By Greg S. Jones
Thursday, August 17, 2017
It’s a debate as old as politics itself, but now we may
finally have a winner. Or at least a loser.
The finale to the age-old argument over the state’s
proper role in the economy is playing out before our very eyes as a trifecta of
headline-grabbing misfortunes dumps cold water on the leftist belief that
greater government intervention in the market leads to greater prosperity.
Because economies are so complex and dynamic, and
statistics so easily manipulated, both socialism-loving liberals and laissez faire–leaning conservatives have
long been able to find evidence to support their respective philosophies. But
as Venezuela implodes, progressive experiments with raising the minimum wage on
the West Coast prove disastrous, and deep-blue Illinois falls deeper into the
red, the Left now finds itself very light on rhetorical ammunition with which
to defend its treasured economic model.
Though liberals may now try to distance themselves from
the chaos in Caracas, the Venezuelan government was once praised by a cadre of
revered upper-echelon leftists including Jeremy Corbyn, Oliver Stone, and
Bernie Sanders. Past adoration was such that far-left website Salon
referred to Venezuela’s socialist economy as a “miracle.”
Such praise hasn’t aged well, however, as the grossly
irresponsible redistributive policies that helped Venezuela to achieve one of
the lowest wealth gaps in the Western Hemisphere have now brought the country
to its knees. As oil, the country’s chief export and cash cow, tanked, the
socialist government doubled down on its invasion of the free market with price
controls, rationing, and restrictions on imports, creating a cauldron of
corruption and uncertainty that made Venezuela unattractive to international
companies. Or any company for that matter.
The country’s currency, the bolivar, has declined 94
percent over the past year, and there are now horrific shortages of basic
necessities such as toilet paper fomenting historic civil unrest and, in turn,
increasingly brutal crackdowns by a government that claims to be for the
people.
Some miracle. And because state power is rarely
relinquished easily, the crisis in Venezuela shows no signs of ending soon.
Nor does the lunacy north of the Equator, where some of
this country’s most progressive major cities have begun to experiment with
price controls of their own.
From San Francisco to Seattle to Portland, numerous
leftist locales have decided to buck conventional wisdom and raise their
minimum wages in a bid to outrun the same economic boogeyman that haunted and
sank Venezuela: income inequality. Despite tomes of research concluding that
artificial wage hikes are detrimental to society’s most vulnerable workers,
these cities are succumbing, one after the other, to the all-too-common urge to
do what feels good rather than what works.
The results have been, shall we say, predictable. In
Seattle, a minimum-wage increase from $11 to $13 resulted in reduced hours worked
and reduced payrolls for minimum-wage earners. And in San Francisco, where the
restaurant industry employs the lion’s share of minimum-wage earners, researchers
found that
higher minimum wages increase
overall exit rates for restaurants. . . . A one dollar increase in the minimum
wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star
restaurant (which is the median rating), but has no discernible impact for a
5-star restaurant (on a 1 to 5 scale).
Bottom line: In their quest to fight income inequality,
the economic geniuses on the Left Coast have not only reduced wages for the
lowest earners but also made it harder for such workers to find employment in
the first place.
But nowhere is the Left’s downward spiral more obvious
than in Illinois. The stalwart liberal state has voted for the Democratic
presidential candidate in the last seven elections, has long maintained a
left-leaning congressional delegation, and has a Democratic-majority state
legislature. It also may well become the first state to declare bankruptcy.
Illinois’s pension funds alone are billions upon billions
of dollars in debt — a quarter-trillion
dollars, to be exact, a number that will almost certainly continue to grow
given the state’s penchant for kicking the can down the road. The pensions,
negotiated by unions and used as slush funds by liberal politicians, are now a
specter haunting the state’s coffers to the point that every household in
Illinois would need to contribute $56,000 to solve its retiree pension and
health-care crisis.
And this is one of the most heavily taxed states in the
country.
Illinois’s political mindset is perhaps best represented
by its trademark metropolis, Chicago, a shining example of liberal politics run
amok. The city’s teachers’ union has ensured never-ending budget shortfalls by
repeatedly insisting on greater compensation for its members (who already
significantly outearn the city’s other college-educated professionals) despite
mounting municipal debt. Such unrealistic demands led to the city’s school
system recently receiving the dreaded “junk bond” rating from Moody’s.
Meanwhile, Democratic mayor after Democratic mayor has
catered to the city’s minority communities in exchange for votes, and yet today
the South Side’s poor cope with notorious homicide rates while the rich in
Lincoln Park drop thousands on the Magnificent Mile before lunch. The city’s racial
wealth gap is visible from outer space.
And yet despite the overwhelming evidence linking liberal
economic policies to the state’s decline, Illinois seems intent on going down
with the ship, much like the Venezuelan government and the West’s once-great
cities. In fact, Springfield is now pushing for its own statewide minimum-wage
hike, a move that according to the American Action Forum could cost Illinois
nearly 400,000 jobs by 2025. It’s an interesting remedy for a state bleeding to
death financially.
This unfortunate confluence of events should serve as a
warning to an increasingly left-leaning Democratic party and the growing number
of young voters who tend toward socialism as an economic solution. But it’s
unlikely to have much of an impact. Though leftists claim science as their
ally, they simultaneously shoo away inconvenient data as if it were a fly.
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