi-permanent welfare state program that encourages people not to find work?  Let’s talk about it now.

The unemployment statistics are not good.  After 18 months and $862 Billion stimulus, unemployment is at 9.5%, there’s a 5-to-1 ratio of job seekers-to-job openings, 6.7 million Americans have been out of work for at least six months, 2.5 million American workers will run out of unemployment benefits, and about 2 million jobs have been lost.

What can we learn from economics?  Without question, economists know that if you subsidize something, you get more of it.  Of course, many of us have heard anecdotal evidence as well of unemployed people who only seriously look for work right before their benefits expire.  More rigourous economic studies confirm that when unemployment benefits are extended, actual average unemployment duration increases.

What can be done?  No one wants to see the truly needy and unemployed suffer.  But, adding another $30B of deficit spending on top of $1.4 Trillion of deficit spending isn’t a great recipe for economic success.

The answer to the problem is not more unemployment benefits and it’s not more deficit spending.  It’s to create a lot more jobs in the private sector.  How do we accomplish this task?

The answer is a change in fiscal policies.  America needs to lower taxes on economic growth.  We need to cut taxes on income, savings, and investment.  We also need to cut big government deficit spending.  We can’t tax and spend ourselves into prosperity.

America needs pro-growth fiscal policies that have a proven track record of creating new jobs.  They worked in the past.  They will work again.  Will Washington wake up in time – before we get into a double-dip recession or worse, a depression?

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Depression, Double-Dip Recession, Economic Growth, Economy, Jobs, Taxes | Comments closed

Economic Optimism Down – 17 Month Low – Why?

By Gerard Francis Lameiro | Published: July 13, 2010

SPECIAL BLOG POSTING

Investor’s Business Daily reported this week that economic optimism is down to a 17 month low, according to the IBD/TIPP Economic Optimism Index.  Separately, small business confidence is also declining with a lower sales outlook, according to the National Federation of Independent Business.  Why has economic optimism declined?  Are these results unexpected?  Let’s talk about this now.

The primary reason for the decline in economic optimism is the lack of jobs for those who are seeking work.  According to the IBD article, Raghaven Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, believes the official unemployment rate of 9.5% “grossly underestimates” the jobs problem.  He thinks the true jobless rate might be as high as 22-25%.

These results are not unexpected if you follow the economy closely.  I think a double-dip recession continues to be a very real prospect, unless we change fiscal tax and spending policies.  2011 might see the next dip with the repeal of the Bush tax cuts.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Double-Dip Recession, Economy, Jobs, Taxes, Unemployment | Comments closed

Is Wealth Redistribution the Best Way to Get Excellent Health Care?

By Gerard Francis Lameiro | Published: July 12, 2010

Dr. Berwick, the new interim apppointment to head the Centers for Medicare and Medicaid Services (CMS), is in the news a lot lately over his remark about “… any health-care funding plan that is just, equitable, civilized and humane must – must – redistribute wealth from the richer among us to the poorer and less fortunate.”  Is wealth redistribution the best way to get excellent health care?  Is forced socialized medicine for all Americans the way to help some Americans who need help with paying for health care?  And … if Medicare is teetering on bankruptcy now with an unfunded liability of $38 Trillion, how can we expect the government to fund a complete takeover of the health care industry?  Let’s talk about it now.

Here’s the bottom line.  Is wealth redistribution the best way to get excellent health care?  The answer is an emphatic NO!   Here are a few reasons why the answer is NO!

1.  Big government has a bad track record of running Medicare, Medicaid, and Social Security.  There is no reason to believe ObamaCare will be run any better.  We can expect higher costs for premiums and lower quality health care.  Look at the Massachusett’s universal health care program to see how costs have skyrocketed.

2.  Shortages and rationing are inevitable.  Look to Britain and Canada to see how poorly rationing works.  Look at all the examples of people denied the tests, treatments, and drugs that are vital to save lives.

3.  Redistribution of wealth means burdenly tax-paying Americans with more taxes.  Taxes are already too high and are killing jobs now.  More taxes mean more job losses.  Expect unemployment to increase dramatically as the Bush tax cuts expire in 2011 and many, new taxes kick in.

4.  Redistribution of wealth also means economic growth will be curtailed.  The whole economy will be hurt.  Within the health care industry expect fewer innovations in drugs, medical devices, tests, and treatments.

5.  ObamaCare is not needed.  The problems with our pre-ObamaCare, health care system centered largely around an intricate and complex set of regulations, subsidies, and tax policies that hurt the system.  About 50% of all health care expenditures were controlled by government and much of the rest was indirectly controlled by government.  Government was the problem with our health care industry.  More government control will only exacerbate the problems.

The list goes on.

Remember, it might take some time in some countries.  But, socialism always leads to moral and economic bankruptcy.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Economic Growth, Health Care System, Jobs, Socialism | Comments closed

Note to Readers – A Change in the Blog Posting Schedule and More

By Gerard Francis Lameiro | Published: July 8, 2010

Due to my work schedule, I need to change how often I do blog postings.  Instead of twice-a-week postings on Monday evening and Thursday evening, I plan to do just Monday evening blog postings, at least for now.

