Sunday, April 19, 2015

'You Are Entitled to Your Own Opinion. You Are Not Entitled to Your Own Set of Facts'

Former Democrat US Senator Daniel Patrick Moynihan of New York used to punctuate his speech with the following quote as he debated the finer points of welfare reform, entitlement reform and budget sanity:

'You Are Entitled to Your Own Opinion. You Are Not Entitled to Your Own Set of Facts'

If the Democrat Party ever returned to the point of view that old-line liberals such as Senator Moynihan and most Southern Democrats used to hold that budgets must be balanced, entitlements must be radically reformed, waste in government must be eliminated and taxes should be kept as low as possible, they may obviate the need for any political party to challenge them.

That doesn't look like it will ever happen in the aftermath of the Obama years. Does it?

There has been a lot of talk lately about 'income disparity'; the minimum wage and the 'low' (sic) unemployment rate. A lot of it is fueled by polling, much of the time with the general public, many of whom are not registered to vote and therefore, not really critical to future elections (until and unless they register to vote though in the meantime).

A lot of it is fueled by political operatives and spinmeisters seeking to gain political advantage one way or the other. Most of it is predicated on their knowledge that the vast majority of the American public is either not interested in digging to the bottom of these complicated issues to know the truth; they implicitly trust their elective representatives to 'be honest' (sic) and do the background work for them; or they plain just do not care one way or the other at all.

Let's take a closer look at these 3 issues named above and see if we can help you, at least, become a source of solid wisdom by getting you in touch with the raw data you need to help others see things in a new light:

1) 'Income Disparity'

There has been 'income disparity' since the dawn of mankind.

The biggest and strongest used to get the majority of the food necessary to survive in prehistoric times. Kings and queens used to rule their subjects through feudal systems that allowed them to live in vast luxury while most of their subjects lived in squalid conditions. Even up until the 20th century, the disparity between the truly very upper-class of income earners and net worth owners was enormous.

One of the most successful democratizing forces in human history, free market capitalism, has brought hundreds of millions of people in America and around the globe up into relatively high standards of living that anyone in the 18th or 19th century would have found simply unbelievable.

The mere fact that a vast majority of American households have air-conditioning, refrigerators, cell phones and very expensive Nike shoes is proof-positive that something very special has happened in America and other nations where democracy and capitalism have been allowed to flourish. The number and percentages of Americans who have gone up the livability index over the decades is simply astonishing when compared to other less developed nations or even our own relatively short American history.

Know how many people in America make over $1 million per year in net income according to the IRS? We know all the NFL, NBA and MLB professional athletes are comfortably in this high-income category as are all the entertainers, actors, rap stars and reality stars such as Kim Kardashian that everyone knows about.

No one seems to ever be upset that LeBron James or Lady Gaga make millions of dollars per year, do they? Tell the same people that some corporate executive is making $5 million running some business he/she started, nurtured, suffered through and built and they go crazy like the big bad businessman has stolen something from everyone else in the society simply by providing a product or service they want to buy.

The answer is about 250,000 income-earners earn over $1 million in income in any given year.* Out of an overall population of about 140 million tax returns, which includes joint returns between spouses.

That is just 0.1% of the entire population of America.

The number of people making over $10 million per year who filed returns? Based on 2009 IRS data, 8,274 people. 0.006% of all people living in America.

When we are talking about 'income disparity' in America, we are talking about a very tiny fraction of very successful people versus the vast majority of people who make less than $200,000 per year. It is hardly an epidemic of biblical proportions that a lot of people are making out like bandits while the rest of America suffers from them 'stealing' money from the rest of us as the news media would want to have you believe so the rest of their narratives make some sort of sense.

97% of Americans make under $200,000/year which doesn't sound as bad as the media tries to make the issue of income disparity look, does it?

2) Minimum Wage

Didja see the story about the guy in San Francisco who has decided to pay all of his workers $70,000/year? Even people who presumably would have worked otherwise for minimum wage for a number of years before getting raises based on merit, length of employment with the company and ability?

We hope he succeeds. It is his money and his company. He can do whatever he wants to with his money and company is our honest opinion.

It will be interesting to see how the more talented people with more work responsibilities will respond to this flattening out of the pay scales. There is something in everyone's wired human nature that tends to compare their work effort and output with others in any setting be it work, government or professional athletics.

Think Michael Jordan would have ever acquiesced to being on the same Chicago Bulls team where Scottie Pippen and Steve Kerr and the benchwarmers all made the same amount of salary as he did at a far lower level than he actually earned as he led them to 6 NBA Titles? Doubtful. Very doubtful.

For some reason, perhaps again because of the bias of the media, people don't begrudge the fact that LeBron James and Michael Jordan can make $1 billion playing a game with short pants on but some businessman in a 3-piece suit who runs a company with 100,000 employees to watch over and take care of by making the right business decisions gets creamed if it is reported that he makes $10 million in salary one year with $25 million in exercised stock options.

It is just out of whack when it comes to objective reporting.

