Minimum Wage, Obamacare and Unintended Consequences

Posted by PITHOCRATES - February 3rd, 2014

Economics 101

The Affordable Care Act greatly increased the Cost of Unskilled and Inexperienced Workers

The Affordable Care Act has changed the employment landscape.  In particular it changed a lot of people from full-time employees to part-time employees.  Especially at entry-level jobs.  Or minimum wage jobs.  Jobs that may be physically demanding but require minimum skill or experience.  Making them ideal for unskilled and inexperienced teenagers entering the workforce.

Not everyone, though, is a teenager in these minimum wage, entry-level jobs.  Some adults find themselves in them, too.  Older adults.  Single parents.  Widows.  Widowers.  People whose circumstances have changed.  And who don’t have the skills or experience for other employment.  So they find themselves struggling to get by on their entry-level, minimum wage job.

Then the Affordable Care Act (i.e., Obamacare) made their struggle more difficult.  For it required employers to offer health insurance to anyone working 30 hours or more per week.  Greatly increasing the cost of unskilled and inexperienced teenagers.  And their other entry-level, minimum wage workers.  So they did the only logical thing.  They cut their hours below 30 hours per week.  Shrinking the paychecks of both teenager.  And those who are struggling to live on their minimum wage paychecks.

The Unintended Consequences of Obamacare changed Full-Time Workers to Part-Time

We call it unintended consequences.  When a government program to solve one problem creates another problem.  In an attempt to give people with insufficient income to buy health insurance Obamacare forced their employers to provide health insurance for them.  This caused employers to cut hours for these employees.  To keep the cost of their entry-level, minimum wage workers from rising.  Thus reducing their insufficient income even further.

The rollout of Obamacare did not go well.  In the effort to give people affordable health insurance a lot of people actually lost the health insurance they liked and wanted to keep.  Another unintended consequence.  (Unless the Democrats designed the Affordable Care Act to destroy the private health insurance industry as many believe then things are going exactly as planned as people may soon start demanding that the government step in and provide national health care).  Causing a bit of a problem for the political party that gave us Obamacare.  The Democrats.  In the upcoming midterm elections.

It’s one thing causing people with individual insurance policies to lose their health insurance that may or may not have voted for you.  But to further impoverish the impoverished working those entry-level, minimum wage jobs was another.  For thanks to endless class warfare the Democrats put the impoverished into the Democrat camp.  So they needed to do something to replace the income they lost when Obamacare changed them from full-time to part-time employees.  And chose further class warfare.  By forcing those ‘rich’ employers to pay their entry-level, minimum wage workers a ‘living wage’.  By increasing the federal minimum wage.

Obama wants to Raise the Minimum Wage to replace Earnings lost when Obamacare made Full-Time Workers Part-Time

In the State of the Union address President Obama said he wanted to raise the federal minimum wage to $10.10.  But why $10.10?  The current federal minimum wage is $7.25.  And if you earned that working 40 hours each week for 50 weeks (assuming you take 2 weeks off over the year for personal reasons, holidays and vacations) that comes to $14,500 per year.  Raising the minimum wage to $10.10 brings those annual earnings to $20,200.  Or $5,700 more at the higher wage rate.  It’s a lot of money.  But probably not enough for someone to quit a second job.  For if someone is working 20 hours a week at a second job that would come to an additional $7,250 a year.  If they work 30 hours a week in a second job that would come to an additional $10,875 a year.  And some people have to work 70 hours or more a week to approach a ‘living wage’ when they don’t have the skills or experience for a job that pays more than an entry-level, minimum wage job.  So raising the minimum wage to $10.10 an hour probably won’t solve everyone’s financial woes.  But it will do something else.

If people who were working 40 hours a week went to working only 29 hours a week after Obamacare they would lose 11 hours of pay.  At the current minimum wage that comes to $79.75 less in their paycheck each week.  A significant amount for someone struggling to make it on something less than a ‘living wage’.  But look at what happens when we raise the minimum wage to $10.10 for those 29 hours.  If we multiply the additional $2.85 per hour to those 29 hours that comes to an additional $82.65 a week.  Which is a little more than the $79.75 they lost when Obamacare cut their hours.  So it would appear that the new push to raise the minimum wage to $10.10 is to put the money the Obama administration took out of these workers’ paychecks back into their paychecks before the fall midterm elections.  So they still won’t be angry and vote Republican because of what the Democrats and their Affordable Care Act did to their paychecks.

They want to sound compassionate to those with insufficient income by wanting to raise the minimum wage to replace what they took away from them with Obamacare.  To give these people a ‘living wage’.  For the current minimum wage is actually worth about 20% less than it was during the Reagan administration.  When it was $3.35.  Wait a minute, you say.  How can $7.25 be worth less than $3.35?  Because of the Democrats’ embrace of Keynesian economics.  The government wants to print money to spend.  To provide economic activity when the private sector is not.  And when President Nixon decoupled the dollar from gold in 1971 they ramped up those printing presses.  And have been depreciating the dollar ever since.  Because they made the dollar worth less and less over the years the purchasing power of the federal minimum wage fell.  Even when people were earning more dollars.  And raising the minimum wage won’t address this problem.  Only voting the Keynesians out of office will.

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Roosevelt, Wage and Price Controls, Fringe Benefits, Health Insurance, Pensions, Unions, Bankruptcy and Bethlehem Steel

Posted by PITHOCRATES - September 3rd, 2013

History 101

(Originally published November 20th, 2012)

The Roosevelt Administration fought Inflation by Passing a Law to Cap Employee Wages

Most times when those in government try to fix things they end up making things worse.  Giving us the unintended consequences of their best intentions.  And the government had some good intentions during World War II.  They were printing money to pay for a surge in government spending to pay for war production.  As well as a host of New Deal programs.  Which sparked off some inflation.  Inflation is bad.  Enter their best intentions.

One of the biggest drivers of inflation is wages.  Higher wages increase a company’s costs.  Which they must recover in their selling prices.  So higher wages lead to higher prices.  Higher prices increase the cost of living.  Making it more difficult for workers to get by without a pay raise.  Which puts pressure on employers to raise wages.  If they do they pass on these higher costs to their customers via higher prices.  It’s a vicious cycle.  And one all governments want to avoid.  Because higher costs reduce economic activity.  And that’s how governments get their money.  Taxing economic activity.

Enter wage and price controls.  The Roosevelt administration thought the way to solve the problem of inflation was simply passing a law to cap employee wages.  To halt the vicious cycle of escalating prices and wages.  Something employers didn’t like.  For that’s how they got the best people to work for them.  By offering them higher wages.  With that no longer an option what did these employers do to get the best people to work for them?  They started offering fringe benefits.  Which became a killer of business.

As People lived longer in Retirement Retiree Pension and Health Care Expenses Soared

Employers began offering health insurance and pensions as fringe benefits for the first time.  To get around the wage and price controls of the Roosevelt administration.  Which they had to pass on to their customers via higher prices.  So the wage and price controls failed to do what they were supposed to do.  Keep a company’s costs down.  Worse, these benefits made promises many of these businesses just couldn’t keep.

Roosevelt also empowered unions.   Who would negotiate ever more generous contracts.  By demanding generous pay and benefits for current workers.  And pensions and health care for retired workers.  But it didn’t end there.  The unions also expanded their membership as much as possible.  So in those contracts they also got very costly workplace rules.  If a lamp burnt out at a workstation the worker had to call an electrician to replace the lamp.  They could not screw in a new lamp themselves.  The unions defined every work activity in a workplace and created a job classification for it.  And only a worker in that job classification could do that work.  Which swelled the labor rolls at unionized plants.  Who all were receiving generous pay and benefits.  As were a growing number of retired workers.  Greatly increasing labor costs.

