Back In Black

Recently, the State of Vermont published a revised revenue forecast for 2016 that puts the state

Laughter is the best medicine.

Laughter is the best medicine.

budget, finally, back in the black.  Is this financial wonder due to strong economic growth, a “snapback” from the Great Recession?

No.  As the report itself states, on Page 1 (h/t to Vermont Digger):

The slowest economic recovery in post-WW2 history will likely continue in FY16 and FY17, with some acceleration bringing slightly above-average revenue gains, though very close to previous expectations. Virtually all of the current changes in General Fund revenues relative to the prior January forecast, per the below chart, are the product of statutory changes made in the last legislative session, and represent about $30 million in new tax revenues.

So the budgetary forecast wasn’t “fixed” based on significant reductions in YOY spending, nor by accelerated economic growth.  The General Fund revenue growth is all based on new taxes.

These tax changes primarily impact the General Fund, with the largest tax changes affecting personal income and sales taxes. Without these new tax revenues, the General Fund would have increased by about $9 million in FY16 and declined by about $1 million in FY17, relative to January projections.

But even this outlook has its caveats, as indicated near the end of the report, specifically regarding the General Fund (the largest revenue source in the budget), on Page 15 (1st paragraph):

As illustrated in these tables, and consistent with past projections, longer term revenue growth from the mix and structure of the taxes in the three funds analyzed herein is unlikely to keep pace with recent levels of expenditure growth (emphasis added).

In other words, tax revenue growth rates do not match expenditure rates, which means the state is still consistently budgeting to spend more than it takes in.

But the real impact of Vermont policies is being felt where it’s always felt – in the lives and pockets of working Vermonters.  The forecast cites the low unemployment rate Vermont is “enjoying”, as if that constitutes evidence of some kind of recovery:

Vermont employment growth has also strengthened in recent months, with year over year growth in the past 12 months accelerating to 1.4%, vs. 0.7% in the preceding 12 month period. This has pushed the State unemployment rate to 3.6%, the lowest in New England and the fourth lowest in the U.S. 

Vermont employment has increased in recent months, but compared to historical employment levels the state is still an employment trainwreck.  The number of employed Vermonters, what the state’s forecast calls “employment growth” has increased from prior months, to 336,550 in June 2015.  In January 2015, that number was 334,550, so clearly some hiring is occurring.

2015 Unemployment snag

But to put this in a larger perspective, the last time Vermont had 336,550 employed, it was October 2012.  In other words, it’s taken Vermont 2.5 years just to climb back to 2012 levels of employment.

To give it more of a historical perspective:  What was Vermont’s highest employment level in the last 10 years?  344,150, in April 2006.  Which means Vermont now has roughly 8,000 or so fewer people employed now than 10 years ago.

2006 Unemployment snap

Vermont’s labor force – the number of people available and willing to work – has shrunk in almost direct correlation to the decrease in employment numbers.  The labor force in April 2006 was 356,700.  In June 2015, the labor force is 348,950, a difference of -7,750.  This is why Vermont’s unemployment rate in April, 2006, of 3.5%, looks so much like June 2015’s unemployment rate of 3.6%, even though we have about 8,000 fewer people employed.

To put this a bit more painfully, Vermont has lost an average of 800 jobs every year for the last 10 years.

So while the state’s latest forecast loudly touts the low unemployment rate, it neglects to mention that a) the total number of Vermonters employed is at historical lows, and b) the labor force itself has shrunk.

A shrinking labor force is not an indication of economic health.  It’s an indication that there are fewer opportunities for employment in the state.

Oddly, the report also discusses income inequality (page 7 of the report), as if a more equal distribution of wealth is a desired goal, and discusses the “owners of capital” as if it’s straight out of the Marx/Engels reader.  But as more and more people drop out of the labor force, it’s entirely unsurprising that incomes are reduced.  In fact, since the state’s own long-term labor forecast calls for the largest job growth sectors to be in the service industry, whatever policies the state has been putting into place to improve the economy, and thereby the incomes of Vermonters, is not working.

By the state’s own admission, its economic policies are having the opposite of the desired effect:

Vermont's economic policies in a nutshell.

Incomes are down in the recession – so let’s fix that by raising taxes!

The report goes on to state:

Income growth has become increasingly concentrated among the highest income groups over the past 30 years and this has continued during the current economic recovery. past 30 years and this has continued during the current economic recovery.  Between 2009 and 2012, recent studies estimate that virtually all real U.S. income growth accrued to the highest 1% of all income tax filers.  These same analyses, however, suggest that in Vermont, income inequality has not been quite as pronounced, with income growth among the top 1% during this same period of 21.8% vs. growth among the bottom 99% of about 4.6%. They also suggest that longer term income inequality, though growing from lows in the late 1970’s to levels in 2012 not seen since the late 1920’s, are similarly less pronounced in Vermont than in the nation as a whole.

So income growth is only good if it’s at the lowest income groups?  Considering that the highest income groups pay the vast majority of income taxes collected, is the state arguing for reduced incomes at the highest levels so things are less “unequal”?  How will budget gaps be filled when the rich are no longer quite so rich?  Since half the country pays no net income taxes, how, exactly, would increased state expenditures be paid for if the 1% didn’t have increased incomes?

As the report says on Page 11:

The increasing volatility in revenues due to a growing reliance on Personal Income,

Deep thoughts for a Vermont legislature.

Deep thoughts for a Vermont legislature.

Corporate and Estate taxes, was on full display in both FY14 and FY15. In FY04, these three tax categories comprised 50.6% of Available General Fund tax revenues. In FY15, they represented 60.9% of revenues, and are expected to exceed 62% within the next five years.

So while bemoaning inequality, the report also states Vermont has become and is increasingly becoming reliant on personal incomes to constitute the bulk of General Fund revenues.  Shouldn’t the state, then, be celebrating wage inequality?  Who else is going to fund the General Fund?

The state’s forecast now shows that the anticipated budget will be in the black, but so did the prior years’ budgets, which sometimes required a budget recission one month after the budget was passed. When the legislature scrambles to find yet another tax, this time in the form of one on sugary drinks, one which places both an additional cost of compliance on the backs of business owners and increases the aggregate tax burden on Vermonters, and then counts itself as a fiscal hero for doing so, the environment is created that assumes that this is the way budgeting and the state’s economy blame shiftshould work.  In other words, Vermont will see these same steps taken again and again.

What’s really happening is that the state is patching holes in a sinking ship, and is running out of things to patch it with.  What doesn’t help is the state’s continuing demonization of those who pay the majority of the bills in the state, and who will share an ever-increasing burden of doing so.

 

 

 

A Legacy Unraveled: Shumlin’s Economic Slide

Vermont’s semi-favorite son and quitting Governor Peter Shumlin will, in the space of a year and a half or so, probably be shopping around his “legacy” with a hand out, looking for a job.  So let’s take a quick look at Vermont’s employment picture, since Peter routinely brags about Vermont’s low unemployment rate, and we’ll use, oh, let’s just go ahead and use North Carolina because I live here now.

In comparing Vermont’s data to another state, we’ll see how Peter stacks up against something other than himself.  Let’s start at the top, with the Unemployment Rate – remember, the calculation for the unemployment rate is:

Number of Unemployed / Labor Force

As an example, if you have 5,000 people unemployed, and your labor force is 100,000, that’s 5% unemployment.  But note – if you have 4,500 people unemployed (a reduction in the total unemployed), and your labor force shrinks to 99,000, your unemployment rate drops to 4.5%.  Fewer people are unemployed, but more than that number are no longer in the labor force, which has the happy (political) result of reducing the unemployment rate:

When less is more, politically.