For those readers who have sent me positive comments, please know that they are greatly appreciated.

By the way, my new book is scheduled to come out in September.  I’m planning to do a National Radio Tour as part of the book launch.  I’m looking forward to working with Sandy Frazier (an outstanding publicist) and talking with my friends in the media.  They are all wonderful people!

I wish all my readers (both book and blog readers) and media friends ( TV and Talk Radio hosts, producers, and staff) a great summer!

My next blog posting on an important economics-related topic in the news should appear on Monday evening, July 12th.  There is a lot to write about.  That’s for sure.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.  

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Posted in About This Blog | Comments closed

Low Interest Rates – Who Wins? Who Loses?

By Gerard Francis Lameiro | Published: July 5, 2010

In The Wall Street Journal this week, an op-ed piece deals with the Federal Reserve’s policy of near-zero interest rates, presumably to help our very anemic and faltering economic recovery.  Are we really in an economic recovery?  Or, are we on the edge of a double-dip recession?  Or worse yet, are we entering a depression as some seem to worry?  With interest rates near zero, who wins and who loses?  Let’s talk about it now.

According to the article, the Federal Reserve policy is primarily helping big government finance its huge deficits and helping big banks pad their balance sheets.  With interest rates this low, big government can borrow at low rates.  Similarly, big banks can profit from the spread between their borrowing costs and their lending revenues.  So, near-zero interest rates favor big government and big banks.

If the “bigs” are winners, who are the losers?  Unfortunately, main street savers and investors.  People living on savings and investments such as retired people can’t make much money on their savings and investments.  In some cases, the managers of pension funds are taking larger than normal risks with their investments, hoping to make up for the ground lost with near-zero interest investments.  Also, States that depend on taxing wealthy individuals are running into budgetary problems because the wealthy can’t earn as much – and hence, don’t pay as much taxes.  Some States appear to be teetering on bankruptcy.

Near-zero interest rates favor big government and big banks.  Too bad main street savers and investors are not treated as well.

It still appears that a double-dip recession is likely at a minimum.  Some asset deflation also appears to be a reasonable expectation.  As to the possibility of a depression, I think it is too early to tell.  If fiscal (spending and tax) policies and monetary (money supply and interest rate) policies move from Keynesian to pro-growth, I think we can see a rapid recovery.  However, I currently have not seen indications of such policy changes.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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Posted in Depression, Double-Dip Recession, Economy, Financial Sector Regulation, Interest Rates | Comments closed

Vagueness Impedes Economic Growth – Why?

By Gerard Francis Lameiro | Published: July 1, 2010

Writing in The Wall Street Journal this week, Daniel Henninger suggests a “void-for-vagueness doctrine” for Congress.  What does he mean by “vagueness?”  And, why is this suggestion so very important for economic growth?  Let’s talk about it now.

The impetus for The Wall Street Journal column was the recent Supreme Court decision that found that the “honest services fraud” law was too vague, thereby helping former Enron CEO Jeff Skilling gain a partial victory in his attempt to overturn his conviction.

Indeed, vagueness in a law is an issue.  Justice George Sutherland in 1926 even went so far as to say that a vague law “… violates the first essential of due process of law.”  The point is simple: if people can’t understand a law because it is too vague, then how can the government hold people accountable to it.  It’s a matter of justice and fairness.

In addition, vagueness is vitally important today.  Congress continues to pass large and unwieldy laws that most Americans don’t have the time or energy to read.  Even our Senators and Representatives often skip reading the laws that they are voting on.  Two examples are the health care bill and the financial reform bill.  Because parts of the bills lack specificity, we might all have to wait months or even years to see what they really mean and how they will impact America.

Economic growth is predicated on investment in new businesses, new products and services, and new jobs.  But, vagueness - in current legislation passed (such as health care) and in potential new legislation (such as financial reform, cap-and-trade, and VAT taxes) – means uncertainty.  Investors can be very reluctant to invest in a climate of vagueness and uncertainty.

Vagueness impedes economic growth.  Investors and economic growth both require a climate of reasonable rules and regulations, enforced under the rule of law, and low to moderate investment taxes.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Economic Growth, Economy, Financial Sector Regulation, Health Care System, Rule of Law | Comments closed

Are We Entering a Depression?

By Gerard Francis Lameiro | Published: June 28, 2010

Economist Paul Krugman in an op-ed column in The New York Times online edition indicates that he is fearful that we are now in the early stages of a depression, possibly the third depression in our history.  Krugman also appears to believe that the cause will be government policy mistakes.  Specifically, he sees the need for additional stimulus spending to spur growth.  Is Krugman right?  Are we entering a major depression?  And, if we are, is the remedy for the Federal government to spend a lot more money?  What do you think?  Let’s talk about it now.