For awhile businesses could absorb these costs.  Business was growing.  As was the population.  There were more younger workers entering the factories than there were older workers retiring from them.  But things started changing in the Sixties.  The population growth rate flattened out thanks to birth control and abortion.  So as the population grew slower the domestic demand for manufactured goods fell.  While in the Seventies foreign competition increased.  So you had falling demand and a rising supply.  Making it harder to pass on those high labor costs anymore.  Which proved to be a great problem as their market share fell.  For as they laid off employees fewer and fewer workers were paying the pensions and health care costs for an ever growing number of retirees.  Pensions were chronically underfunded.  Worse, people began to live longer in retirement thanks to advances in medicine.  Increasing retiree pension and health care expenses for these businesses.  Bleeding some of them dry.

Bethlehem Steel filed Bankruptcy when they had 11,500 Active Workers and 120,000 Retirees and Dependents

Bethlehem Steel helped build America.  And win World War II.  It made the steel for the Golden Gate Bridge.  And the bridges between New York and New Jersey.  Many of the skyscrapers you see on Manhattan are made with Bethlehem steel.  Little Steel.  Second only to Big Steel.  U.S. Steel.  Big Steel and Little Steel dominated the US steel industry.  Until, that is, foreign competition entered their market.  And the steel minimills arrived on the scene.  Neither of which had unionized workforces.  Or those legacy costs (retiree pension and health care expenses).  Which spelled the doom of the sprawling Bethlehem Steel.  From 1954 to 2003 hot-rolled steel sheet prices rose 220%.  While wages soared over 900%.  And it got worse.

Employment peaked in 1957 at 167,000 workers.  By the mid Eighties that fell to 35,000.  With some 70,000 retirees and dependents.  That is, Bethlehem’s retiree costs were about twice their active labor costs.  As business continued to fall employment fell to 11,500.  While their retirees and dependents rose to 120,000.  Just over 10 retirees for each active worker.  Unfunded pension obligations soared to $4.3 billion.  Just impossible numbers to recover from.  Which is why Bethlehem Steel is no longer with us today.  The company was dissolved in 2001.  With International Steel Group (ISG) buying some of their remaining assets.  Then, in 2005, a foreign steel company, Mittal Steel, merged with ISG.  Leaving no remnants of Bethlehem Steel in American hands.

ISG got the steelworkers union to reduce the number of job classifications in the Bethlehem plants they took over from 32 to 5.  Greatly shrinking the labor rolls.  And increasing efficiency.  Helping these remaining assets to move forward.  The pension fund was taken over.  With retirees losing only about $700 million, giving retirees a pension of up to $44,386.  But retirees lost their health care.  Some $3.1 billion in spending obligations that the company couldn’t pay.  And didn’t.  A sad ending for an American great.  A failure the Roosevelt administration was responsible for.  As their good intentions resulted in unintended consequences.  Setting businesses up to fail with costly fringe benefits.  Adding yet another demand to the union’s list of demands.  Spending obligations these businesses couldn’t pay once domestic demand fell while steel supplies rose.  Leading to the inevitable.  Bankruptcy of large unionized companies.

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China raises the Price of Cotton and Chases the Textile Industry out of China

Posted by PITHOCRATES - June 9th, 2013

Week in Review

Communists think they are smarter than capitalists.  They think they can manage an economy better than market forces.  Despite the failure of the Soviet Union, China (under Mao), North Korea, Cuba, etc., there are many Western nations with activist governments.  Believing like the Chinese that smart bureaucrats can make the economy operate better than those market forces can.  But the problem is they can’t control all market forces.  So when they intervene there are always unintended consequences that usually make things worse after their intervention.  As this example in China shows (see China’s cotton procurement policy hurting textile industry by Staff Reporter posted 6/9/2013 on Want China Times).

China has jacked up the domestic price of cotton to 20,400 yuan (US$3,325) per tonne as of May 13, 4,500 yuan (US$730) higher than the international price, reports Shanghai’s First Financial Daily.

Industry insiders said that the current procurement policy does nothing to benefit cotton farmers and will have a serious effect on the domestic mid-stream textile industry, forcing many firms to move their operations overseas, the paper said…

The government has justified its cotton procurement at prices higher than international levels, by arguing that the policy can protect the interest of farmers and stabilize domestic cotton farm acreage and output, which assures the domestic supply…

The high cost has forced textile firms to abandon orders, with a growing number of firms relocating to Vietnam, Bangladesh, and India. Downstream firms, in dyeing and printing, have also been affected.

China expanded their cotton production when international cotton prices rose.  Then international prices fell.  Leaving them with a surplus of cotton selling at a price that did not recover the costs of that expanded production.  So these wise bureaucrats decided to raise the price of cotton.  And restrict imports.  Problem solved.  They forced the domestic textile industry to buy the higher priced domestic cotton.  Which, of course, raised the price of the textiles they sold.  Above the prevailing international price.  Pricing them out of the international markets.  So this economic reality forced them to relocate to a country that did not force them to purchase cotton above market prices.  Allowing them to produce textiles and sell them at prices the international markets would pay.

This is the same reason why the U.S. doesn’t have a domestic textile industry anymore.  Only it wasn’t government forcing textile manufacturers to buy cotton at above market prices.  It was the unions forcing them to pay labor at above market prices that increased the price of their textiles.  And priced them out of the international markets.  Because there are always unintended consequences whenever we interfere with market forces.  Always.  And the end result is always worse after the intervention.  Always.

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Roosevelt, Wage and Price Controls, Fringe Benefits, Health Insurance, Pensions, Unions, Bankruptcy and Bethlehem Steel

Posted by PITHOCRATES - November 20th, 2012

History 101

The Roosevelt Administration fought Inflation by Passing a Law to Cap Employee Wages

Most times when those in government try to fix things they end up making things worse.  Giving us the unintended consequences of their best intentions.  And the government had some good intentions during World War II.  They were printing money to pay for a surge in government spending to pay for war production.  As well as a host of New Deal programs.  Which sparked off some inflation.  Inflation is bad.  Enter their best intentions.

One of the biggest drivers of inflation is wages.  Higher wages increase a company’s costs.  Which they must recover in their selling prices.  So higher wages lead to higher prices.  Higher prices increase the cost of living.  Making it more difficult for workers to get by without a pay raise.  Which puts pressure on employers to raise wages.  If they do they pass on these higher costs to their customers via higher prices.  It’s a vicious cycle.  And one all governments want to avoid.  Because higher costs reduce economic activity.  And that’s how governments get their money.  Taxing economic activity.

Enter wage and price controls.  The Roosevelt administration thought the way to solve the problem of inflation was simply passing a law to cap employee wages.  To halt the vicious cycle of escalating prices and wages.  Something employers didn’t like.  For that’s how they got the best people to work for them.  By offering them higher wages.  With that no longer an option what did these employers do to get the best people to work for them?  They started offering fringe benefits.  Which became a killer of business.

As People lived longer in Retirement Retiree Pension and Health Care Expenses Soared

Employers began offering health insurance and pensions as fringe benefits for the first time.  To get around the wage and price controls of the Roosevelt administration.  Which they had to pass on to their customers via higher prices.  So the wage and price controls failed to do what they were supposed to do.  Keep a company’s costs down.  Worse, these benefits made promises many of these businesses just couldn’t keep.