We have talked about the minimum wage debate before and how skewed it is in the media versus reality.

The truth is that very few people start their working careers at the minimum wage...and stay there for the entirety of their working lives. The Bureau of Labor Statistics issued a report in 2001 that found the following:
They found that 63 percent of the minimum-wage workers in their sample were employed at higher-than-minimum wage jobs 1 year later. Also, Bradley R. Schiller found that “only 15 percent of the 1980 entrants still had any (minimum wage) experience after three years, “which suggests that long-term minimum wage employment is rare.

The really odd thing about the argument from proponents of a higher minimum wage to say, $15/hour at McDonald's, is that it is accelerating the replacement of minimum wage labor with electronic kiosks where NO human is needed to take your order for a Big Mac and fries. The choice for many companies is to go with no minimum wage at $15/hour and find other ways to replace such workers as McDonald's is doing with technology.

3) 'Obama has caused the lowest unemployment rate since Ronald Reagan!' 

We have written about this many, many times before but it bears repeating once again:

The important thing in any jobs report is not the unemployment rate (because it can be manipulated) but the number of Americans actually working in a good job that is not part-time or temporary.

The latest jobs report was dismal enough, showing a slowdown of the creation of new jobs in the month of March at 126,000 for the month which was well below projections. Job creation numbers for the previous 2 months of 2015 were also revised downwards from the announced 'official' numbers.

We don't know for sure but we have the feeling that a majority of 'official' jobs reports during the entirety of the Obama Administration, now in its 6th year and still counting, have been revised downwards in terms of the number of jobs created each month. We just haven't checked them all yet.

Want to know how you can really tell if an economy is moving upwards and strengthening under any President? Count the number of Americans who were at work in full-time (FTE) jobs before he was elected and then count up how many are currently at work in FTEs today and compare the difference.

That might not be the most 'fair' way to compare the economic policies of any President because the incoming Administration is saddled for at least the first year or 2 with the policies, good or bad, from the previous Administration. But that is the way Reagan, Bush 41, Clinton and Bush 43 have been evaluated so that is the way Obama will be looked at by future historians in the rear view mirror.

145,362,000 people were working  full-time in October 2008 before the Crash occurred and the Great Recession ensued.

148,331,000 Americans were working full-time as of March 2015. 2 million of them were working part-time because that is all the work they could find.

That is a net increase of about 3 million jobs over 5 years. 600,000 net new jobs per year. 50,000 per month.

Granted, 5.5 million jobs were blown apart by the Crash of 2008 and ensuing Recession through 2012. President Obama always complains he was dealt a bad hand when he took over from Bush 43 and that 'it would take some time to recover' those jobs. If you add in these lost jobs as part of the recovery under Obama, it only takes his job creation numbers up to 133,333 jobs per month since 2009, still far below the 300k jobs created each month under Reagan's policies.

Know how many jobs were lost in the Carter-induced recession of 1980-1982?  3 million jobs, all from a much lower jobs basis to begin with. President Reagan's free market economic policies recovered all of them quickly in 1983-84 and then continued that job creation for the majority of his 2 terms in office.

It is fair to say that a good part of the energy of the American economy (and taxpayer money in the form of bailouts and support and expanded balance sheets of the Fed) was spent on not losing any more jobs from 2008-2012 and that it is a good thing that we have now expanded jobs past what it was in 2008 prior to the Crash.

But is this the best we can do as a nation? There are now 9.6 million Americans who are unemployed and still looking for work, that is.  Millions of Americans have plain dropped out of the workforce altogether over the past 6 years. Last month, our labor participation rate of working age adults who are in the workforce or actively looking for work dropped to 62.8%, the lowest participation rate since the middle of the desultory Carter years in 1978.

If it doesn't 'feel' like we have a booming economy, it is because it is not a booming economy.

Booming economies are accompanied by expanded job opportunities up-and-down the wage scale; hard assets increase in value and inflation rates start to inch up as more demand competes for scarce supplies of money, intellectual capital and materiel for products and services.

The way to 1) lift people off the unemployment line; 2) shift discouraged workers from being discouraged to look for work to actively looking for work; and 3) push up wage scales from the minimum wage on up the wage scale and reduce income disparity is, you guessed it, pass economic policies that will increase economic activity, not frustrate it.

Whatever you may think of President Obama as a person and as a politician, even he and his economic team readily admits that the American economy is 'not performing as well as everyone would like it to perform'.

Well, why not then? If what the Obama White House has proposed has not worked, why not try something different, yes?

We think the Obama White House should take a lesson from the pages of history where even FDR's Treasury Secretary testified before Congress in 1939 and said that everything they have tried to jump-start the economy through government intervention and programs had failed...and it was time to do something different.

It probably will not come from the Obama Administration, ya think?

The next President has a chance to jump-start this economy starting Day One and get millions of Americans back to work and on their way to providing better lives for their families and themselves.

January 20, 2017 can not come fast enough for them.

*It was 235,000 returns from 2009 data. We are estimating as the economy has recovered somewhat since then up to around 250,000.


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