Yikes, a major depression.  Actually, I have been thinking the same thing for quite some time.  I think there exists a real chance we are in the beginning stage of another major depression, in many ways like the Great Depression and in some ways quite different.  Obviously, we are not close to a depression yet.  But, I think Krugman might still be right.  However, Krugman’s remedy of spending more is the WRONG answer.

Our economic recovery is currently very anemic.  But, I strongly believe the economy will be hit even harder in 2011 with an assortment of tax hikes and totally new taxes.  MORE taxes simply mean LESS money in the private sector to invest in new businesses, new products and services, and new jobs.  These new taxes and higher taxes will take their toll on unemployment numbers.

The current government policy we seem to be following is to increase taxes, increase spending, increase borrowing, and increase deficits.  There have been some notable exceptions.  But, in general, the government has a tax-and-spend mindset.  This is the precise opposite of a pro-economic growth policy which we desperately need now.

It is widely agreed that the various previous stimulus packages have failed to boost our economy.  Krugman’s policy answer will likely fail as well.  If our own economic history and data are not enough, just look at Japan’s record of attempting to stimulate their economy.  Keynesian economics didn’t work in Japan either.

Yes, we might be entering a depression.  If we do find ourselves in a depression, we can blame government policies.  But, the cause will not be too little stimulus spending.  It will be the lack of a pro-economic growth policy that emphasizes tax cuts for everyone.  Recall the Harding-Coolidge, post World War II, JFK, Ronald Reagan and Bush tax cuts.  In each case, unemployment was low and the economy soared.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.  For more information, please visit: http://GerardLameiro.com .

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Posted in America's Future, Depression, Economy, Jobs, Taxes | Comments closed

Sustainable Capitalism vs American Capitalism – What’s the Difference?

By Gerard Francis Lameiro | Published: June 24, 2010

An op-ed piece in The Wall Street Journal this week talks about ”sustainable capitalism” and long term value creation.  It appears that the authors believe by integrating environmental, social and governance factors into business strategy, metrics, and assessments of risks/opportunities, long term value creation can be achieved, possibly maximized.  It also appears that the authors think considering such factors can also influence business incentives and public policy formulation.  So, what’s the difference between so-called “sustainable capitalism” and good old, American Capitalism that has produced the greatest, most productive, most generous nation in the history of the world?  Plus, what really sustains capitalism?  Hint – It’s not high taxes and complex government regulations.  Let’s talk about it now.

Sustainable capitalism appears to me to be a pleasant-sounding marketing brand name for a highly regulated and government-controlled form of capitalism that includes such things as tough environmental domination of the market.  I expect that it includes among other things some strict form of cap-and-trade regulations that seek to ration energy usage through pricing and other mechanisms.  I also believe it would include more intrusive restraints placed on corporate boards.  Sustainable capitalism can probably be summed up as government control of the economy in the name of radical environmentalism.

A better and more descriptive brand name for sustainable capitalism might be environmental socialism.

On to the next question.  What really sustains American Capitalism?  That’s easy.  American Capitalism requires such things as the Rule of Law, Contract Law in which courts enforce contracts, economic freedom to make business decisions that most cost-effectively utilize scarce economic resources, and private property (that’s not confiscated or controlled by burdensome taxes, excessive regulations, or inappropriate use of eminent domain).

Sustainable capitalism is supposed to enhance long term value creation.  Look at Europe.  Has it worked there?  True value creation and wealth creation, both in the short term and the long term, are the product of American Capitalism.

If you want to read more about the Architecture of American Capitalism and its superior effectiveness, I suggest you read my book, America’s Economic War.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.  For more information, please visit: http://GerardLameiro.com .

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Posted in America's Economic War, American Capitalism, Architecture of American Capitalism, Economic Freedom, Environmental Socialism, Socialism, Welfare State Socialism | Comments closed

My New Blogging Plans

By Gerard Francis Lameiro | Published: June 22, 2010

As you might have noticed, I took a break from blogging recently.  While these blog posts are relatively short, they still take time and I really needed some more time.

This month I have been working on my next book which is currently scheduled to be out in the fall.  If all goes well with the book, I hope to do another National Radio Tour after the book is published, with possibly some TV interviews thrown in as well.  By the way, the new book cover looks beautiful.  It’s bright, colorful, visually-stunning and optimistic (at least in my opinion).

I plan to continue blogging again right here on this website.  Plans include giving the blog a name:

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge

and a new schedule.  Instead of random postings done once or twice a week, I plan to write one blog post late Mondays on a current economics-related topic in the news with my analysis.  In addition, I plan to write a second blog post late Thursdays dealing with some insight and/or some practical knowledge from the field of economics.  Finally, I hope to have my blog carried on Amazon.com as a Kindle blog subscription sometime soon.

If you enjoyed my blog posts in the past, you should like my new format and consistent schedule.  You can look forward to reading about economic news and analysis, as well as getting practical knowledge and insights from the world of economics.  Of course, I plan to write about the vital importance of economic freedom to economic growth, peace and prosperity.

 

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Posted in About This Blog | Comments closed