When less is more, politically.

So let’s look at the Unemployment Rate, NC on the left, VT on the right, for the past 10 years (data from BLS.gov):

 

unemployment vt vs nc

Both states follow the same percentage arcs, although North Carolina’s rate was significantly higher than Vermont’s (and continues to be slightly higher), and has also hit a slight uptick in early 2015.  Does that mean that Vermont and North Carolina are roughly the same, in terms of employment outlook?

Not exactly.  Let’s take a look at the Labor Force detail, which the Bureau of Labor Statistics describes as:

The labor force is the sum of employed and unemployed persons.

Basically, this is everyone working and everyone who could work but is looking for a job (actively looked in the last 4 weeks).  Obviously, North Carolina has a much larger population than Vermont (9.9 million to 626,000) , but we’re looking for trends here, not a specific numerical comparison – and the trend is obvious:

One of these things is not like the other.

One of these things is not like the other.

North Carolina now has close to 500,000 more people in the workforce than it did in 2005.  There are some ups and downs, but the trend is obviously positive.  If you look at 1/2011, the date of Shumlin’s inauguration, there’s roughly 4,600,000 in NC’s labor force.  By 1/2015, it’s at 4,750,000 – an increase of about 150,000 in four years.

Vermont’s labor force?  It’s at the same number as it was in 2005.  10 years of “growth” have netted a labor force that grew and shrunk back to the level it was 10 years ago.  Granted, Shumlin came into the governor’s office in January of 2011, near the peak of Vermont’s labor force.  But it has declined steadily ever since he was inaugurated.  Roughly 10,000 fewer people are in Vermont’s labor force since Shumlin was inaugurated, and the lower that number is, the lower the unemployment rate becomes – so, insanely, the reduction in the number of Vermonters working contributed to one of Shumlin’s primary economic selling points, the lower unemployment rate.

Another feather in the cap of Shumlin.

Another feather in the cap of Shumlin.

Now let’s look at Employment itself:

employment vt vs nc

Vermont was already in a downturn when the recession hit in 2007 (officially the recession ended in 2009), but it’s still roughly at exactly the same number it was 10 years ago.  Compared to North Carolina, Vermont’s 10-year performance is almost perfectly flat; North Carolina has added something like 450,000 employed in the same period.  That’s 100,000 more employed than Vermont’s entire workforce.

Note that Shumlin, coming into office in January 2011, has managed to be the Governor who’s watched the state’s numbers decline from what looked like a mini-recovery in 2011 to levels below the low mark in 2005, when it dropped below 335,000 in 2014/2015:

How long until we get back to 344,000 employed?  Who cares, when you're a quitter!

How long until we get back to 344,000 employed? Who cares, when you’re a quitter!

 

Shumlin’s not going to be running for governor again, which is probably a reflection on his policies he’s implemented that have contributed to factory ruinsthe slow-rolling death of Vermont’s economy.  These policies look like they came home to roost in the 2014 elections that he won by only a few thousand votes.  Those votes, or lack of them, speaks to the average Vermonter’s ability to see through his administration’s talking points to the reality felt on the ground, out in the real world, outside of Montpelier.  The real world, and its future, looking like something less than paradise, and something more like rampant abandonment.

 

 

 

Bottom Feeding

CNBC recently ranked states by their overall competitiveness, including categories like cost of doing business, education, quality of life, workforce, access to capital, etc.  As CNBC describes it:  42nd place

We score all 50 states on more than 60 measures of competitiveness, developed with input from a broad and diverse array of business and policy experts, official government sources, the CNBC Global CFO Council and the states themselves. States receive points based on their rankings in each metric. Then we separate those metrics into 10 broad categories, weighted based on how frequently each is used as a selling point in state economic development marketing materials. That way, our study ranks the states based on the criteria they use to sell themselves. This year some states were tied. Learn more about our categories and methodology.

So where did that rank Vermont, the state whose governor routinely touts as a great place to live in, work, and do business in?

42nd.

Just to be a bit more helpful to Peter Shumlin’s staff, that’s the bottom quintile.  Vermont is in the worst bracket.  The good news?  Vermont ranks highly in quality of life, in 2nd place.

As most Vermonters know, you can’t eat or live in a quality of life.  What it looks like in the CNBC rankings, though, is that Vermont would be ranked even lower if it weren’t for the Quality of Life metric, and Education – and Education is high based on per-pupil spending.

Below is the ranking sorted by lowest-ranked, the Worst 10 States.  What’s interesting is that Vermont’s workforce is ranked so low, yet Shumlin has frequently said that companies have jobs, but have trouble hiring qualified candidates.  Well, there’s a reason – because even if some firms are looking to hire better-qualified candidates, it’s very likely that those candidates are already working in another state, for the other factors shown below.  They choose not to live in Vermont, so you won’t see their applications coming in.

Vermont's worse than Mississippi?

Vermont’s worse than Mississippi?

Since Vermont is ranked 34th in average income (based on 2012 Dept of Labor info), why would, say, an engineer decide to take a pay cut to live in a state with a higher cost of living than other states?  It’s like getting hit twice – first, in taking a lower-paying job, and second, in taking on higher costs of living.  It’s not like other states don’t have lakes, skiing, and foliage.

Speaking of the cost of living, last year Vermont was ranked 40th, and now it’s ranked 41st in 2015 – so it’s heading in the wrong direction:

I'll bet that small shed on the right can be rented out for $850/month.

I’ll bet that small shed on the right can be rented out for $850/month.

What do the top 10 states look like, in terms of attributes?  The short answer is:  Nothing like Vermont.

A top ten list where VT cannot be found.

A top ten list where VT cannot be found.

Minnesota has essentially the same rating that Vermont does in terms of Quality of Life and Education, but Minnesota is ranked 1st, and Vermont is 42nd.  So if you’re looking to say that at least Vermont has high ratings in those categories – and those would be the only two highly-ranked categories for Vermont – then you’re fresh out of reasons to stay in Vermont, if you want to make a living, own your own home, and have something, someday, to pass onto those children.  As it turns out, you can have a high rating for Quality of Life, and a high rating for Education, and not get slammed with a huge tax burden, and get paid a decent wage.

As an example of why Vermont is perceived to be, well, less than friendly toward business, I give you (courtesy of Vermont Digger):  People Complaining About Natural Gas – and the new pipeline that will bring this cheap and plentiful energy source into Vermont:

Witnesses who testified against Vermont Gas said cold climate heat pumps are an efficient alternative heating source, home heating oil prices are low, and NG Advantage can send natural gas on tractor-trailer trucks to industrial customers who still want the gas.

Well, let’s see if I can help here by asking a few questions:

How many homes have cold climate heat pumps in Vermont?  What would it cost to install them in a few hundred thousand homes?

Heating oil prices are low now.  Is that going to continue indefinitely?  What’s been the incentive for people to switch to domestically-produced natural gas?  Was it historically low and unchanging oil prices?

Tractor-trailer trucks run on, what, sunshine and rainbows?  How about the roads they run on?  Are they also made of rainbows, or are those made of unicorns?  If your argument is that natural gas will create additional greenhouse gases, what comes out of the exhaust pipes of tractor-trailers?

