OPEN LETTER TO BARACK OBAMA ON HIS AUTOBIOGRAPHY “A PROMISED LAND” Part 108 OBAMA’S VIEW ON MINIMUM WAGE “I promised to raise taxes on high-income Americans to pay for vital investments in education, research, and infrastructure. I promised to strengthen unions and raise the minimum wage”

Milton Friedman – A Conversation On Minimum Wage FREE TO CHOOSE

March 9, 2021

Office of Barack and Michelle Obama
P.O. Box 91000
Washington, DC 20066

Dear President Obama,

I wrote you over 700 letters while you were President and I mailed them to the White House and also published them on my blog http://www.thedailyhatch.org .I received several letters back from your staff and I wanted to thank you for those letters. 

There are several issues raised in your book that I would like to discuss with you such as the minimum wage law, the liberal press, the cause of 2007 financial meltdown, and especially your pro-choice (what I call pro-abortion) view which I strongly object to on both religious and scientific grounds, Two of the most impressive things in your book were your dedication to both the National Prayer Breakfast (which spoke at 8 times and your many visits to the sides of wounded warriors!!

I have been reading your autobiography A PROMISED LAND and I have been enjoying it. 

Let me make a few comments on it, and here is the first quote of yours I want to comment on:

The financial system was in a meltdown and taking the American economy with it.
 As I saw it, the combination of globalization and revolutionary new technologies had been fundamentally altering the American economy for at least two decades…. By 2007, the American economy was not only producing greater inequality than almost every other wealthy nation but also delivering less upward mobility.
     I believed that these outcomes weren’t inevitable, but rather were the result of political choices dating back to Ronald Reagan. Under the banner of economic freedom—an “ownership society” was the phrase President Bush used—Americans had been fed a steady diet of tax cuts for the wealthy and seen collective bargaining laws go unenforcedThere had been efforts to privatize or cut the social safety net, and federal budgets had consistently underinvested in everything from early childhood education to infrastructure. All this further accelerated inequality, leaving families ill-equipped to navigate even minor economic turbulence.
     I was campaigning to push the country in the opposite direction. I didn’t think America could roll back automation or sever the global supply chain (though I did think we could negotiate stronger labor and environmental provisions in our trade agreements). But I was certain we could adapt our laws and institutions, just as we’d done in the past, to make sure that folks willing to work could get a fair shake. At every stop I made, in every city and small town, my message was the same. I promised to raise taxes on high-income Americans to pay for vital investments in education, research, and infrastructure. I promised to strengthen unions and raise the minimum wage as well as to deliver universal healthcare and make college more affordable.
     I wanted people to understand that there was a precedent for bold government action. FDR had saved capitalism from itself, laying the foundation for a post–World War II boom.

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Clinton and not Reagan was responsible for the 2008 housing bubble crisis because of home buying subsidies! Take a look at this quote from the article below:

The sordid tale begins in 1994, with President Bill Clinton and his National Partners in Homeownership. U.S. politicians long have sought to win votes with homebuying subsidies, but Mr. Clinton took the strategy to new levels. “It was unheard‐​of for regulators to team up this closely with those they were charged with policing,” observe the authors.

Trump vs. Biden on the Minimum Wage

In another display of selfless masochism, I watched the TrumpBiden debate last night.

The candidates behaved better, for whatever that’s worth, but I was disappointed that there so little time (and even less substance) devoted to economic issues.

One of the few exceptions was the brief tussle regarding the minimum wage. Trump waffled on the issue, so I don’t give him any points, but Biden fully embraced the Bernie Sanders policyof basically doubling the minimum wage to $15 per hour.

This is very bad news for low-skilled workers and very bad news to low-margin businesses.

The economic of this issue are very simple. If a worker generates, say, $9 of revenue per hour, and politicians say that worker can’t be employed for less than $15 per hour, that’s a recipe for unemployment.

Earlier this month, Professor Steven Landsburg on the University of Rochester opined for the Wall Street Journal on Biden’s minimum-wage policy.

