The unimportant news thread

[NorthNYMark]

Boiling a frog slowly still boils the frog, no? Or more plainly: can you frame a coherent economic argument that shows the consequences of a minimum wage hike do not materialize if the hike is phased in? And if so, why not a hike to $40?

Wouldn't the sensible position on the minimum wage be to index it to the rate of inflation?  Generally, it seems to me that the minimum wage should increase at regular intervals, as long as inflation does--that keeps it level in terms of buying power, rather than shrinking.  If we had deflation, it would make sense for the minimum to decrease in proportion.

[Ken B]

Wouldn't the sensible position on the minimum wage be to index it to the rate of inflation?  Generally, it seems to me that the minimum wage should increase at regular intervals, as long as inflation does--that keeps it level in terms of buying power, rather than shrinking.  If we had deflation, it would make sense for the minimum to decrease in proportion.

You are one for refining upon bad ideas!  if it's a bad idea now to tell someone he cannot offer his services at a rate where he can get a job, then tieing that restriction to inflation just compounds (sic) his woes.

[Todd]

Wouldn't the sensible position on the minimum wage be to index it to the rate of inflation?

Several states already index minimum wage to inflation.  It has no material impact on employment.  Minimum wage values as they currently exist - excluding the current push to $15/hr - are low enough so that they don't really have a material effect on employment. 

A variety of studies going back at least twenty years show that minimum wage increases do not generate material job losses (that is, widespread or even heavily concentrated in certain sectors) and are less important to low wage employment than other economic factors (eg, overall GDP growth).  On the flip side, the CBO projects job losses if the minimum wage goes up to politically desirable levels ($10/hr).  So, you can pick your poison: empirical studies vs projections.  It's yet another case of dueling studies. 

One could argue that a more material impact will be seen if the minimum wage is raised to $15/hr nationwide now or even over a few years.  That is more plausible.  It is also politically impossible.

[ibanezmonster]

You are one for refining upon bad ideas!  if it's a bad idea now to tell someone he cannot offer his services at a rate where he can get a job, then tieing that restriction to inflation just compounds (sic) his woes.

Are you saying tying minimum wage to inflation is a bad idea? So then you're very much in support of loads of welfare being spent on people (I believe you said you were pro-welfare state or something like that)? I suppose an unlivable minimum wage isn't too much of a bad thing as long as the government is willing to pick up the slack. If minimum wage were to stay so low, people shouldn't complain about welfare spending...

[Ken B]

Are you saying tying minimum wage to inflation is a bad idea? So then you're very much in support of loads of welfare being spent on people (I believe you said you were pro-welfare state or something like that)? I suppose an unlivable minimum wage isn't too much of a bad thing as long as the government is willing to pick up the slack. If minimum wage were to stay so low, people shouldn't complain about welfare spending...

Pretty much. I support a negative tax. if you get say a $4 per hour job then (as your income increases your tax rate climbs) you might pocket as example $3.90 an hour. If you get $400 an hour you benefit to a lower fraction but higher amount.

This is how most of the welfare state would be delivered. Not all, but most.

This has several advantages. It disrupts markets less. It lets the poor participate in and benefit from markets more. It costs less. It respects people more; recipients are not micro-managed or drug tested or submitted to worthiness tests. It is less susceptible to graft and political manipulation. It is pretty transparent. It is inherently counter-cyclical in its fiscal effect.

Politicians hate it. It's worth pondering why.

[Todd]

Politicians do not hate Milton Friedman's idea of the negative income tax.  In practice, in the US, it is called the Earned Income Tax Credit, and it is one of the largest anti-poverty programs. 

[NorthNYMark]

Pretty much. I support a negative tax. if you get say a $4 per hour job then (as your income increases your tax rate climbs) you might pocket as example $3.90 an hour. If you get $400 an hour you benefit to a lower fraction but higher amount.

This is how most of the welfare state would be delivered. Not all, but most.

This has several advantages. It disrupts markets less. It lets the poor participate in and benefit from markets more. It costs less. It respects people more; recipients are not micro-managed or drug tested or submitted to worthiness tests. It is less susceptible to graft and political manipulation. It is pretty transparent. It is inherently counter-cyclical in its fiscal effect.

Politicians hate it. It's worth pondering why.

I'm not entirely clear on your wording here--by "might pocket as example $3.90 an hour," do you mean a welfare-like subsidy in addition to the $4 wage, or do you mean that the tax is 10 cents and the $3.90 is what's left over from the $4?  Not having heard of a negative tax, I googled it, and it would seem to be the former, i.e., a paid addition to the wage (though I still can't quite tell from the way you worded it). People making more would gradually get less subsidy, then none, then would start paying taxes as their income rises. I guess the idea is that since the poor would basically be getting a minimum wage, there would be less need for other kinds of welfare.

If that is what you mean, it certainly is an interesting idea.  Do you know if it has been tried anywhere?  It would be interesting to see it implemented in a small state to see how it would actually work out.  As with anything else, even if everyone agreed, there would probably be endless debates on what the amounts should be, etc. The article I read pointed out that one problem would be that if the negative tax subsidy were equal to a minimum wage, there would be no incentive for someone to work a minimum wage job.  But if it's too low, it might not be enough of a safety net (people can't live on the current minimum wage alone as it is).  I imagine it would be quite difficult to get the balance right (but of course, that's true of any social safety net). 

[Todd]

Do you know if it has been tried anywhere?

The USA.