Lastly, let’s look at Cold-climate heat pumps – Even Efficiency Vermont states that you’ll need traditional backup for these heat sources:

As outdoor temperatures drop, so does the efficiency and heat output of an air-source heat pump (one

One assumes this sign wasn't raised when Vermont Yankee's petition for an extension was denied.

One assumes this sign wasn’t raised when Vermont Yankee’s petition for an extension was denied.

challenge of using this technology in a cold climate). Selecting one of the qualifying models will help with this. A back-up heat source will be needed when the temperature drops below zero.

So, the answer to heating your home in a state that’s pretty well-known for cold winter temperatures is a system whose efficiency drops the colder it gets?  And that you’ll still need your traditional heat sources to stay warm in the winter?

These are the arguments being used to stop construction on a natural gas pipeline?  I hate to break it to those opposed, but your arguments actually bolster the case for construction of the natural gas pipeline.

But don’t worry, Rutland Area Climate Coalition.  Help is on its way to argue your cause for you in the form of…..Jim Dumont?

Jim Dumont, who represents AARP and Kristin Lyons, pressed the Public Service Department on several points.

Natural gas distribution, Dumont argued, has only about a 25 percent cost advantage over a cold-climate heat pump.  Dumont argued that cold-climate heat pumps are cost-effective for homeowners as compared to natural gas. Further, he said that industrial customers don’t need natural gas through a pipe because they can trucked in by NG Advantage.

So let me get this part straight – natural gas distribution is only 25 percent better than a cold-climate heat pump?  Only 25%?  Gee, I don’t know, maybe if were only 83% better, Dumont would have me convinced.

Call me crazy, but 25% better seems a lot better than 0% better.  Arguing that industrial customers don’t need

Only in VT can we argue that increased trucking is good for the environment.  And good for snarky t-shirts.

Only in VT can we argue that increased trucking is good for the environment. And good for snarky t-shirts.

gas through a pipe because they can have it trucked in is a laughable, side-splitting argument to make.  They could have it parachuted in, too, so they don’t need it through a pipe.  But considering that they can have it through a pipe, and it’s cheaper and more efficient to have it piped in, well, perhaps the industrial customers can build one less natural gas truck loading dock and roll around in a big pile of their saved dollars.

But as it’s become pretty clear, based on the CNBC rating, that these circling-the-drain arguments about whether or not a gas pipeline is better for Vermont is another perfect example of why Vermont’s business climate is continually ranked at the bottom of the barrel.  When Vermonters wonder aloud why they can’t find better-paying jobs, or a job at all, look no further than their fellow Vermonters who populate such groups as the Rutland Area Climate Coalition.

 

A Quitter’s Work Is Never Done: The Shumlin Short-Timer

The Putney Powerhouse, Peter Shumlin, is quitting – and as an odd comparison to what it’s like to quit in the private sector, he gave himself a

Peter looks great in yellow.  It's definitely his color.

Peter looks great in yellow. It’s definitely his color.

year and a half’s worth of down time before he hangs up his spikes.  Or his gubernatorial epaulets.

This is somewhat in contrast with Peter’s prior exhortations for Vermonters not to quit, on such things near and dear to his heart like single payer.

“What I would argue strongly is don’t quit before we start,” said Shumlin. “Don’t quit before we start.”

I guess it’s OK to quit after you start, if you’ve got the steely backbone of a Peter Shumlin.

But, since he’s decided to become Sir-Quits-A-Lot, Peter’s now going to be laying out his laurels for all Vermonters (and potential future US Senate voters) to coo over, lovingly, while he puts his feet up in his office as a short-timer, and tells us “we” have a lot left to do:

“Now we have a lot left to do; let’s get back to work,” he said, according to the Free Press.

Shumlin cited his work to reduce unemployment rates and expand high-speed Internet access and preschool education, the Free Press reported. He also touted various laws he’d signed, including one requiring that genetically modified foods be labeled, another raising the state’s minimum wage and a third offering free meals in schools.

Let’s tackle Peter’s accomplishments one by one, since he’s so helpfully listed them for us:

Unemployment:  As has been shown elsewhere, Vermont’s low unemployment number is essentially meaningless, and based largely on the reduction in active labor force, not an increase in the number of employed.

In fact, in 2014, the total labor for shrunk from 349,400 (Jan 2014) to 348,400 (Dec 2014), a reduction of 600.  The unemployed number for

Great news!  More people are unemployed!

Great news! More people are unemployed!

those two same date ranges increased by 150, from 14,300 to 14,450, but the unemployment rate stayed the same – because the number of people who dropped out of the labor force exceeded the number who became unemployed.

Remember – Peter’s claiming this as an accomplishment.

The state’s own short-term labor outlook shows that 9 of the top 10 growth jobs in Vermont do not require a college degree. What kinds of salaries are generally available if you don’t have a degree?  How easy is it to live in Vermont with one of the highest aggregate tax burdens in the country?

Vermont’s total personal income, as measured by the BEA?  Ranked 50th out of 57 states.  That’s as far from first place as you can get, and Shumlin is touting his economic record here?

Oh, and Vermont’s ranked the 43rd best state for business by Forbes.  So Peter’s also got that legacy working for him.

Expanding High-Speed Internet:  Well, that’s a feather in your cap, if you think using federal grant money to extend fiber or wireless down the last miles of Vermont’s roads is a critical piece of infrastructure-building.  It might very well be, but the market drives those

I can see Peter's 2014 election results right here in the corn field!

I can see Peter’s 2014 election results right here in the corn field!

demands, not the state – unless, of course, there are federal dollars involved and one can make some hay claiming that this infrastructure will help bring jobs to Vermont.  If the expansion of access has been so successful, why aren’t we seeing job growth?  And why aren’t we seeing new office buildings go up on those scenic Vermont roads, all over the state, where a data pipe is now available?

Why is it you find dockworkers located near docks?  That’s where the work is.  If there were more work available in Vermont, you would see the demand for data infrastructure increase, and it would already have been built out in those areas where the demand is.  That the smallest ends of the demand curve for internet access sit on the last few miles of Vermont roads, out in the sticks, does not mean that providing data to those locations will salve the economic wounds inflicted by decades of anti-business deeds, and rhetoric.

GMOs:  Just a quick note to politicians:  Every foodstuff is genetically modified.  That there are newer ways of doing this does not erase

Look at those evil, GMO-tainted seedless grapes!

Look at those evil, GMO-tainted seedless grapes!

millenia of modifications, it just makes those changes occur faster.  Labeling on the package isn’t going to change anything, in the same way that labeling cigarettes as being dangerous to your health doesn’t change the fact that smokers will buy them.

This is an accomplishment?  It’s like saying labeling the weight of the package in the product is an accomplishment.

Minimum Wage:  As has been repeatedly and tiresomely noted, raising the minimum wage increases unemployment.  The CBO estimated that an increase to $10.10 would decrease employment by 500,000 workers nationally.  Again, this is an accomplishment?  Raising the cost of anything involving the production of a good or a service means the price goes up, which means (generally) that demand for that product or service will go down.  Which means that there will be less demand, or need, for the labor to provide that product or service.

Offering “free” meals in schools:  Maybe Peter needs to go back to school himself, because TANSTAAFL says otherwise.  Touting something as free does not make it so; those meals are paid for by tax revenues, not a magically free meal-delivery system.  Oh, and how are

MmmmMMMMMmmm!  You first, Peter.