It isn’t only that I think Mr. Biden is frequently wrong. It’s that he tends to be wrong in ways that suggest he never cared about being right. He makes no attempt to defend many of his policies with logic or evidence, and he deals with objections by ignoring or misrepresenting them. …Take Mr. Biden’s stance on the federal minimum wage, which he wants to increase to $15 an hour from $7.25. …So why does Mr. Biden want to raise the minimum wage…?He hasn’t said, so I have two guesses, neither of which reflects well on him. Guess No. 1: He’s dissembling about the cost. …The minimum wage…comes directly from employers but indirectly (after firms shrink and prices rise) from consumers. A minimum wage is a stealth tax on eating at McDonald’s or shopping at Walmart. …Mr. Biden should acknowledge the cost of wage hikes and argue for accepting it. Instead he’s silent about the cost, hoping he can foist it on people who won’t realize they’re footing this bill. Guess No. 2: He’s rewarding his friends and punishing his enemies. New York is going to vote for Mr. Biden. The state also has a high cost of living and high wages—so New Yorkers would be largely unaffected by the minimum-wage hike. Alabama is going to vote against Mr. Biden. Alabama has a low cost of living and relatively low wages—so under the Biden plan Alabama firms would shrink, to the benefit of competitors in New York. Alabama workers and consumers would pay a greater price than New Yorkers.

And Mark Perry of the American Enterprise Institute recently highlighted some of the adverse effects for unskilled workers.

It’s an economic reality that workers compete against other workers, not against employers, for jobs, and higher wages in the labor market. And it’s also true that lower-skilled, limited-experience, less-educated workers compete against higher-skilled, more experienced, more educated workers for jobs. …If the minimum wage is increased…, that will…take away from unskilled workers the one advantage they currently have to compete against skilled workers – the ability to offer to work for a significantly lower wage than what skilled workers can command. …Result of a minimum wage hike to $15 an hour? Demand for skilled workers goes up, demand for unskilled workers goes down, and employment opportunities for unskilled workers are reduced.

Since I recently shared videos with Milton Friedman’s wisdom on both taxes and spending, here’s what he said about the minimum wage.

Let’s share one last bit of evidence. Mark Perry’s article referenced some new research by Jeffrey Clemens, Lisa Kahn, and Jonathan Meer.

Here’s what those scholars found in a study published by the National Bureau of Economic Research.

We investigate whether changes in firms’ skill requirements are channels through which labor markets respond to minimum wage increases. …Data from the American Community Survey show that recent minimum wage changes resulted in increases in the average age and education of the individuals employed in low-wage jobs. Data on job vacancy postings show that the prevalence of a high school diploma requirement increases at the same time. The shift in skill requirements begins within the first quarter of a minimum wage hike. Further, it results from both within-firm shifts in postings and across-firms shifts towards firms that sought more-skilled workers at baseline. Given the poor labor market outcomes of individuals without high school diplomas, these findings have substantial policy relevance. This possibility was recognized well over a century ago by Smith (1907), who noted that the “enactment of a minimum wage involves the possibility of creating a class prevented by the State from obtaining employment.” Further, negative effects may be exacerbated for minority groups in the presence of labor market discrimination.

So why do politicians push for higher minimum wages, when all the evidence suggests that vulnerable workers bear the heaviest cost?

Part of the answer is that they don’t understand economics and don’t care about evidence.

But there’s also a more reprehensible answer, which is that they do understand, but they want to curry favor with union bosses, and those union bosses push for higher minimum wages as a way of reducing competition from lower-skilled workers.

P.S. Here’s my CNBC debate with Joe Biden’s top economic advisor on this issue.

P.P.S. Here’s a rather frustrating discussion I had on the minimum wage with Yahoo Finance.

P.P.P.S. But if you’re pressed for time, don’t listen to me pontificate. Instead, watch this video.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733 everettehatcher@gmail.com

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