Daily Archives: July 21, 2017

Last of the Consequences . . .

I was hoping that in at least in this last article, I wouldn’t have to talk about Seattle. But they make themselves such an easy target.

I mentioned a couple of days ago a University of Washington study commissioned by the city of Seattle to back up their idea that raising the minimum wage result in more money in low-wage worker’s pockets without hurting businesses.

Kind of like having your cake and eating too.

So when the bipartisan UW study showed that, because of hours being cut, workers were making 6%, or about $125 a month less, and small businesses were closing at a much higher rate than before the wage increase, the city abruptly pulled the study, disavowed it ever really existed, and turn the study project over to an group headed by Professor Reich of UC Berkeley.

Amazingly, Professor Reich is most well-known for being a founding member of the anti-capitalist group, the Union for Radical Political Economics (URPE).

Don’t know what Seattle will do if this doesn’t work either.

Now back to your regularly scheduled ‘Unintended Consequences’  screed.

It’s a standard axiom in economics that when you throw money at a system, prices will rise to absorb the excess. And here’s a personal example. 

When my little sister was born in 1961, my mother’s entire medical bill was a little over $400. That was for pre-natal care, delivery, hospital, i.e. the total bill.

However, when our son Chris was born in 1968, just the pre-natal and delivery doctor’s bill was $1200. The hospital was on top of that.

Now what happened between 1961 and 1968? I’ll give you a hint.

LBJ signed it into law.

It was known as the Social Security Act Amendments, more popularly known as Medicare/Medicaid. The House Ways and Means Committee estimated that by 1990 the cost of Medicare would be $9 Billion.

Are you really surprised to find out that the amount actually clocked in at over $67 Billion.  And now in 2016 Medicare alone accounts for over 15% of the Federal budget, or about $588 Billion

And we’re not even talking about Medicaid yet.

Another system that has suffered from an excess of money is education. And this one has the money coming from two different sources – The expanded college loan program, and Jimmy Carter.

Today’s student loan program really got its start in 1965 with the Higher Education Act, loafed along until the mid-90’s, and then skyrocketed in the 21st century until last year student loan debt topped out at over $1.3 Trillion, compared to about $800 Billion in total credit card debt.

And why would that be?

In 1970, the. average yearly tuition was $358 for public four-year institutions and $1,561 for four-year private colleges.

In 1980, the. average yearly tuition was $2,100  for public four-year institutions and $9,500 for four-year private colleges.

In 1990, the. average yearly tuition was $3,720 for public four-year institutions and $17,340 for four-year private colleges.

In 2000, the. average yearly tuition was $5,110 for public four-year institutions and $23,560 for four-year private colleges.

In 2010, the. average yearly tuition was $8,820 for public four-year institutions and $29,700 for four-year private colleges.

Note the big jump was between 1970 and 1980, when the 1965 loan program really kicked in, and tuition increased by over SIX times. And since 1980 tuition has increased 1120%

By comparison, medical costs, the bugaboo everyone’s worried about, has only gone up 601%, while food costs went up 244%.

I guess the best thing we can hope for is that the government doesn’t start throwing money at the food supply

So how does Jimmy Carter figured into this? Well, he created the Department of Education in 1980, and then money started pouring back to local schools. From your taxes, of course. And since the house always takes a cut, they send back to the states a lot less than they take in. Gotta pay for those 3 martini lunches somehow.

Remember the government has no money of its own. It all comes from you.

So what did all this money do? It gave us school buildings that look like luxury hotels, high schools with football stadiums that could host the Super Bowl, and staff (not teachers) that increased many multiples times.

For example, Foley Elementary School, Junior High, and High School, where I went halfway  through the 8th grade before we moved to Colombia, South America, had about 8 employees in 1962.

The Principal who ran the Junior High/School, the Vice Principal who ran the Elementary School, two secretaries (one for each), two nurses, and two librarians.  And of course the custodians.

Now, according to their website, they have 55 people working on staff, with only a 25% increase in student population.

They’ve got to use up all those extra dollars somehow.

Wrapping up, remember what I said about hoping the government doesn’t start throwing money at the food supply? Well what do you think will happen if they start throwing money at EVERYTHING?

Recently there have been new calls for a guaranteed income for every man, woman, and child in the US, most recently by Mark Zuckerberg, founder of Facebook, in a Harvard Commencement speech.

The idea has been around for a while, but it’s been gaining steam with calls to help people whose jobs are being taken over by technology. You know, the ones losing their jobs to technology because of the increases in the minimum wage. Funny how that works out, huh?

Different amounts are mentioned, but in the neighborhood of $13, 000 to $15,000 per person is usual. So a family of four would get $60,000.

Now if this happens, I predict several things will result.

1. Prices of everything will skyrocket.

2. People will start to have more kids. (remember the cobras!)

3. Many people will stop working, since they don’t need to now.

4. As more people stop working,  the taxes will have to rise substantially on the people who still work to pay the basic income of those who aren’t.

5. As this happens, more people will stop working, deciding why work if it’s all going to taxes. Lather, Rinse, Repeat.

6. At this point the death spiral sets in, and it all descends into chaos.

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And isn’t that a happy thought.

Thought for the Day:

“The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn’t work and then they get elected and prove it.”  – P.J. O’Rourke


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