Roosevelt also empowered unions.   Who would negotiate ever more generous contracts.  By demanding generous pay and benefits for current workers.  And pensions and health care for retired workers.  But it didn’t end there.  The unions also expanded their membership as much as possible.  So in those contracts they also got very costly workplace rules.  If a lamp burnt out at a workstation the worker had to call an electrician to replace the lamp.  They could not screw in a new lamp themselves.  The unions defined every work activity in a workplace and created a job classification for it.  And only a worker in that job classification could do that work.  Which swelled the labor rolls at unionized plants.  Who all were receiving generous pay and benefits.  As were a growing number of retired workers.  Greatly increasing labor costs.

For awhile businesses could absorb these costs.  Business was growing.  As was the population.  There were more younger workers entering the factories than there were older workers retiring from them.  But things started changing in the Sixties.  The population growth rate flattened out thanks to birth control and abortion.  So as the population grew slower the domestic demand for manufactured goods fell.  While in the Seventies foreign competition increased.  So you had falling demand and a rising supply.  Making it harder to pass on those high labor costs anymore.  Which proved to be a great problem as their market share fell.  For as they laid off employees fewer and fewer workers were paying the pensions and health care costs for an ever growing number of retirees.  Pensions were chronically underfunded.  Worse, people began to live longer in retirement thanks to advances in medicine.  Increasing retiree pension and health care expenses for these businesses.  Bleeding some of them dry.

Bethlehem Steel filed Bankruptcy when they had 11,500 Active Workers and 120,000 Retirees and Dependents

Bethlehem Steel helped build America.  And win World War II.  It made the steel for the Golden Gate Bridge.  And the bridges between New York and New Jersey.  Many of the skyscrapers you see on Manhattan are made with Bethlehem steel.  Little Steel.  Second only to Big Steel.  U.S. Steel.  Big Steel and Little Steel dominated the US steel industry.  Until, that is, foreign competition entered their market.  And the steel minimills arrived on the scene.  Neither of which had unionized workforces.  Or those legacy costs (retiree pension and health care expenses).  Which spelled the doom of the sprawling Bethlehem Steel.  From 1954 to 2003 hot-rolled steel sheet prices rose 220%.  While wages soared over 900%.  And it got worse.

Employment peaked in 1957 at 167,000 workers.  By the mid Eighties that fell to 35,000.  With some 70,000 retirees and dependents.  That is, Bethlehem’s retiree costs were about twice their active labor costs.  As business continued to fall employment fell to 11,500.  While their retirees and dependents rose to 120,000.  Just over 10 retirees for each active worker.  Unfunded pension obligations soared to $4.3 billion.  Just impossible numbers to recover from.  Which is why Bethlehem Steel is no longer with us today.  The company was dissolved in 2001.  With International Steel Group (ISG) buying some of their remaining assets.  Then, in 2005, a foreign steel company, Mittal Steel, merged with ISG.  Leaving no remnants of Bethlehem Steel in American hands.

ISG got the steelworkers union to reduce the number of job classifications in the Bethlehem plants they took over from 32 to 5.  Greatly shrinking the labor rolls.  And increasing efficiency.  Helping these remaining assets to move forward.  The pension fund was taken over.  With retirees losing only about $700 million, giving retirees a pension of up to $44,386.  But retirees lost their health care.  Some $3.1 billion in spending obligations that the company couldn’t pay.  And didn’t.  A sad ending for an American great.  A failure the Roosevelt administration was responsible for.  As their good intentions resulted in unintended consequences.  Setting businesses up to fail with costly fringe benefits.  Adding yet another demand to the union’s list of demands.  Spending obligations these businesses couldn’t pay once domestic demand fell while steel supplies rose.  Leading to the inevitable.  Bankruptcy of large unionized companies.

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2012 Endorsements: Benjamin Franklin

Posted by PITHOCRATES - October 15th, 2012

2012 Election

Franklin understood Wealth was not Money but the Talent and Ability of the Entrepreneurs and Artisans

Benjamin Franklin was born into the middle class.  A proud member of what he called the middling people.  Entrepreneurs.  And the very definition of what it meant to be American.  Hard-working people.  Who built success based on diligence, frugality and honesty.  People who strived to live a virtuous life.  Even if they sometimes faltered.  Franklin believed doing good works led to salvation.  He believed in God and was tolerant of all religions.  Especially if they were charitable and helped others, making the world a better place.  So when he could he gave back to his community.  And to his country.  He would die a famous rich man.  But he always thought of himself as that middle class printer.  Who worked hard.  And tried to be virtuous.  Sometimes he failed.  But he did a lot of good along the way.

When he arrived in Philadelphia he had only one Dutch dollar.  He secured employment with a printer where he worked with industry and frugality.  From his first days as an apprentice.  To when he was a small business owner.  Later, on a return trip from London, he came up with four resolutions to live a better life.  1.) It is necessary for me to be extremely frugal for some time, till I have paid what I owe.  2.) To endeavor to speak the truth in every instance; to give nobody expectations that are not likely to be answered, but aim at sincerity in every word and action—the most amiable excellence in a rational being.  3.) To apply myself industriously to whatever business I take in hand, and not divert my mind from my business by any foolish project of suddenly growing rich; for industry and patience are the surest means of plenty.  4.) I resolve to speak ill of no man whatever.

When Franklin opened his own business with a partner he put in long hours.  He worked late into the evening (even working overnight when the work required it).  And started work before most others started their workday.  Being a businessman he understood money.  And the cost of borrowing.  He favored the expansion of the money supply to lower interest rates to lower the cost of borrowing for business.  However, he also understood wealth was not money.  But the talent and ability of the entrepreneurs and artisans.  Those middling people who worked with industry and frugality who offered goods and services for sale.  Purchased largely by other middling people.  The basic barter system improved by money.

Franklin believed in Limited Government and worried about too much Social Engineering

When Franklin became a newspaper publisher (i.e., writer/printer/marketer of a newspaper) he refused to become partisan.  In part because he didn’t want to limit his income.  But also for another reason.  He believed in free expression.  And said, “Printers are educated in the belief that when men differ in opinion, both sides ought equally to have the advantage of being heard by the public; and that when Truth and Error have fair play, the former is always an overmatch for the latter.”  Words framed and hung in many a newsroom since.  But he wouldn’t print everything.  He refrained from printing things that were scurrilous.  Immoral.  Or might hurt someone personally.

Franklin believed in rugged individualism.  He worked hard to acquire wealth.  And after he did he helped his community.  He helped organize volunteer fire companies.  Suggested a progressive tax on property to pay for a full-time police force.  Improved the post office.  Organized the Pennsylvania Militia during King George’s War against the French and their Indian allies in America.  (The local militia company elected Franklin to command it but he declined, saying he was unqualified and, instead, served as a common soldier.)  He retired from his printing and media empire at 42.  Set for life financially.  Then he became a scientist.  An inventor.  Then statesman.  With always an eye to detail.  And favored being practical over being rigidly dogmatic.

Franklin believed in limited government.  And had a problem with authority.  But he also believed in order.  And a place for government.  He believed in public-private partnerships and created the matching grant (matching a sum raised privately with an equal sum from the government).  He believed in charity.  Offering a helping hand.  And he was a civil activist.  Always tried to improve his community.  However, he worried about too much social engineering.  And unintended consequences.  Even worried that by helping the poor too much government could make them dependent.  And lazy.  For he built his wealth after arriving in Philadelphia with one Dutch dollar in his pocket.  It was hard work that made his success.  Not charity or dependence.

If Benjamin Franklin were here Today he would likely Endorse the Republicans in the 2012 Election

Franklin would go on to be one of the strongest supporters of Independence from Britain.  He helped edit the Declaration of Independence.  Sat in the Constitutional Convention.  And signed both documents.  As well as the Franco-American treaties bringing the French into the American Revolution.  And the Treaty of Paris officially ending the American Revolution.  He was a Founding Father.  Perhaps as indispensable as George Washington.   So if Franklin were here today what would he think about the country he helped create?  And who would he endorse in the 2012 election?

