American Elephants


Inequality Is Not The Problem: The Problem Is A Lack of Growth and Jobs. by The Elephant's Child

Fifty years later, Lyndon Baines Johnson’s ‘War On Poverty’ has proven to be a total failure. From the end of World War II until 1964, the poverty rate in this country was cut in half. Statistically 94% of the change in the poverty rate in that period can be explained by changes in national per-capita income. Economic growth, as Jack Kennedy famously said, lifts all boats.

If we had continued the trend, economic growth would have reduced the poverty level to only 1.4% of the population today. We didn’t continue the trend, we had a war on poverty, and in the following years, the percentage of Americans living in poverty barely budged. In 1965 18% of the population lived in poverty. Today we are at 15%— 50 million Americans, after spending $15 trillion on antipoverty programs, and continuing to spend $1 trillion a year. John Goodman at the National Center for Policy Analysis (NCPA) notes that:

 Early on ― in the first decade of our 50-year experiment with an expanded welfare state ― carefully controlled experiments funded by the federal government established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency. Think about that. Any serious social science debate about the effects of welfare on the behavior of the recipients was resolved four decades ago!

We now know a lot about how behavior affects poverty. In fact, if you do these four things, it’s almost impossible to remain poor:

1. Finish high school,
2. Get a job,
3. Get married, and
4. Don’t have children until you get married.

Although it is well-established that self-sufficiency is closely related to working and being married, we are increasingly “fighting poverty” by doing the very things that lead to less work and fewer marriages. But we keep adding marriage penalties to welfare benefits. That is,  you get more benefits if there is not a man in the house. And the penalty for attempting to work means losing more benefits that one is apt to gain on a beginning wage. There is a very strong marriage penalty in ObamaCare.

Sargent Shriver, LBJ’s poverty czar, predicted that welfare-state programs would eliminate poverty  by 1976. Didn’t happen. Now the Democrats’ interest has turned to “inequality,” and their focus is not on the poor, but on the very rich, and how to get their hands on their property.

Poverty has increased under Mr. Obama’s watch. It could be expected to rise during the recession, but the recession ended in June of 2009. Poverty continued to rise during the “recovery summer” and in the summer after that to a 50 year high. Enrollment in the food stamp program has increased by 39 percent. Worse, labor force participation rates have climbed. We spend seven of every ten federal dollars on sending checks to the poor and the middle class. Disability rolls have climbed drastically.

A growing economy, which seems to be beyond the ability of the Obama administration, creates jobs. Government welfare can keep people from destitution, but only a free and growing economy can create a ladder out of poverty. You don’t eliminate poverty, or even reduce it by raising the minimum wage. Raising the minimum wage simply means fewer minimum wage jobs, and more workers replaced by robots. The minimum wage is intended as an enticement to business to hire absolute beginners and to spend time and money training those beginners. To be effective in that role, it must be low enough for businesses to feel it worthwhile to train a beginner. Most people on the minimum wage have received a raise in six months — proof that when they have learned something about work, they are worth more.

You don’t increase the welfare of the poor by raising taxes, but by encouraging business to create more jobs. You encourage business by reducing uncertainty, reducing unnecessary regulation and lowering the corporate tax that is the highest in the world, for a start.

Early on ― in the first decade of our 50-year experiment with an expanded welfare state ― carefully controlled experiments funded by the federal government established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency. Think about that. Any serious social science debate about the effects of welfare on the behavior of the recipients was resolved four decades ago! We now know a lot about how behavior affects poverty. In fact, if you do these four things, it’s almost impossible to remain poor:

  1. Finish high school,
  2. Get a job,
  3. Get married, and
  4. Don’t have children until you get married.

- See more at: http://healthblog.ncpa.org/why-we-lost-the-war-on-poverty/?utm_source=newsletter&utm_medium=email&utm_campaign=HA#more-37572

Early on ― in the first decade of our 50-year experiment with an expanded welfare state ― carefully controlled experiments funded by the federal government established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency. Think about that. Any serious social science debate about the effects of welfare on the behavior of the recipients was resolved four decades ago! We now know a lot about how behavior affects poverty. In fact, if you do these four things, it’s almost impossible to remain poor:

  1. Finish high school,
  2. Get a job,
  3. Get married, and
  4. Don’t have children until you get married.

- See more at: http://healthblog.ncpa.org/why-we-lost-the-war-on-poverty/?utm_source=newsletter&utm_medium=email&utm_campaign=HA#more-37572



Milton Friedman Takes On the Minimum Wage by The Elephant's Child

The do-gooders believe that by passing a law saying that nobody shall get less than $9 per hour (adjusted for today) or whatever the minimum wage is, you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to assure, that people whose skills, are not sufficient to justify that kind of a wage will be unemployed.

The minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills. That’s what the law says. The law says that here’s a man who has a skill that would justify a wage of $5 or $6 per hour (adjusted for today), but you may not employ him, it’s illegal, because if you employ him you must pay him $9 per hour. So what’s the result? To employ him at $9 per hour is to engage in charity. There’s nothing wrong with charity. But most employers are not in the position to engage in that kind of charity. Thus, the consequences of minimum wage laws have been almost wholly bad. We have increased unemployment and increased poverty.

Moreover, the effects have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage law.

There is absolutely no positive objective achieved by the minimum wage law. Its real purpose is to reduce competition for the trade unions and make it easier for them to maintain the higher wages of their privileged members.



Here’s How to Put Waiters and Waitresses Out of Work. by The Elephant's Child

In an election year, one of the big problems is that everyone wants to do nice things for their voters. They want to appeal to the heart.  But your government does not love you, much as they try to make you think they do. They love getting re-elected.  Case in point: Senator Tom Harkin (D-IA) has introduced the Rebuild America Act. (Good names make it harder to vote against). Among other things, the Iowa Democrat wants to raise the minimum wage by 220% for employees who receive tip income, such as waiters and waitresses. Huh?

Seems like only yesterday, Congress was railing about waiters and waitresses not paying taxes on their tip income. Fact: the federal minimum wage for employees who earn tip income is $2.13 an hour. The Labor Department permits this lower minimum wage so long as the employee earns at least the full federal minimum wage of $7.25 when tips are included. If tips fall short of that amount, employers kick in the rest. According to Census Bureau data, the average hourly wage for a restaurant employee earning tip income is $11.82. Top earners can collect $24 an hour or more. It pays to be a nice waiter or waitress.

The difference between the two minimum wages is called the “tip credit.” It is a political acknowledgment of the single-digit profit margins in tipped industries, and of the income supplement that gratuities provide.

Economic studies show no relationship between a boost in restaurant employee base wages and their take-home compensation.  A study that examined 20 years of Census Bureau data found that each time the mandatory state wage for tipped employees rose by 10%, hours worked fell by 5%.

Economists William Even and David Macpherson analyzed Sen. Harkin’s bill, and they estimate that the combined loss of hours would translate to the loss of 447,000 jobs. There are always consequences. Table-service restaurants have experimented with computer terminals tat allow customers to order and pay at the table. When a server is only carrying food to the table, restaurant jobs won’t be as lucrative.

Progressive politics is simple. Just make the employer pay more. The law of unintended consequences always applies.  But if Sen. Harkin’s bill doesn’t pass, restaurant employees in Iowa will know (maybe) that he tried, which is the point.




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