MmmmMMMMMmmm! You first, Peter.

those meals looking, by the way?

But what’s really driving Peter’s self-imposed exile is the massive and unmitigated failure of single-payer, his “signature” piece of legislation.  A failure so large that Peter decided he would only detail how big the failure is until after his last election in November 2014, an election that was so close it had to get tossed to the Vermont legislature to decide.

Only after he was safely back in office in December 2014 did Shumlin decide to acknowledge publicly what everyone else has known for a year or more:  That his version of single-payer was a mismanaged hack job that spent hundreds of millions of tax dollars on a website that still doesn’t work, years later, and so, he bailed on it:

Shumlin had missed two earlier financing deadlines but finally released his proposal. But he immediately cast it as “detrimental to Vermonters.” The model called for businesses to take on a double-digit payroll tax, while individuals would face up to a 9.5 percent premium assessment. Big businesses, in particular, didn’t want to pay for Shumlin’s plan while maintaining their own employee health plans.

He didn’t “miss” them – he purposefully chose not to release his proposal due to political considerations, because there was no way that implementing single-payer wouldn’t raise taxes by an enormous amount.  The estimated cost was $2.2 billion and the state’s total budget is already $5 billion.  That’s roughly a 50% increase in taxes.

“These are simply not tax rates that I can responsibly support or urge the Legislature to pass,” the governor said. “In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.”

Note that implementing single-payer would not guarantee any additional access to care.  It would just give everyone an insurance card.  There’s an enormous difference between covering everyone under one insurance plan, or even 50 plans, and the insured actually being able to see a doctor.  Ask Canadians.

And that was for a plan that would not be truly single payer. Large companies with self-insured plans regulated by ERISA would have been exempt. And Medicare also would have operated separately, unless the state got a waiver, which was a long shot.

Again, since the state’s demographics mean that MediCare spending gobbles up massive chunks of the state’s budget, it also means that

This does not look like a soft landing.

This does not look like a soft landing.

single-payer wouldn’t address the primary cause for commercial insurance rate increases – the Medicare cost-shift.  His proposal ignores it entirely.

In short, even Peter can read the writing on the wall.  Considering his near-defeat last fall, even in a state as politically progressive as Vermont’s, another Shumlin term was rapidly becoming a pipe dream for the Man With A Questionable Plan from Putney.

 

 

Bernie Sanders: Apocalypto Economics Part 2 – Electric Boogaloo

Continuing from last week’s post regarding Bernie Sanders’ calls for abject lunacy, or, as he sees it, an economic “plan”, we’ll pick up where we left off with the good Senator Who’s Not Really From Vermont Else He Would Have Had to Hold Two Jobs to Keep the Roof Over His Head Like Real Vermonters Do:

Bernie’s off to the races:

Addressing Wealth and Income Inequality

Today the richest 400 Americans own more than $2.3 trillion in wealth, more than the bottom 150 million Americans combined. Meanwhile, nearly half of Americans have less than $10,000 in savings and have no idea how they will be able to retire with dignity.

But half of Americans pay no income tax.  That bottom 150 million pay zero in income taxes, which means the rest of us are paying for

Bernie can have my dollars when he pries them from my warm, manicured finger...nails.

Bernie can have my dollars when he pries them from my warm, manicured finger…nails.

everything that they receive in terms of government benefits.  Everything.

“Owning” $2.3 trillion in wealth does not mean that 2.3 trillion is in a big box of gold coins in someone’s basement.  It means those dollars are invested, or in property, or in some active form that creates jobs.  How does a company raise money to build a new plant to build more widgets?  It issues stock.  Who buys that stock?  People expecting a return on the investment, naturally, but the people with money to invest – meaning they don’t want to throw it away.

Who benefits from that new plant being built?  The contractors who build it.  The people hired to staff it once it’s up and running.  The customers who buy the widgets.  The investors who bought stock, because if the company is successful, they will see returns on that investment in the stock price and/or dividends.

So, if owning so much wealth makes you a bad person – why does Bernie want to kill jobs by confiscating more of that money?  Does he not want contractors to have jobs building the plant?  What about their families?  How will little Jimmy go to baseball camp this summer if his electrician Dad doesn’t get the job roping the new plant everyone was talking about?

Wealth is not a pile of money, to be doled out by a aging hipster who tells everyone what he thinks about “fairness”.  Wealth is fungible, it is risked, and confiscation of wealth has historically lead to, just in the 20th century, around 100 million deaths.

We need real tax reform that makes the rich and profitable corporations begin to pay their fair share of taxes. It is absurd that in 1952 corporate income taxes provided 32 percent of federal revenue while in 2014 they provided 11 percent.

It’s absurd that the US corporate tax rate is the highest of all the OECD countries. Taxes are a cost.  Increase costs, and you decrease the ability of the company to expand, hire more people, develop new products.  Y’know, run a business?  Would Bernie want to increase the taxes on a mom and pop shop?  If not, why not?  If it’s because it would make them less profitable, and maybe make the margins so slim that the company gets closer to operating in the red, then why would he think it’s OK to apply the same logic to corporations?  Just because corporations are bigger?

It is scandalous that major profitable corporations like General Electric, Verizon, Citigroup and JP Morgan have, in a given recent year, paid nothing in federal income taxes.

It’s scandalous that Bernie is propagating lies.  To wit:

General Electric:  Not only do they actually pay corporate income taxes, but state and local taxes, too.  But they’re not required to disclose those amounts, and the “zero” payment in taxes was a claim made by analyzing financial statements, not by actual company disclosures.  Which they’re not required to make.

Verizon:  Funny, but VZW lists income tax on their financial statement.  Did Bernie miss that in his in-depth analysis of their finances?

CitiGroup:  Hmm.  They show $2.7 billion in taxes paid.  How could Bernie be wrong?

JP Morgan:  Income tax expense?  $7.63 billion.  Does Bernie need a math tutor?

It is fiscally irresponsible that the U.S. Treasury loses about $100 billion a year because corporations and the rich stash their profits in the Cayman Islands, Bermuda and other tax havens.

No.  It’s outrageous that dollars earned overseas – dollars risked, not just piles of money, they are what’s earned after risking them in

Granted, it's hard to re-distribute burned wealth.

Granted, it’s hard to re-distribute burned wealth.

investments of all kinds – cannot be repatriated without a huge tax penalty, which makes the return of such dollars less of a sane financial decision than, say, pulling a Joker and burning a couple hundred million in cash.

The US Treasury isn’t “losing” a thing.  The USG – through its policies and bureaucratic apparatus – create the conditions that corporations have to react to.  It’s not the other way around, even with billions spent in lobbying, just to mitigate the outrageous policies put into place by people who have absolutely zero experience in the real world, in work, in dollars, in risk.  None.  Zero.

Yet they think they have the right, the duty, and the power to tell us what’s good for us.

And think about this, Bernie, if you can wrap your wizened head around it – how much money is the sainted Treasury losing due to companies being less profitable because of the very same laws and regulations you put into place as a kind of punishment for creating jobs?

This must end. We need a tax system that is fair and progressive. Children should not go hungry in this country while profitable corporations and the wealthy avoid their tax responsibilities.