First of all he would be appalled at the size of the federal government.  Which would be unrecognizable to him from the limited government he helped create.  He would find the taxes and regulations on business suffocating to the entrepreneurial spirit.  Dissuading who knows how many from working those long hours.  Like he did.  He spent his time doing what he loved.  Printing, publishing, writing, etc.  Not hiring lawyers and accountants to help him pay his taxes and comply with regulations.  He would like the cheap credit available to business but he would have been shocked by the level of government spending and the level of the federal debt.  For the federal government is anything but frugal.  And the size of the welfare state, the amount of people receiving federal benefits, would have confirmed his fears about too much social engineering.  The blatant bias in the media would have disturbed his nonpartisan senses greatly.  Finally, being someone who rose from the middle class and built his own wealth he would have been greatly offended by the class warfare in politics today.

So who would Franklin endorse in the 2012 election?  Well, the Democrats want to make government bigger.  They want to increase taxes and regulations.  With Obamacare being a big one that will discourage many small businesses from growing.  The current Democrat administration has been the least frugal of all administrations.  Their spending having even caused a credit downgrade.  Their stimulus bill did not benefit the middling people.  Instead, most of that money went to rich Democrat donors.  They want to increase an already immense welfare state.  Which under the current administration has set a record for the number of people on food stamps.  Other than one cable channel (FOX News) and talk radio most media has a liberal bias.  Where truth and error do NOT have fair play.  And it’s the Democrats that push class warfare.  Who want to transfer even more of the tax burden to the wealthy.  Even though the top 10% of earners are already paying about 70% of the taxes.  While the Republicans want to cut taxes and regulations.  Cut spending.  Shrink the size of government.  And provide a business-friendly environment.  So others may start a business and rise up from the middle class.  Who can then give back to their community.  Like Franklin did.  So it is likely that if Franklin were here today he would endorse the party that was closer to his political and business philosophies.  The Republicans.  And the Romney-Ryan ticket.

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Filmmakers don’t like the High Cost of Making Movies in California so they Film Elsewhere

Posted by PITHOCRATES - September 22nd, 2012

Week in Review

California provides a good example of what not to do.  That’s because they are a very liberal/progressive state.  Who like to live in a fantasyland of what could be.  Passing active, interventionist policies to try and change the way people think and act.  Unleashing a wave of unintended consequences.  And chasing filmmakers out from the film capital of the world (see California lost $3 billion in film crew wages from 2004 to 2011, report says by Richard Verrier posted 9/18/2012 on the Los Angeles Times).

California lost $3 billion in wages from 2004 to 2011 because of film and TV production flocking to other states and countries, a new study concludes.

Burbank-based Entertainment Partners, the industry’s largest payroll service company, which specializes in advising companies on how they can take advantage of film tax credits around the world, says its own research has found that California lost 90,000 jobs and saw its share of overall production wages in the U.S. decline 10% during the period as film producers took their business elsewhere.

About half the lost wages went to New York, Louisiana, New Mexico, North Carolina and other U.S. states that offer film tax credits and rebates — states that added 45,000 production jobs during the same period. The other half of the lost $3 billion went to Canada, Britain and other foreign countries, according to the report.

Wow.  They lost 90,000 jobs to states and countries that were more movie-making-friendly than California.  The movie-making capital of the world.  Which has cost the state of California taxes on $3 billion in wages.  No wonder California is going broke.  Their high taxes and high regulatory costs chase their own movie-making people out of their state.  So the very tax rates and regulatory policies that were supposed to increase tax revenue have decreased tax revenue.  Who’d a thunk it?  Well, pretty much everyone but a tax & spend, Keynesian, liberal Democrat.

They call these results unintended consequences despite having the best of intentions.  We simply call it causality.  If you implement anti-business policies you will get less business activity.  And filmmakers will go elsewhere to make their movies.

The findings were recently shared with representatives of the Motion Picture Assn. of America, the state’s finance department and the office of Gov. Jerry Brown, who is weighing whether to approve bills that would extend funding for California’s film program two more years. The state sets aside $100 million annually to qualified productions under a program that is due to expire next year.

Goldstein noted that his company’s research also shows the California tax credit has had some effect in slowing the job losses and migration of film work since it took effect in 2009 and that California would see an increase in employment if the credit was expanded.

“If California does not extend the credit, there will be more lost productions to other states and jurisdictions,” he said.

So some admit that California is not business-friendly.  That if they don’t offer special ways to avoid their punishing taxes and regulatory policies even more film business will leave the state.  Of course, if it’s happening in the film industry it’s happening in other businesses.  Which again explains why California is going bankrupt.  Their anti-business policies are chasing taxpayers (i.e., employees) out of the state.  By chasing business out of the state.

The MPAA, industry groups and labor unions have argued that tax credits should not be judged by short-term revenues alone, and that the state program is necessary to keep California competitive with at least 40 other states that offer incentives.

Vans Stevenson, senior vice president for state legislative affairs for the Motion Picture Assn. of America, said Entertainment Partners’ findings underscored the need for preserving California’s film incentive.

“Entertainment Partners’ data shows definitively that the production tax incentives have helped to stem the flow of jobs and wages out of California, and that the incentives are vital to California’s competitiveness,” he said.

Apparently it’s just not just the high taxes and high cost of regulatory policies chasing business out of the state.  It’s also the high cost of union labor.  For the unions are admitting that they make the state of California uncompetitive in the film industry.  And want tax credits to offset their high costs to bring the film business back.  That is, they want the taxpayers to subsidize that portion of their pay and benefits that chases business out of the state.  So they can keep their jobs.  They want taxpayers to take a pay cut (by paying higher taxes) so they don’t have to.  That’s fair, right?

California is a liberal state.  They like to run and regulate business the way they want to.  Not how business would like.  And when these policies chase business away they want higher taxes to subsidize the high cost of their anti-business policies.  To help business escape their punishing policies.  And bring that business back.  Which further raises taxes.  And chases more business away.  In effect killing the golden goose that pays for their generous public sector pay and benefits.  Which are currently bankrupting the state of California.

We need to learn from California even if California cannot learn from their own mistakes.  Anti-business policies are bad.  And will encourage businesses to leave the state.  Businesses hire people.  Who become taxpayers.  Taxpayers pay all the government’s bills.  Governments need to understand this connection between businesses and paying the bills.  For there is no other way to pay the bills without businesses and their private sector jobs.

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FT133: “Liberal Democrats want to run our lives because they are far smarter than the people voting for them.” —Old Pithy

Posted by PITHOCRATES - August 31st, 2012

Fundamental Truth

People like to Laugh and not get Weighed Down with the Serious Issues so they Watch the Fake News and SNL

Those on the Left are suave.  Hip.  Cool.  Funny.  And boy are they full of self-confidence.  They are so sure of themselves that they sound like they know everything.  That they are smarter than the average person.  Especially when they speak with arrogance and condescension.  When they laugh with all-knowing condescension and smirk they just seem like people we should agree with.  And many do.  For they sound so smart that they must know what they are talking about.  Besides, these people are the suave, hip, cool and funny people on television we so enjoy watching who are saying this.  We like these people.  And want to be like them.  So we make disparaging comments about conservatives like they do.