[Ken B]

I'm not entirely clear on your wording here--by "might pocket as example $3.90 an hour," do you mean a welfare-like subsidy in addition to the $4 wage, or do you mean that the tax is 10 cents and the $3.90 is what's left over from the $4?  Not having heard of a negative tax, I googled it, and it would seem to be the former, i.e., a paid addition to the wage (though I still can't quite tell from the way you worded it). People making more would gradually get less subsidy, then none, then would start paying taxes as their income rises. I guess the idea is that since the poor would basically be getting a minimum wage, there would be less need for other kinds of welfare.

If that is what you mean, it certainly is an interesting idea.  Do you know if it has been tried anywhere?  It would be interesting to see it implemented in a small state to see how it would actually work out.  As with anything else, even if everyone agreed, there's probably be endless debates on what the amounts should be, etc. The article I read pointed out that one problem would be that if the negative tax subsidy were equal to a minimum wage, there would be no incentive for someone to work a minimum wage job.  But if it's too low, it might not be enough of a safety net (people can't live on the current minimum wage alone as it is).  I imagine it would be quite difficult to get the balance right (but of course, that's true of any social safety net).

The 10 cents is a result of paying a low rate on your income in my example. Right now if you earn an extra $4 an hour you don't get to keep all of it. If you are in a 25% bracket for instance you keep 3. So my example has someone earning $4 taxed at a 2.5% rate. Earn $5 you might pay say a 6% rate. So imagine the negative tax works out to $4 an hour. If you take a $4 job you end up with 7.90. Take that $5 at 6% you end up with 8.70. $10  job taxed at 10% you end up with 13 = 4+9.
So progressive rate, the more you earn the higher the fraction you pay, but never removing the incentive and reward for working. ( all made up numbers here if course).
Of course you can use a flat rate too, with an initial deduction. This has pros and cons. Its simpler.

Not tried that I know of. The EITC is a small step in this direction. It is a good program. But no-one can maintain that it is enough to live on, or replaces the bulk of the welfare state apparatus. Or that the tax code has been simplified as this envisions.

[Todd]

Not tried that I know of. The EITC is a small step in this direction. It is a good program. But no-one can maintain that it is enough to live on, or replaces the bulk of the welfare state apparatus.

That is right wing idealism with no chance of becoming reality.  The EITC is implemented exactly how a stand-alone NIT would have to work - refundable tax credits administered by the central taxing authority.  Some states also have similar programs.  It is currently the third largest anti-poverty program, behind Medicaid and food stamps, so it is far more than a small step.  The scale can be increased or decreased, but the practical mechanism exists.  It is not the same as a guaranteed minimum income, but that is impractical and politically impossible. 

[ibanezmonster]

In practice, in the US, it is called the Earned Income Tax Credit, and it is one of the largest anti-poverty programs.

Lol, true! 

[Ken B]

What an interesting place. Mark asked if the scheme of replacing the welfare state with a negative tax has been tried anywhere. Apparently it has been tried in the USA but it's a fantasy to imagine it could be tried in the USA.

[Ken B]

She's making a list
She's checkin' it twice
She's going to find out who's Jewish or nice
Diane Rehm is coming to town

http://thefederalist.com/2015/06/10/nprs-diane-rehm-has-a-list-of-troublesome-jews-she-wants-you-to-know-about/

[Todd]

What an interesting place. Mark asked if the scheme of replacing the welfare state with a negative tax has been tried anywhere. Apparently it has been tried in the USA but it's a fantasy to imagine it could be tried in the USA.

No, it's a fantasy to imagine that in its ideologically pure form it can or will be tried.  It has been tried, is currently in use, and will continue to be used in the US in the form of the EITC.  Ideologues will, of course, insist that since the pure form has not been tried, that the NIT has not been deployed, despite the actual facts.

[Ken B]

More on Diane Rehm and her list. I don't really agree with this take, but it's interesting.

http://www.washingtonpost.com/news/volokh-conspiracy/wp/2015/06/11/why-did-diane-rehm-fall-for-an-anti-semitic-hoax/

Why don't I agree? Because Rehm tossed in the list bit. That has a connotation here of secrecy, conspiracy, cabal. The implication couldn't be clearer. And how could it be a sensible rejoinder to his denial? Is she seriously saying, wait wait Bernie are you sure, you are on this list, care to rethink your answer? More likely the list was her intended follow up if Bernie copped to dual citizenship. So she just plowed on. I see malice where Bernstein sees duped, but I agree it's arguable either way.

[Ken B]

Identity politics
http://www.buzzfeed.com/tamerragriffin/rachel-dolezal-once-told-a-student-she-did-not-look-hispanic#.abGeYnwAM

And

http://dailycaller.com/2015/06/12/u-oklahoma-to-segregate-gay-students-into-separate-but-equal-study-lounge/

[Ken B]

Lithuanian aggression.
http://blogs.rollcall.com/wgdb/to-counter-putin-poland-and-lithuania-officials-want-u-s-bases-durbin-says/?dcz=

[Ken B]

Oops. Just past the post, 

The 800th anniversary of Magna Carta. Only 3 clauses are still in effect, but one guarantees the right to trial by jury.

Andrei, to his eternal shame, scoffs at Magna Carta. But there are some here who would do away with trial by jury and the presumption of innocence altogether.

[Florestan]

Oops. Just past the post, 

The 800th anniversary of Magna Carta. Only 3 clauses are still in effect, but one guarantees the right to trial by jury.

Andrei, to his eternal shame, scoffs at Magna Carta. But there are some here who would do away with trial by jury and the presumption of innocence altogether.

I don´t scoff at it. I just think it worth pointing out that there is quite a lot of mythology surrounding it.

As for trial by jury, Greeks and Romans practiced it 1,500 years before Magna Carta. 

[Todd]

If partially hydrogenated vegetable oil is outlawed, then only outlaws will have partially hydrogenated vegetable oil.