I agree.  It’s not fair.  It’s not fair that if I get a second job, I get taxed at an effectively higher rate, all because I’m willing to work for what I want.  It’s not fair that if you pay zero in income taxes, you still get to vote for politicians who sell the idea of raising taxes on the people who already pay all the taxes, in order to give the people paying no incomes taxes more stuff.  That doesn’t seem fair at all, does it?

We have a progressive tax structure already.  The more you earn, the more you pay.  Done.

Children do not go hungry “in this country”.  Instead, we have a widespread obesity problem among our poorest children.  Why?  Because the government is there to fix problems for us, that’s why.  Why is it that in the US, the poor are obese, but in, say, Sudan, the poor are starving?

Mmmmm....re-distributive deliciousness.

Mmmmm….re-distributive deliciousness.

And Bernie thinks the fix for the non-hungry is more re-distribution?  What’s he planning on re-distributing, Ho-Ho’s?

The next issue Bernie plans on failing to address:  Reversing Climate Change!

The United States must lead the world in reversing climate change and make certain that this planet is habitable for our children and grandchildren.

We must?  Why?  Because you say so?  How can we make certain the planet is habitable if an asteroid hits it?  Will taxing the 1% at a higher rate fix that somehow?

We must transform our energy system away from fossil fuels and into energy efficiency and sustainable energies.

So Bernie’s all for nuclear energy.  Got it.  Oh, not really?  Well, good luck powering your house, then, with solar, geo, and wind – and nothing else.

Millions of homes and buildings need to be weatherized, our transportation system needs to be energy-efficient and we need to greatly accelerate the progress we are already seeing in wind, solar, geothermal and other forms of sustainable energy. Transforming our energy system will not only protect the environment but create good-paying jobs.  

Look at Bernie protect those eagles!  Thank you, Senator Super-Genius!

Hey, protected species, schmo-tected species.

As has been noted, especially in Vermont, wind power does not seem to be helping the environment much, unless by “helping” you mean a ton of dead birds, denuded Green Mountains, and highly toxic solar panels distributed all over what are becoming the less Green Mountains.

Yep, that’s Progressivism in a nutshell – more of what you don’t need, at a higher expense, with more collateral damage.

Bernie’s next easy problem to solve:  Health Care!

Health Care for All

The United States remains the only major country on Earth that does not guarantee health care for all as a right.

The countries that do guarantee it as a “right” have some of the worst access to health care services, pay higher taxes to cover it, and their citizens frequently travel to the US to receive health care.  Making something a “right” does not make it cheap, ubiquitous, or practical.  Try making a “right” to diamonds, or space shuttles, or Eiffel towers.  How would that work out?

Secondly, every American had access to health insurance, in one form or another, prior to ACA.  So even as he touts the modest gains of the system we absolutely had to have to provide everyone with health insurance, we still have people with no health insurance (which largely consists of people who could sign up for, or qualify for a program, but fail to sign up).

But why do we still have uninsured?  Bernie voted for it.  Why didn’t he fix it?  Why the failure, Bernard, and why are you touting this failure out loud, unless you don’t want us to vote you in for SuperPresident of America, since you failed to fix what other countries have so obviously and easily fixed?  It’s so easy that Sweden did it, and they’re mostly known for, um, meatballs.

Despite the modest gains of the Affordable Care Act, 35 million Americans continue to lack health insurance, and many more are underinsured.

You could issue 350 million health insurance cards tomorrow and that does not guarantee one damn thing in terms of access to care or health outcomes, nor does it address costs – the two things the ACA was sold to the US as a fix for what ailed us.  Instead, we passed it, increased

Swing and a miss, Bernard.  Try again.

Swing and a miss, Bernard. Try again.

costs massively, especially for private insurance rates, and we didn’t cover everybody.

I’m no politician, but that looks like Epic Fail time, Bernard.  Go back to the drawing board on it and get back to me.

Yet we continue paying far more per capita for health care than any other nation. The United States must move toward a Medicare-for-All single-payer system.

Only in the fantasy land of BernieLand does he think that moving to an under-funded and going broke Medicare system, an insurance that many doctors routinely refuse to take because it does not reimburse them at cost, will fix health care in the United States.  Medicare is underfunded by $38 trillion.  Bernie’s “solution” is like dropping a big bag of gasoline onto an already-raging fire to put it out.  That approach only works if you are both massively and obscenely stupid.

Or, Bernie’s goal is simply more control over the lives of the proles he seems to want to command, in every aspect of their lives.  Then it’s a raging success!

Finally, Bernie wants to wave his magic re-distributive wand once again and make college free.

Making College Affordable for All

We live in a highly competitive global economy.

Thanks for the update, comrade.  Did you go to college to learn that?

Not pictured:  Who pays for the buildings and stuff.

Not pictured: Who pays for the buildings and stuff.

If this country is to do well economically, we need to have the best-educated workforce in the world. Yet today many Americans cannot get a higher education, not because they are unqualified but because they simply cannot afford it.

Yet we have more people enrolled than ever in college.  There’s financial aid, loans, grants, available for any student to go to school.  I’ve worked at a college.  No one who was admitted was ever turned away because they could not “afford it”.

Millions of others who do graduate from college or graduate school are drowning in debt. According to the Consumer Financial Protection Bureau, the total amount of outstanding student loan debt in the United States has tripled in the last 10 years and has now reached $1.2 trillion.

That’s what happens when you subsidize colleges with guaranteed student loans.  There is zero incentive for the college to cut costs, and therefore reduce tuition increases, when you make it enormously easy through federally-guaranteed student loans for students to, well, take out loans!  Boom!  Everyone’s happy!

Oh, except the recent graduate who wonders now why colleges have such attractive dorms yet his degree in advanced waffle-making isn’t netting him six figures on Wall Street.

The United States must join many other countries in understanding that investing in our young people’s education is investing in the future of our nation. I will soon be introducing legislation to make tuition in public colleges and universities free and substantially lower interest rates on student loans.

The United States spends ka-zillions on pre-K through college, all of it either directly paid through taxes, or subsidized through both taxes and federal and state tuition assistance programs at the college level, yet we’re not “investing” enough.  Here’s an idea:  When colleges are building dorms with hi-tech lounges and swimming pools that look like resorts, it’s time to break open an economics book to understand what subsidies really do, and that’s essentially what federal student loans do:  Subsidize ridiculous spending which results in tuition rates that are triple the national inflation rate.

Hmmm.  One of these trends is not like the other.

Hmmm. One of these trends is not like the other.

Oh, and how does college become “free”?  Who now pays for the buildings, teachers, staff, hot tubs, and high-speed internet connections at the local U?  Fairies and unicorns?  Bernie doesn’t say how he’ll make college free, just that he’ll be introducing legislation that is entirely disconnected from economic reality.  Someone has to pay for everything, no matter how much it’s worth.

So, in short for Bernie, there’s a lot to re-distribute, and not enough time to re-distribute it all, so vote Bernie for President!

Bernie Sanders: Apocalypto Economics Part 1

Very little should shock or amaze Americans anymore.  As an example, if I suggested that an out-of-work socialist wannabe once found himself the mayor of a small town in Vermont, by a scant few dozen votes, and would later on parlay that dubious achievement by becoming a US Representative, then a US Senator, then a presidential candidate, well, people would have laughed.

Instead, though, we’re left with the reality of a Bernie Sanders (famous non-worker), who seems to have all the ideas about how to fix the

Here, Senator Sanders (on the right) asks a taxpayer to "give a little more".