The people who get their ‘hard news’ from Jon Stewart on the Daily Show or from Stephen Colbert on the Colbert Report are probably like the people in their audiences.  Who laugh longer and harder when the humor is more derogatory.  Disparaging conservatives.  Or Republicans.  They are there for the laughs.  And they love the conservative insults.  Those watching at home laugh, too.  Because they have been conditioned for so long to laugh at conservatives.  From listening to their classmates in schools.  Their teachers.  Their professors in college.  Movies.  And, of course, television.  From the fake news shows.  To Saturday Night Live.  That made belittling conservatives an art.

These people like to laugh.  To enjoy life.  And not get weighed down with the serious issues.  Which is why they watch the fake news and SNL.  To escape.  And enjoy a good laugh.  But because they don’t like getting weighed down with the serious issues they typically don’t watch serious news.  So most of the news they get is from the fake news shows.  SNL.  And the liberal talking heads on the opinion/news shows that are more opinion than news.  And even on these opinion/’news’ shows they take cheap potshots at conservatives.  Laugh.  And smirk.  Which reinforces what they saw on the fake news shows.  Giving these derogatory attacks on conservatives more legitimacy.  Making them mainstream.  Normal.  And, therefore, correct.

Do those on the Left know their Idol, JFK, was a Tax-Cutter like Ronald Ragan?

As you watch these shows and hear these guffaws at the expense of some conservative have you ever wondered how much these people understand the underlying issue that their lampooning the conservative about?  Do they have a fundamental understanding of economics?  Can they differentiate Keynesian economics from the Austrian school of economics or the Chicago school?  Do they understand the connection between monetary policy and inflation?  Do they understand the affect of the population growth rate on government spending?  Here’s a hint.  Think of why Social Security and Medicare are going bankrupt in the very near future.  What’s the connection?  If the number of taxpayers grows at a slower rate than those retiring from the workforce you get what we have today.  And no amount of taxing the rich can change that.

Can they name the Founding Fathers?  Do they know what each did to help found the nation?  Other than own slaves?  Do they understand that they abandoned a slave-based economy in the North because it was a very inefficient economic model?  As well as immoral.  Slavery didn’t make the nation rich.  It only made a few southern plantation owners rich.  Do they understand why there was slavery in a nation built on liberty?  It was the only way to get the southern plantation owners to join the union.  And the southern plantation owners held power in the southern states.  If the large union failed there would have been smaller unions of states.  In the northeast.  The middle states.  The south.  In the west.  With the British, French and Spanish at their borders.  Had the northern states had their way on the issue of slavery at the Founding there would not have been a United States.  But more of the Old World in the New World with the constant fighting that has plagued the Balkans.  Don’t believe that?  Well, it has happened.  America’s bloodiest war, the American Civil War, was a war between sectional interests.  Which the South lost because they and their slave-economy was poorer than the non-slave North.  And finally on the issue of slavery do they understand that it was the Republicans that ended slavery?  That the Democrats pushed the Jim Crowe Laws?  That the Democrats filibustered the Civil Rights Act of 1964?  And that more Republicans voted for that act than did Democrats?  I’m guessing when those on the Left who call Republicans racists do not know the history of the United States.

Do those on the Left know their idol, JFK, was a tax-cutter?  Who favored trickle-down economics?  It’s true.  His policies of tax cuts produced an economic boom.  Just like they did when Ronald Reagan continued the work started by JFK.  Which was rudely interrupted by LBJ, Richard Nixon, Gerald Ford and Jimmy Carter.  Do they understand that using corn for fuel leads to higher grocery prices?  And more hunger in the less developed world?  Do they understand that if everyone drove an electric car that it would be equivalent to adding one air conditioner on the electric grid for each car?  And the only way to meet that additional demand is by adding more coal-fired power plants?  Producing more air pollution than the cars they replaced?  Of course they don’t know this.

People tend to Vote Conservative because of what they Know not what they Feel

Those on the Left have little understanding of what their policies will do.  As they’ve littered the nation with the unintended consequences of their best intentions.  Which typically makes whatever problem they’re trying to fix worse.  Such as trying to help single mothers with AFDC.  Aid to Families with Dependent Children.  That relieved fathers of their parental responsibilities by having the state be husband and father.  Which destroyed poor families in the inner city.  But despite their failures the Left continues with more of the same.  Resorting to the same old attacks on conservatives.  Knowing that those on television will take their cheap potshots, laugh, smirk, disparage and condescend.

They hate conservatives.  Not for any rational reasons.  They just have been conditioned to.  And those on television are wealthy enough that they don’t have to live in the real world where they have to deal with those unintended consequences.  Insulated from the fallout of horrible policy they can go through life whistling a happy tune.  Knowing that even though the policies they support have failed they can feel good about themselves because they had the best of intentions.  That they care.  They are so sure of themselves that they could never conceive that they could, perhaps, be wrong.  And the reason why they are so arrogant, condescending and downright mean is that conservatives don’t accept their infallibility.  While these uppity conservatives dare to believe they could actually be right.

Liberals believe that not only can they be right but that they always are right.  Because they are so much smarter than the average person.  Which is why they believe they should run our lives.  People have other things to worry about.  Like sitting in the audience of a fake news show.  These people need help.  Because they can’t get by in life without a progressive government looking out for them.  Life is complicated.  And hard.  They need help.  They need smart people looking out for them.  So these people vote liberal.  To leave the governing to experts.  So those who can’t live without the help of smarter people providing for them decide who those smarter people are.  Even though they are the least qualified to do so.  For it’s not the people who have a fundamental understanding of economics voting for liberals.  People who understand our history.  Those who run small business.  The fiercely independent with rugged individualism.  The people who have built this nation.  No.  These people tend to vote conservative.  Because of what they know.  Not what they feel.  Like others do.  Like those who vote liberal.  Because they don’t know any better.  But feel good about who they vote for.

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LESSONS LEARNED #84: “The bigger and more complex government gets the more unintended the consequences.” -Old Pithy

Posted by PITHOCRATES - September 22nd, 2011

Prohibition had Popular Support from Wives, Progressives and Organized Crime

The Progressive movement began changing our lives in the beginning of the 20th century.  Thanks in large part to the American Civil War.  After a generation of American fathers were killed by the ravishes of war a lot of sons grew up without a manly role model in their lives.  They had no father to learn manly chores from.  To go hunting with.  To beat the crap out of them when they misbehaved.  To toughen them up for the real world.  Instead all they got was the loving and nurturing stuff from their mothers.  And when they grew up they wanted to be mothers, too.  And nurture the American people.  For mother knows best.

When these children grew up they changed government.  Instead of it being the limited government of their fathers they wanted an activist one.  To make our lives better.  More fair.  And safer.  Which is why they supported the temperance movement.  And took it to Prohibition.  To save the American family.  To stop drunken husbands from beating their wives.  To prevent poverty by keeping the money in the family.  And out of the saloons.   To stop the epidemic of venereal disease.  Spread by prostitutes who frequented saloons.  Trying to get some of that family paycheck.  Before the saloon owner got it all.  So Prohibition had popular support.  From wives.  Progressives.  And organized crime.

This was an unintended consequence of Prohibition.  For the law prohibited “the manufacture, sale, or transportation” of booze.  But not the drinking of it.  And when there’s a will there’s a way.  There were people who still wanted to drink.  And could without facing any consequences for it if caught by the law.  So they kept drinking.  And there was a booming demand.  And a willing albeit illegal supply network to meet that demand.  So life was good.  For those who liked to indulge in inebriating beverages.  And for those who provided those inebriating beverages.  Especially the providers.  Because when you make anything illegal that is in high demand means only one thing.  High profits.

