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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.

And isn’t that a happy thought.

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48 years ago today, in Tuscaloosa, AL, Jan and I spent the day sitting in the living room of our only friends who had a color TV, watching the Apollo 11 moon landing.

Of course, since all the video from the moon was in black & white, I’m not sure watching it on a color TV made much difference.

At that time I was still in school, but with my father working for Boeing at Marshall Space Flight Center in Huntsville, AL, and Jan’s father working for Rocketdyne at the Cape, I was determined that someday I would work for NASA  too.

And though it took me nine years, in December 1978 Jan and I, and our two kids, moved from Montgomery, AL to Houston where I went to work for a NASA contractor at JSC.

And by the time the Space Shuttle was flying, I found myself in charge of processing the in-flight video coming down live from the Shuttle and sending it out to the world for others to see, kind of completing the circle.

While I was at NASA, one thing I heard over and over, from former astronauts, present astronauts, engineers and technicians, was “We made it to the moon. Why did we leave and never go back?”

About 4:15 this afternoon Jan and I headed into Conroe to meet up with Debi and Ed Hurlburt to have dinner at Cracker Barrel, Thursday being Jan’s favorite – Turkey and Dressing Day.

While everyone else went with the crowd and ordered the T&D, I, marching to my own drummer, ordered the Beef Roast Campfire Meal.

I had this once before and it’s really good, perfectly seasoned, moist and juicy. Really good,

By the time we left it was almost 7:30, so we did log in the prerequisite three hours that are required for all RV’er get-together meals. Hopefully we’ll be able to meet up again soon.

Now back to more Unintended Consequences.

I try not to pick on Seattle, but it’s just so easy. A recent paper in the Economic Policy Journal documents how, as Seattle’s minimum wage has increased from $9.47 to $11 to $13 to $15, restaurant health code violations has risen even faster.

And this is not per capita, but just on total violations. Which is even stranger, since as the minimum wage went up, the number of restaurants has been falling, either from going out of business, or moving out of t he city. Some people found this strange and couldn’t figure out the cause and effect.

Having been in the restaurant business a long time ago, I can tell you exactly what’s happening. They’re cutting the staff and the dedicated cleaning crew is the first to go. Then the cleaning jobs get spread out among the remaining staff. But as more and more reductions hit, there’s less and less time to do anything but your basic job, i.e. making hamburgers, for instance. So the cleaning jobs fall further and further behind.

In pretty much any business, but the restaurant business especially, if your labor costs suddenly increase, you have two real options . . . cut other costs or raise prices. So you start by cutting hours, and then cutting jobs. And of course that’s when you can start to have a problem with things like health code violations.

Now any time the idea of increasing the minimum wage comes up, the ivory tower elites will say, “Just raise prices. Since everyone will be doing it, you won’t be at a disadvantage.”

First off, if the business could get away with raising prices to make more money, THEY WOULD HAVE ALREADY DONE IT!   THEY ALL WOULD HAVE.

When you raise prices, people stop coming to your establishment. Now you hope that the higher prices will offset the loss of some customers. But at some point you start falling behind the curve and are just losing money. As you keep raising prices, sales go down.

Like the old adage, “I lose money on every sale, but I make it up in volume. Yeah, right!

Or like the story of the little boy who sets up a lemonade stand in front of his house. A guy comes by and asks how for a cup of lemonade, and the boy says, “$1000.00.”

The guy says, “How in the heck do you plan to make money selling lemonade for a thousand dollars a cup.

The kid says, “Well, I only have to sell one cup.”

I guess that goes for a $1000 hamburger too.

Of course some companies are using the minimum wage to restructure and cut costs even more.

The Applebee’s franchisee for NYC has over 40 restaurants there, and as the state’s minimum wage increased, he’s cut over 1000 jobs in the last year, two-thirds of his employees. But he’s doing this not by reducing service due to less employees, but by embracing technology.

He’s moving all his stores to the table-top kiosks for ordering, paying, and playing games.

Instead of having one server for every three tables, he will have one ‘concierge’ for a dozen tables, there mostly to be sure you understand how operate the kiosks.

He expects eventually to cut over 2000 total jobs.

And according to the New York Post, the state’s lost over 1000 restaurants last year, about double the number lost in the previous years before the wage hike. And now they’re complaining about tax revenues being down, and are talking about raising taxes.

They never learn.

I’ve got enough for about one more blog on this, so I’ll finish up tomorrow night.

I really appreciate all the nice comments from our readers on this series. Thanks.

Thought for the Day:  

Ignorance is repairable, stupid is forever. 

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