Here, Senator Sanders (on the right) asks a taxpayer to “give a little more”.

country by shoveling all of the responsibility – meaning dollars – for applying Bernie’s “fixes” onto the backs of the people who work for a living.  All of it.  Every single dime of idiotic spending, which, as history has shown, has not solved the problems of poverty, will come out of the pockets of the people groaning to themselves on their daily drives to jobs they don’t necessarily love, but work hard at anyway, because that’s what workers do.

Workers work, they don’t preach.  Workers don’t have Socialist manifestos un-cleverly disguised as political agendas loaded daily onto a Senate website.  Recently, because Bernie’s taxpayer-supported website does not provide enough bandwidth for his breathless exhalations, Bernie posted a manifesto of sorts, for a political revolution, on HuffPo.  It’s really more of a factually dishonest rambling, but hey, he’s running for President, so he’s just following Hillary’s lead here.

So let’s begin exploring Bernie Sanders’ Economic Apocalypto:

The good news is that the economy today is much better than it was six years ago when George W. Bush left office. The bad news is that, despite these improvements, the 40-year decline of the American middle class continues. Real unemployment is much too high, 35 million Americans continue to have no health insurance and more of our friends and neighbors are living in poverty than at almost any time in the modern history of our country.

The bad news for Bernie is that he’s economically illiterate, but he’s just scoring points here off Bush.  The economy is not “much better” than it was six years ago.  In fact, the GDP growth rate, despite massive increases of government spending (one of the 3 components of GDP), is right about where it was 6 years ago.  Unemployment has gone down, but that rate reduction is largely due to tens of millions of people leaving the workforce, and an increase in the rolls of food stamp and disability programs.

And unemployment is still higher than when the recession started.  6 years into our "fundamental transformation"

And unemployment is still higher than when the recession started. 6 years into our “fundamental transformation”

 

Look at that economy thrive!  Look at all those people no longer working.

Look at that economy thrive! Look at all those people no longer working.

 

And now, the obvious economic rigging argument:

This is what a rigged economic system looks like. At a time when millions of American workers have seen declines in their incomes and are working longer hours for lower wages, the wealth of the billionaire class is soaring in a way that few can imagine. If you can believe it, between 2013 and 2015, the 14 wealthiest individuals in the country saw their net worth increase by over $157 billion. Children go hungry, veterans sleep out on the streets, senior citizens cannot afford their prescription drugs — and 14 individuals saw a $157-billion increase in their wealth over a two-year period.

Incomes are declining for a host of reasons, one of which is that when people are unemployed and they can stay on unemployment for 99 weeks now – up from 52 weeks just a few years ago – there’s less incentive to take jobs at lower rates of pay, regardless of prior income levels earned.  As Bernie himself argues:

Unemployment benefits pump money into the overall economy because most recipients quickly spend all of the money they receive.

Even if this were true, and desirable (I guess Bernie’s not a fan of savings accounts), where does unemployment money come from?  Taxes.  So those dollars would have been spent already in the economy had they not been taxed, then doled out through state agencies in the form of unemployment.

There’s no “pump”.  All that’s been done is to shift consumption (spending) from one time period (when the person is employed) to another (when the person is unemployed), while filtering those tax dollars through state agencies, which means that a percentage of those dollars are taken out to pay for state employees to administer the program, etc.  By extending unemployment benefits, you actually increase the unemployment cost of the employer, which makes it more expensive to operate their business, hire a new employee, etc – so, ironically, increasing unemployment benefits decreases the likelihood that an employer will hire more people.

Well done, Bernie.  Good thing you skipped “Econ 101″ for “Understanding Engels 101“.

As for the rich getting richer, the richest people do not hold the majority of their money in the form of cash, it’s invested – so if the stock market goes up, so does their net worth, even if it’s on paper.  And since Bernie has argued to increase the tax on capital gains, he’s incentivizing the rich to keep their money in stocks and not spend it (to avoid the higher tax) – which is what he argues “pumps” money into the economy.  Whether he understands this or not, he’s actually arguing for the rich to get richer and not spend their money.

Oh, and as for veterans sleeping out on the streets, Bernie sits on the committee (and used to chair it) that’s supposed to spend billions to make sure that doesn’t happen – and he can’t even do that?  He was chair when veterans were dying in Arizona VA hospitals, but it’s somehow income inequality that made that happen?  If veterans are out on the streets, at least they’re not dying in a hospital that Bernie has the responsibility to oversee.  It’s like blaming the fire department after you set your own house on fire.

garden of earthly economic delights

Bernie’s Garden of Earthly Economic Grotesqueries

Grotesqueries, thy name is Bernie:

The grotesque level of income and wealth inequality we are experiencing is not just a moral and economic issue; it is a political issue as well. As a result of the disastrous Citizens United Supreme Court decision, billionaires are now able to spend unlimited sums of money to buy the candidates they want. The Koch brothers, an extreme right-wing family, recently announced that they were prepared to spend some $900 million in the next election cycle. This is likely more money than either the Democratic or Republican parties will spend. If you think that it is an accident that the Republican Party has become a far-right party, think again. The Koch brothers’ agenda — ending Social Security, Medicare, Medicaid, the U.S. Postal Service, the Environmental Protection Agency and all campaign finance limitations — has become the agenda of the Republican candidates they fund.

Citizens United is only disastrous in that if it’s speech Bernie disagrees with.  If it’s Soros-funded criticism, though, that must be OK.  Note that Bernie complains about $900 million in Koch money, but Soros money dwarfs that amount (including what he’s not paying in taxes, damn those rich hedge-fund managers, Bernie! – and Hillary has stated she’ll spend $2.5 billion on her presidential campaign).  Where will Hillary’s $2.5 billion come from?  Politically neutral donors?

So, just to clarify – it’s OK if liberals or progressive spends billions, it’s not OK if conservatives spend hundreds of millions.  Inequality in a progressive nutshell.

And now, for his next trick, Bernie will tell us how to fix unemployment.  By creating jobs!  Why didn’t I think of that?

How does Bernie plan on creating those jobs, you might ask?  How can Magical Jobs Wizard Boy do what no one else has thought to do before?  Well, here’s how:  A Federal Jobs Program!  Yay!  Why has no one ever thought of this before?

If we are truly serious about reversing the decline of the middle class and putting millions of people back to work, we need a major federal jobs program. There are a number of approaches that can be taken, but the fastest way to create jobs is to rebuild our crumbling infrastructure — roads, bridges, dams, levees, airports, rail, water systems and wastewater plants.

Why, oh why, isn’t Bernie president right now?  Let’s just call him President Genius and get it over with!  The sheer audacity of hope encapsulated in a jobs program!  Hey, didn’t we try that in 2009?  How did that work out?  We tripled annual deficits and economists agreed that paying a million dollars for a job – through the transfer of taxes taken from the productive sector to the public sector – was a fantastic idea?

Um, no.  In case Bernie needs some help here, and it seems obvious that he does, taking dollars from an employer in the form of taxes, and then transferring that money to someone enrolled in a federal jobs program does not gain you one single economic benefit.  In fact, it’s a net negative to the economy, since a) it costs money to administer these programs at the federal and state level, so you’re already shaving off some percentage off each dollar spent, b) those dollars taxed away for this program are not spent in investment or salaries in the private sector, where actual economic growth occurs, so this program will retard that growth – during a recession, no less, and c) stimulus spending is rife with political cronyism.  What we call in the private sector “felonies”.