There’s a Profit Incentive for Criminals because Illegal Stuff Costs More than Legal Stuff

At first everyone laughed as they flaunted the law.  It was, after all, a victimless crime.  People wanted to buy.  And the underworld wanted to sell.  No harm.  No foul.  For awhile.  Until the gang violence spilled over into the public streets.  When innocents saw this violence up close and personal.  Some even dying in the crossfire.  Like in Chicago.  Owned for a time by Al Capone.  King of the bootleggers.  Who killed off the competition.  The Valentine’s Day Massacre being the tipping point.  When the cops started fighting back.

The FBI eventually got Capone.  On tax evasion.  But it didn’t end the violence.  You know what did?  The repeal of the 18th Amendment.  And letting the people drink again.  Which they really needed during the depressing New Deal programs of FDR.

By decriminalizing alcohol they removed the profit incentive for criminals.  Because illegal stuff costs more than legal stuff.  So there’s no market for bootlegged liquor anymore.  So the gangs turned to another illegal substance.  Drugs.  Whose criminalization has far worse unintended consequences than Prohibition ever had.  We can trace most violent crime in the U.S. to drugs.  From theft to support a drug habit.  To Capone style gang warfare to protect turf.  To the unspeakable horrors on and south of the US-Mexican border.

The Decriminalization of Drugs:  Damned if We Do.  And Damned if We Don’t.

So what is one to do?  Decriminalize drugs?  Not quite the same thing as ending prohibition.  Drugs are a little more potent than alcohol.  Especially methamphetamine.  Crystal meth addiction destroys lives.  Which is why it’s such a lucrative drug.  You can manufacture it anywhere from chemicals.  And it’s addictive.  Addiction provides a steady demand.  And its chemistry provides a readily available supply.  That you can hide.  Unlike Coca fieldsPoppy fields.  Or marijuana fields.

Meth has a strong foothold in the drug-taking community.  Despite it being illegal.  One shudders what would happen if we decriminalized drugs.  Like meth.  It’s potent.  Addictive.  And popular with the kids.  It takes a fake ID to buy alcohol when underage.  Because there are few pushers selling cases of beer and wine coolers on the street.  But if an adult can buy it legally it could be hard for a drug dealer to pass up the underage market.  I mean, there are no empty bottles or cans to trace back to a store.  And if you’re caught carrying, hey, it isn’t illegal.

So we’re damned if we do.  And damned if we don’t.  The war on drugs has a devastating cost on society.  But the drugs are so harmful.  And helping users break their addiction also costs society.  Broken families.  Lost jobs and careers.  Children addicts can no longer provide for.  Infectious disease.  Overdose.  Violence.  Criminal activity.  And decriminalizing drugs won’t make any of that better.

The Poorer You are and the More Children You Have the More Money You Get on Your EBT

America has been fighting another war.  A war on poverty.  Which probably has been more destructive than the war on drugs.  Economist Thomas Sowell blames the welfare state for the destruction of the black family.  By subsidizing failure.  Providing incentives not to succeed.  A disincentive to be responsible.  The very programs to help the poor have destroyed the poor.  With unintended consequences that have destroyed generations.

This video was from 1980.  Fast forward to today and you can see this put in another way.  Perhaps a little less elegantly.  But it reinforces Dr. Sowell’s argument.  There’s a video on YouTube that praises the EBT card in California.  A program to help poor single people with children.  Depending on the number of children and your circumstances, the government loads a dollar amount on the EBT card.  You then use it like a debit card.  At any store that accepts EBT.  The government then reimburses the store owners.

So the poorer you are and the more children you have the more money you get on your EBT card.  As Dr. Sowell pointed out, this may be a disincentive to be responsible.  And the YouTube video shows this.  We should note, though, that the rapper who made this video said that “it was meant to be satirical and poke fun at a real issue.”  Some have called it inappropriate.  You can judge for yourself after you watch the video.  (NOTE:  If you’re at work or are in a public place you probably should wait until you get home to watch this video.  It contains very graphic language (as in the ‘f’ word).  And may be racially insensitive.  Please exercise due discretion when viewing It’s Free, Swipe Yo EBT.)

Government may have Meant Well but the Road to Hell is Paved with Good Intentions

Prohibition made it harder to manufacture and distribute alcohol.  But people still drank.  Because it wasn’t illegal to drink.  At first it was just a game.  Imbibing at the speakeasy.  Then buildings exploded.  And bodies littered the street.  Much like they are in Mexico today.  And along the US-Mexican border.  Because well organized enterprises are trying to meet a lucrative demand north of the border.  That our drug policies made lucrative.  Just like Prohibition made bootlegging a lucrative business.

Unintended consequences are a bitch.  And whenever government tries to fix something we often get something worse.  Prohibition and our war on drugs have given us organized crime to deal with.  And our war on poverty has destroyed poor families.  By incentivizing irresponsible behavior.   And making generations dependent on government.

At every time, though, government meant well.  They always say that they had nothing but good intentions.  But we should remember what they say about good intentions.  That the road to hell is paved with good intentions.

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FUNDAMENTAL TRUTH #84: “The bigger and more complex government gets the more unintended the consequences.” -Old Pithy

Posted by PITHOCRATES - September 20th, 2011

Filthy, Stinking Hippies never Liked Income Disparity.  Or Real Work.

Say you’re a server at a nice restaurant.  And you’re really good.  People ask to sit in your section.  For your prompt and courteous service.  And they show their appreciation.  With big tips.  And frequent trips to the restaurant.  Good food.  And great service.  It’s what makes a restaurant successful.

Now let’s say the restaurant owners retire and turn over the business to their children.  And let’s say they’re liberal Democrats.  Children of the Sixties.  Hippies.  Filthy, stinking hippies.  And still are.  Though they may bathe more these days.  Anyway, they take over the exploitation of the working class in this bourgeois restaurant.  (They see all business in these terms.)  And they’re going to make some changes.

They never liked the income disparity they saw between the servers.  (Or real work for that matter.)  And they don’t like you.  Because you’re getting more in tips than the other servers.  And that just isn’t fair.  You’re just lucky to get better tables.  As if you won some lottery in life.  It’s only blind, dumb luck that makes you the high earner in the restaurant.  So they’re going to level the playing field.  Make it fair for everyone.  Not just for the rich.  You.  But for everyone.  From now on all tips go into a jar.  And at the end of the day they will divide those tips evenly between all servers.  Everything fair.  And everyone happy.

People don’t Approve of Slavery and Prefer to Keep the Fruits of Their Labor

Or so they would believe.  Because you’re not going to be happy, are you?  I mean, you know why you made more in tips.  You provided exceptional service.  And your reward for your hard work?  A punitive tax.  They’re going to share part of your tips with the less exceptional servers.  So what will you do?

I’m guessing that you’re not going to say, “Vive la revolución.”  And work even harder.  Instead I’m betting that you will be looking for a new job.  At a restaurant that rewards hard work.  And if there are no other food service jobs available?  Because liberal Democrats are in power?  And they’ve killed the economy?  Well, then, you just won’t work as hard.  Because you don’t approve of slavery.  Having the fruits of your labors given to others.

So the new owners, the filthy, stinking hippies, will lose their best server.  And soon will notice a steady decline in the quality of service.  For their servers quickly learn that working harder doesn’t mean any more pay.  So they don’t.  Work harder.  Food sits in the kitchen longer.  By the time they serve it to the customers it’s lukewarm.  They don’t refill drinks.  Customers begin to complain.  Even about the quality of the lukewarm food.  The executive chef quits.  Business drops off.  The business goes into debt.  Losing some $10,000 each month.  And things get so bad under the new owners that not even Robert Irvine could save this restaurant.

The new owners thought their way was going to make a better work environment for their employees.  But the only workers who liked the new policies and stayed were their worst employees.  All the good ones quit.  And those who remained lost their jobs eventually as the business finally went under.  So everyone in the end lost.  Because these hippies thought they knew what was best for everyone.

Accidents Sometimes Happen when Men Control Complex Machines

So bad ideology has unintended consequences.  But complex systems to simplify complex things also have unintended consequences.

The modern jetliner is a complex machine.  They can literally take off, fly and land themselves.  But don’t.  Pilots still take off.  And land.  But the other 99% of the time these aircraft fly themselves.  Pilots input data into the flight computers.  And the computers fly the aircraft.

So pilots don’t fly as much as they used to.  They log a lot of hours in the cockpit.  But they’re not really flying.  They’re operating computers.  Pushing buttons.  Turning dials.  And communicating with air traffic controllers.  They’re not ‘connected’ to the aircraft like in the old days.  Fly-by-wire technology insulates the pilot from the flight controls.  The days of stick and rudder are gone.  When a pilot was one with the aircraft.  Through constant feedback via the senses.  Flying by the seat of the pants.  When a hand on the steering column told a pilot how the plane was flying.  Even while on autopilot.  While having a conversation with a flight attendant standing in the cockpit door.

Back then you needed far more piloting skills than you do today.  Because there were no flight computers.  Like they have today.  That’s why a lot of pilots came out of the military.  Because the military pushed pilots in their training.  Taught them to fly through anything that can happen while flying.  Including recovering from a stall.  Something that just doesn’t typically happen in a modern jetliner these days.

Pilot error has accounted for the majority of accidents.  So removing the pilot from the ‘flying part’ of flying an airplane made sense.  And it would make aviation safer.  And it has.  This is not to criticize pilots.  It just shows that accidents sometimes happen when men control complex machines.  So reducing the amount of time the pilot is in control of the aircraft makes them safer.  That is, as long as the computers have good data.

The Safer You Make Flying by Removing the Pilot from the Flying the less Skilled Pilots Become

And that’s a problem.  Sometimes the computers don’t have good data.  For various reasons.  Such as iced up airspeed sensing pitot probes.  Which has happened a few times.  Giving false airspeed data.  Or sometimes conflicting airspeed data.  There’s more than one probe.  And different flight computers get their airspeed from different probes.  One could show a dangerous high airspeed.  Another can show the actual airspeed.  Giving a pilot a bit of a problem.  Which is compounded if that pilot spent more time inputting data to a computer than flying.  Because when computers get bad data they often disengage.  And the modern pilot will spend most of his or her time trying to reengage it.  Instead of flying the airplane.  As they are trained to do.  Because it’s safer.

A dangerous high airspeed indicates that the plane may be accelerating.  Past its maximum airspeed rating.  Which could make the plane break up in flight.  So a pilot may pull back the engine throttles.  To slow the plane.  To keep it from breaking up in flight.  Of course, if that was an erroneous airspeed, the pilot will only slow the plane down.  And perhaps cause it to stall.  And that has happened, too.

A plane has a ‘stick shaker‘ to warn the pilot of a potential stall.  Normally after you get a stick shake you push the yoke forward to lower the nose and pick up speed.  Of course, if you just got an over-speed warning you might not do this.  And you may interpret that stick-shake as buffeting from the plane just before it breaks up in flight.  So you may raise the nose.  And pull the throttle levers back. To slow the plane down.  And that’s exactly what you will do.  Slow the plane down.  Right into a stall.  Which is flying too slowly to create lift with the wings.  And once the plane stalls it will just fall out of the sky.

There’s a tradeoff in aviation.  The safer you make flying by removing the pilot from the flying the less skilled pilots become.  So when something happens, such as an erroneous airspeed indication, their initial reaction is to fix the computer.  Not fly the airplane.  And planes have fallen out of the sky because of this.  Because even the simple problems don’t have a lot of time to fix.  An old-school pilot who flew B-52s, on the other hand, would probably say something like this.  “Hot damn.  The idiot box is broken.  Now I get to fly this son-a-bitch.”

When Legislation goes Wrong those in Government Simply Say they had Nothing but the Best Intentions

Every time you try to make something too complex.  Or try to change human behavior.  You are going to get unintended consequences.  Always.  Because complex things are complex.  And people are like snowflakes.  No two are alike.  And it is the height of arrogance to believe that you know an individual better than they know themselves.  Or that ‘one size’ fits all when it comes to solutions.

But that’s government.  Complex.  And where the few think for the many.  And decide what’s best for them.  This is a recipe for unintended consequences.  Which is why so much of their legislation goes wrong.  And when it does they simply say they had nothing but the best intentions.

Of course, you see what good intentions can do in a restaurant.  Or in a jetliner at 30,000 feet.

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LESSONS LEARNED #61: “The political elite has always exploited blacks.” -Old Pithy

Posted by PITHOCRATES - April 14th, 2011

The New World leaves old Prejudices in the Old World

Americans hated Catholics.  And why not?  Most Americans were British.  In the 18th century.  When Protestant Great Britain was forever at war with Catholic France.  Since the Reformation, it’s what Protestants and Catholics did.  Hated each other.  You just did it.  Eventually you would learn why.  But by then you were already hating.

Also, in the 18th century, slavery was part of normal life.  As it had been for centuries.  Slavery was often the misfortune of a conquered people.  Part of the social strata.  Or simply an economic tool.  Such as used in Mercantilism.  As European powers established colonies, they needed bodies to exploit the raw material and send it back to the mother country.  And the ‘godless’ people they were able to buy from African slave traders were perfect.  These ‘savages’ were little more than animals.  Struggling to live in a hostile environment.  They were better off in slavery.  In the New World they would have food and shelter.  And their masters would protect them from their hostile environment.  The way they saw it, they were doing them a favor.  Or so went the prevailing thought of the day.

During the Revolutionary War, George Washington commanded an army made up from all the colonies.  They were mostly Protestant.  But it also included Catholics.  So he had to tone down the anti-Catholic sentiment that was pretty pervasive among many of these British Americans.  And then there was a march into Canada by General Benedict Arnold.  To get the Catholic Canadians (once a French colony) to join the American cause.  (They passed on the offer.)  And so it was in the Army that the American cause transcended religion.  For it was in the army where the Protestant fought side by side with the Catholic.  As well as the free black.  Who yearned for that liberty, too, that the Americans were fighting for.  Giving Washington pause for thought.  Protestant.  Catholic.  Black.  White.  They were all people.  Americans.  This thing they were fighting for was greater than the individual colonies.  The New World would in fact be a new world.  The prejudices of the past would be left in the Old World.  And he learned that in the Army.  Where America was truly born. 

The Three Fifths Compromise Empowers the Planter Elite

It was many of these Army veterans that championed religious freedom.  And the abolitionist movements.  But the pull of the Deep South was strong.  Their planter elite, though a minority of the population, dominated political power.  Much like the landed aristocracy of feudal Europe.  They had money, power and influence.  Their view of the Revolutionary War was different than George Washington’s.  They weren’t looking to build anything greater.  No.  They just wanted to get rid of the British.  And go back to the way things were.

With the war won, that’s exactly what a lot of people did.  Go back to the way things were.  There were problems, though.  War debt, for one.  And a lack of unanimous consent.  The Confederation Congress required a unanimous vote to do anything.  Which was a rare thing.  The sectional interests were just too strong.  So in 1787, they gathered in Philadelphia to write a new constitution.  And create a new nation.  It wasn’t easy.  During the ratification process, some holdouts agreed to ratify if they added a Bill of RightsJames Madison agreed to this and worked tirelessly in the first Congress to deliver on this promise.  The issue of slavery?  That was a different story.