Oh, and if federal spending and deficits at unprecedented levels are good for the economy, why does this chart look like this?

 

Federal spending goes up, economic activity goes down, and salaries are flat.  More cowbell, please!

Federal spending goes up, economic activity goes down, and salaries are flat. More cowbell, please!

 

Oh, wait, don’t worry – Bernie’s got a plan to fix wages, too!  How can he perform this magical feat when trillions in federal spending can’t seem to accomplish anything at all?  Answer:  Just raise wages!

Today, millions of Americans are working for starvation wages. The current federal minimum wage of $7.25 an hour is totally inadequate. In fact, the real value of today’s minimum wage has declined by one third since 1968. By raising the minimum wage to a living wage, we can provide an increase in income for those people who need it the most. Our goal must be that no full-time worker in this country lives in poverty.

Funny, American levels of obesity are at all-time highs, yet Bernie argues that millions are working for starvation wages.  How can you be poor, starving, and obese at the same time?

Hmmm.  Those starvation wages sure are filling.

Hmmm. Those starvation wages sure are filling.

Wages are a cost, Bernie.  No more, no less.  If you raise the cost of a component of a good, its price goes up – so less of that product is consumed.  That means there will be less demand for the labor to produce that good.

Get it now?  Just raising wages increases unemployment.

Let’s not fret, though, because Bernie has found more things to fix.  He trots out the now-massively-dubunked-and-hilariously-overplayed trope about income inequality between men and women:

We must also bring about pay equity. There is no rational reason that women should be earning 78 cents on the dollar compared with men who perform the same work.

Actually, there’s a perfectly rational reason for it, Bernie:  Choices.  As has been widely noted, if you take time off from work for child-rearing, or take jobs at lower rates of pay in order to facilitate child-rearing, then your income (gasp!) goes down.  Men choose more dangerous jobs (on average) than women, which inevitably pay more.  These and a host of other choices men and women make impact their incomes.  Which, once those choices are accounted for in the data, means that the difference between men and women in pay is 1-2%, not 22%.  It’s the same.  There is no wage gap.

End Part 1.  In Part 2, we try to address Bernie’s core economic fallacies, and discuss his hair.

 

The Carolina Cage Match: Peter Shumlin Versus Rational Public Policy

Having recently moved my waffle franchise south to a place the locals here call “North Carolina”, I thought it would be interesting to perform

Don't worry, ShumlinCare covers dental reconstruction.  With a $10,000 deductible.

Don’t worry, ShumlinCare covers dental reconstruction. With a $10,000 deductible.

that most agonizing of middle-school tasks: Compare and Contrast.  But to make it more interesting – and possibly more telling, we’re going to give the C&C treatment to the economies of Vermont and North Carolina. I’m picturing this as kind of a Goofus and Gallant deconstruction of public policy.  If  you happen to assume that Peter Shumlin is the Goofus in this scenario, well, that’s up to you.

A Quick Tax Policy Comparison:

North Carolina:  In 2014, North Carolina recently dropped its income tax rate, and completely flat-lined it. Where they had three brackets before (ranging from 6.0 to 7.75 percent), there is now one single rate of 5.75% on all income levels (actually down .05% from 5.8% in 2014; is there no end to this tax rate reduction madness?).

Vermont:  In 2014, and now in 2015, the governor’s office and the state legislature seem to spend the bulk of their time trying to find new things to tax, and to scratch their heads as to why income tax revenues are not matching the governor’s rosy budget outlooks.  In August of 2014, two months after the state’s budget was passed, the legislature was called back into session to cut the budget they had just said was needed for Vermont’s economic well being.

Pat McCrory, governor of North Carolina, just submitted his 2015-2017 budget.  The overview says a lot about what’s different between the two states:

No tax increases?  Gasp!

No tax increases? Gasp!

This is somewhat different than Shumlin’s plans for 2015 (at least as of December 2014):

The Shumlin administration has already announced that property taxes are set to rise by 2 cents to $1.00 per $100 of assessed value for homeowners and $1.54 for non-residential properties in 2015. And, Speaker of the House, Shap Smith has indicated that he would like to shift more of the $1.5 billion education budget onto the income tax as part of education finance reform.

Also on the front burner for the 2015 legislative session is a $250 million carbon tax, which would translate into a 45¢ to $1.35 tax on every gallon of gasoline, and something similar for home heating fuel.

In every instance, the only solution is more cowbell, er, taxes.  North Carolina is cutting specific taxes on income, gasoline, etc – the taxes that most directly impact the taxpayers’ bottom lines.

What’s Vermont doing?  The opposite.  And has been, for a long time, with Shumlin doubling down on the same policies that are both bankrupting Vermonters and the state.  A quick snapshot shows the difference between Goofus and Gallant:

Vermont tax rates at a glance:

Look at those glorious job-creating rates shine!

Look at those glorious job-creating rates shine!

North Carolina tax rates at a glance:

There's a reason people move here.

There’s a reason people move here.

Change in unemployment rate from March 2014 to March 2015 (hint:  Vermont’s change is statistically insignificant):

 

A 1% decrease versus a 0% change.  Hmm.  More cowbell, then?

A 1% decrease versus a 0% change. Hmm. More cowbell, then?

Finally, let’s take a quick look at state spending, by category, and per capita (strap in):

Vermont at a glance:

 

Vermont Spending dollars and percent

North Carolina at a glance:

NC Spending dollars and percent

Finally, let’s look at the net result of these policies, in terms of job growth.  From January 2014 to January 2015, Vermont’s total employment gain was 1.3%.  North Carolina’s?  2.6%.

At least Vermont got the hard work done on determining the appropriate levels at which to tax soda, though.  So that's something.

At least Vermont got the hard work done on determining the appropriate levels at which to tax soda, though. So that’s something.

Because Shumlin has clearly demonstrated he has trouble with math (unless he’s happily underpaying a neighbor to buy his property without

That's ok, Lois - neither is Vermont's governor.

That’s ok, Lois – neither is Vermont’s governor.

advising said neighbor that he could have gotten relief on his outstanding property tax bill due to his income level, but I digress), I’ll clarify this for him:

North Carolina is doing better than Vermont.  By some numbers, North Carolina is doing twice as good as Vermont is, in terms of creating jobs.  Jobs are what provide tax revenues, not soda purchases.

But when you spend most of your life under a dome that is golden, you don’t really need to see or even try to understand what’s going on outside of the box you’ve happily put yourself into.  Because to do so would point out, at klaxon-alarm-levels of loudness, that you’re killing Vermont’s economy, and with it, the livelihood of all Vermonters.

 

 

Starvation and the Socialist

Former Socialist turned US Senator Bernie Sanders, occasionally seen

Watch out!  Low prices mean the apocalypse is coming.  Or perhaps customers.  One of the two.

Watch out! Low prices mean the apocalypse is coming. Or perhaps customers. One of the two.

somewhere in the vicinity of Vermont, recently took Wal-Mart to task for the wages it pays its workers.  That Bernie is spending time attacking a company that employs 2.2 million people is probably not a surprise to most Vermonters, since he seems to earn his living by throwing mud from his comfortable office perch in DC.