The Deep South would join only if the subject of slavery was off the table.  They agreed.  Tabled it for 20 years.  Give the South time to figure out how to end slavery.  Then they settled on issues of taxation and representation.  The majority of the southern population were slaves.  If they couldn’t count them to determine representation in the new government, the Deep South would have no say in the new federal government.  So they agreed on the Three Fifths Compromise.  They would count slaves as 3/5 a person.  It was a high price to pay for compromise.  For it gave the planter elite of the Deep South a disproportionate vote in Congress.  And in the Electoral College.  Which meant that this minority in the Deep South determined much of American policy until the Civil War.  Thanks to a large black population that couldn’t vote.

Liberal San Francisco:  White, Right and Out of Sight

San Francisco is an interesting town.  They don’t come much more liberal.  Or whiter.  Liberals are lucky if they’re 20% of the national population.  But a good chunk of that 20% apparently lives in San Francisco.  Nancy Pelosi coasted to reelection in 2010 with 80% of the vote even though her national approval numbers were horrible.  Her favorable ratings barely broke 10%.  In other words, the American people were sick of her and her far left liberal agenda.  They voted a bunch of her cronies out of the House of Representatives, and her from the Speakership, transferring control from the Democrats to the Republicans for the first time in a long time.  Her views are definitely not America’s views.  But they’re clearly San Francisco’s views.

Of course, many of the good people of San Francisco think that the other 80% of Americans are just too dumb to know better.  We exasperate them.  For they are the enlightened people.  The intelligentsia.  The caring.  And they were the first to drive hybrids.  Even South Park ridiculed them for that.  Calling San Francisco the smuggest place in America.  Where they like the smell of their own farts.  And they may very well like to smell their own farts.  But you know what they don’t like?  Black people (see Blacks and Republicans by Thomas Sowell posted 3/15/2011 on National Review).

The black population of San Francisco is less than half of what it was in 1970, and it fell another 19 percent in the past decade…

Blacks are being forced out of San Francisco — and out of other communities on the San Francisco peninsula — by high housing prices…

The black population in three adjacent counties on the San Francisco peninsula is just under 3 percent of the total population in the 39 communities in those counties.

It so happens that these are counties where voters and the officials they elect are virtually all liberal Democrats. You might be hard pressed to find similarly one-sided conservative Republican communities where blacks are such small percentages of the population.

So, in other words, rich liberals love to have black people vote for them.  But they don’t want to live anywhere near them.

AFDC and Abortion and the Black Family

America changed in the 1970s.  The sexual revolution was in full force.  Women’s liberation.  Abortion and birth control.  And all the feel-good programs of LBJ’s Great Society to end poverty and racial injustice.  The liberals were changing America.  The black community.  And the neighborhoods of San Francisco.

Aid to Families with Dependent Children (AFDC) caused an epidemic in children being born out of wedlock.  Because the government was paying single women per baby they had.  So they kept having babies.  Because an inexperienced young man couldn’t get a job that would match the generosity of the government.  And it was a lot easier than being a working single-mom.  So kids grew up without a father.  Spent a lot of time on the streets.  Getting into trouble.  This destroyed families in poor neighborhoods.  Which also tended to be black neighborhoods.  It was the worst of unintended consequences.  But it sure did make the recipient of these benefits life-long Democrats.  Because if you have no skills and a large family to raise, what else are you going to do but depend on those government benefits?

Of course, liberal policies weren’t all about having babies.  They were also helping to provide a lot of abortions, too.  To empower women.  To fully liberate women and make them equals in the workplace.  Because they could now do anything a man could do.  Except pee while standing up.  But they could fool around like a man.  And not have to worry about the consequences.  Just like a man.  So with abortion, birth control and a sexual revolution going on, you can guess what a lot of people were doing.  Having consequence-free fun.  If you know what I mean.  But much like AFDC, this liberation appears to have hit the black population especially hard.  A black woman is three-times as likely as a white woman to get an abortion.  And it is the only demographic where abortions exceed live births. 

Abortion is a very controversial subject with data that is often politicized.  Also, there may be other extenuating circumstances that result in these numbers.  But it shows a trend.  Liberal policies have unintended consequences.  And blacks have suffered a disproportional share of these consequences. 

The Democrat Party is the Party of Slavery and Institutionalized Discrimination

So what does this tell us about rich liberals?  First of all, they’re mostly white.  They claim that they are not the racists yet their actions indicate otherwise (San Francisco is mostly liberal and mostly white).  Their views are a minority view.  The 2010 midterm elections clearly showed that.  Yet they wield some of the greatest political power.  How do they do that?  By pandering.  To the labor unions.  The public sector unions.  The teachers.  That usual bunch that benefits by liberal policies and liberal spending.  And, of course, blacks.

When you look at the history, the Democrats haven’t been all that kind to black America.  It was the Southern Democrats who did their best to perpetuate the institution of slavery.  It was the Southern Democrats that institutionalized discrimination in the South following the Civil War.  Yes, the Civil Rights Act was passed by the Johnson administration but it was the Republicans in the House and Senate that made that possible.  The Democrats had majorities in both houses but about a third of their members were against it.  Whereas only a fifth of the Republicans were against it.  In the final House vote, all the Southern Democrats needed was to get 37% of the Republicans to vote against it to stop its passage.  Instead, 80% of Republicans voted in favor of it.  And then, of course, there’s AFDC.  Thomas Sowell blames this (and the liberal welfare state) for destroying the black family.  And the black abortion stats would probably be called genocide in another country.  Some even call it that here.

Which brings us back to the teachers.  Because when you look at these numbers, it is clear that liberal policies have not been good to black families.  But the teachers are in tight with the liberals.  I mean, with their generous pay and benefit packages they get without the taxpayer having a say in their contract negotiations, why wouldn’t they?  The government takes care of them and they take care of government.  They emphasize multiculturalism, fairness and progressive thought.  And downplay history.  The Founding Fathers play minor roles in today’s textbooks.  But students today can all tell us that the Founding Fathers owned slaves.  But they seem to forget the part about Abraham Lincoln, the Great Emancipator, being a Republican.  And that the freed blacks voted for Republicans to protect themselves from racist Southern Democrats.  

Meet the New World.  Same as the Old World.

And then along comes Barack Obama.  The ideal liberal candidate.  And first black presidential candidate.  Because of our public education there is a lot of white guilt over slavery.  So a lot of white America would probably vote for Obama to assuage that guilt.  Which included a large part of those crucial independent voters.  Things were looking up.  But could he deliver the black vote?  He graduated from Harvard Law School.  Columbia University.  He’s an Ivy League guy.  Very professorial.  He could lecture the people.  So well that it offended some.  The Reverend Jesse Jackson said then candidate Obama talked down to black people.  He didn’t like that in the least.  Even said that he wanted to “cut his nuts off.”  So it wasn’t a sure thing.  The black vote.

Of course, Obama won that election.  He took 53% of the vote to McCain‘s 46%.  And the black vote?  All but 4% voted for Obama.  No one gets 96% of the vote.  Unless you’re a dictator in a third world country.  With blacks making up approximately 12% of the U.S. population, it is clear that the black vote determined the election.  For if the black vote followed the same percentage break down of the general vote, McCain would have won the election.

So here we are, some 150 years after the Civil War and the black population is still being exploited by the political elite.  The planter elite maintained power for half a century thanks to the Three Fifth Compromise.  And liberal Democrats today use the liberal welfare state to make as many blacks as possible dependent on government.  Use their control over the public school system to hide the failure of their policies.  Their destruction of the black family.  And their racist past.  To maintain their political power.  And minority rule.  Some things never change.

Meet the New World.  Same as the Old World.  Sadly.

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