Speaking of comfort, Bernie feels comfortable criticizing Wal-Mart, because he’s run multi-national corporations and understands the complexities of cost in labor, materials, utilities, insurance, compliance with local, state, and federal regulations, debt financing, corporate bond issuance, as well as asset and liability management.

Because he knows all these things, Bernie knows that wages should be $10.10 an hour, minimum, not the $10.00 an hour that Wal-Mart has raised them to.

That’s right.  Bernie just knows.  So let’s let this self-proclaimed champion of

That's right, Wal-Mart Comrades!  Senator Sanders and I have given you a 1% increase in salary!  Here, you may also have half a rotten potato.

That’s right, Wal-Mart Comrades! Senator Sanders and I have given you a 1% increase in salary! Here, you may also have half a rotten potato.

the oppressed – who earns roughly $174,000 per year, more or less triple the median household income of Vermonters – tell his side of the story:

IOWA CITY, Iowa, Feb. 19 – U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement today after Wal-Mart announced that all of its workers in the United States would earn at least $9 an hour by April and $10 an hour by 2016:

“The Walton family which owns Wal-Mart is the wealthiest family in America and it is absurd that thousands of their low-wage workers are forced to use programs like food stamps, Medicaid and subsidized housing. Wal-Mart should not be paying starvation wages.”

It’s also absurd that overhead costs, including compliance, cuts into Wal-Mart margins, forcing reductions in other areas that can be controlled – like wages – in order to remain profitable, which means “in business”, so employees have a place to go to earn their salaries.  The world is crazy like that.

Speaking of margins, Wal-Mart’s profit margin as of Jan. 31, 2015, is (prepare to be outraged): 3.77%.  This is a screamingly tight margin, meaning that if variable costs go up by much at any given time (things like electricity, fuel, or wages), it directly reduces the margin.

Considering that as of Jan 2014, operating expenses for Wal-Mart were $91 billion, the bulk of which are labor costs, the company’s net income was $16 billion, something like a 10% increase in operating expenses (roughly $10 billion) would drop net income by 67%.  So bumping a salary up by 50% (moving from $10 to $15 an hour, say) could knock margins down by a third – and making the company less profitable is less likely to mean future raises and salary growth, let alone increase job security.

Now it wouldn’t work exactly like that, because not every salary is $10/hour, but since the bulk of the jobs are at that associate level, there would still be a significant reduction in margin, and a reduction in expectation of future employment.

Here’s Bernie’s math, where he puts it all together in a nice bow for all of us rubes out here in the Green Mountains:

“While this is a step forward and a response to grassroots activism across the country, this is nowhere near enough. Wal-Mart should raise their minimum wage to at least $10.10 an hour now and move it to $15 over the next several years. Struggling working families should not have to subsidize the wealthiest family in the country. Wal-Mart also should end its vehemently anti-union activities.”

Oh, so $10.10 is the correct wage as determined by the Dear Leader, er,

Says the guy who's job, as chairman of the VA committee, is to take care of veterans.

Says the guy whose job, as chairman of the VA committee, is to take care of veterans.

Central Planner-In-Chief, er, the guy who sat on his hands as chairman of the VA committee while veterans died in VA hospitals?  That’s the guy who picked $10.10 out of the air?  That’s the expert we have for wage rates at retail chain stores?

A 1% raise isn’t going to net anyone anything.  The costs associated with updating hundreds of thousands of employee records to increase salaries, alone, would cost more than the 1% increase.  But let’s not let little things like reality get in the way of Captain Soundbite, in terms of his valiant charge against companies that actually employ people.

Raising the salary to $15/hour would dramatically increase operating costs, would significantly cut into an already-tight margin, and increase the likelihood that Wal-Mart would employ fewer people, while asking current employees to work even harder to cover for the people it cannot now afford to employ.  How does any of that sound like a good idea?

Oh, and one last thing:  Bernie has the 45th lowest average staff salaries in the US Senate.  Which may mean that Bernie is saving the taxpayers money, or he’s just not interested in that “fair wage” thing as much as 44 other Senators.  In fact, Bernie has a larger staff (in FY14) than Leahy did, and he’s paying them less – more people employed, at a lower average wage.

Sounds a little bit like Wal-Mart, no?

Power to the people!  Unless you work for Sanders, then it's power to the people looking to work for other Senators that pay more.

Power to the people! Unless you work for Sanders, then it’s power to the people looking to work for other Senators that pay more.

 

 

The Humbled and the Horrified

Peter Welch, Vermont’s lone representative in Congress, posted the signing of his Oath of Office on Facebook on January 6, 2015.  He took the time from his busy schedule of visiting Communists to share his thoughts with his fellow Washingtonians, er, Vermonters:

This afternoon, I took the oath of office to once again represent Vermont in the House of Representatives. I am humbled and honored by the opportunity to serve Vermonters in Congress and look forward to finding common ground on the many challenges facing our country. –Peter

It's not signed in crayon?

It’s not signed in crayon?

Here’s a word missing from his casual Facebook post that readily applies to his fine work done in the last year:

Ashamed.

Why ashamed?  Because Peter, along with Patrick Leahy, lent the legitimacy of their offices to the Castro regime last month, a dictatorship that has suppressed dissent through force and intimidation for decades.  Here’s some handiwork of the Castro regime that Peter does not appear to be humbled by:

You're free in Cuba - to get hit in the head with a pipe if you challenge the dictatorship.

You’re free in Cuba – to get hit in the head with a pipe if you challenge the dictatorship.

Which is a bit of a walk from Welch’s pictures taken while he was visiting Cuba with Senator Leahy:

Not pictured:  Cuban dissidents being beaten by Castro apparatchiks.

Not pictured: Cuban dissidents being beaten by Castro apparatchiks.

Welch routinely votes the party line, siding with Democrats 95% of the time (113th Congress).  This isn’t representation; it is adhesion to a party line in order to ensure a place at the Democrat table.  Vermonters’ interests aren’t served by a time-serving politician, and neither is the national interest served by a representative that shows support for a dictatorship that has routinely executed, imprisoned, tortured, and terrorized anyone who questions the Castro regime.

If Welch really wanted to impress Vermonters about his dedication to service, he’d grab a paddle and help Cuban dissidents travel north through shark-infested waters to reach freedom – if the Castros aren’t too busy sinking these boats that have children aboard.  Better yet, Welch could have sat down with Cuban dissidents who have made it safely to the United States, and asked their opinions about his support for the Castros.

But I suspect there would be fewer smiles at that table for Welch to stare dully at, and less polite conversation.  Instead of leadership, which is what one presumes national office calls for in an individual, we get a Democrat vote machine, a man robotically employed to press the correct vote button as long as that position has been approved by the party elite.

In a way, that’s not too far a reach from what Castro’s been doing since the 1960’s.  Welch has learned that lesson well.

Oh, and in case Welch doesn’t have his TV on this afternoon:

  Over 65 Cuban democracy activists were arrested today in the eastern province of Santiago de Cuba.
  All of those arrested were members of the opposition groups, Cuban Patriotic Union (UNPACU) and Citizens for Democracy (CxD).
  Their crime? Trying to attend Mass at the Sanctuary of Our Lady of Charity.
  They were intercepted by nearly 200 Castro regime agents, who began to beat and arrest them.

Just another day in the worker’s paradise:

Thanks for perpetuating the dictatorship, Peter!

Thanks for perpetuating the dictatorship, Peter!