Monday, August 3, 2015

August, 2015, Part 1, Political Class Insanity: Failing Political Hotel In Baltimore, Heartless Politican In Illinois,and Wage Increase Implosion In Seattle

At the beginning of each month we take a week or so to review the latest insanity from the American political class. Insanity from them includes a wide range of very depressing actions which can include wasteful spending, idiotic quotes, an inefficient and ineffective government bureaucracy, failed economic policies, etc. Every month we continue to prove that we are being served by the worst set of politicians ever.

And as you will see, this month’s review and discussions do nothing to prove that this thesis is wrong in any way:

1) In 2008, Martin O’Malley, then the mayor of Baltimore, a former governor of Maryland and current Presidential candidate, decided it would be a good idea to spend $305 million of taxpayer money to build a hotel, the Baltimore Hilton, in downtown Baltimore. I assume he thought it would be a good idea, would generate tourism traffic and revenue, and what the heck, it was only taxpayer money, not his.

His project resulted in the following results seven years later:

  • After seven years, the hotel has never posted an annual profit.
  • In the BEST year of operation, the hotel lost $2.9 million.
  • According to Maryland state senator, James Brochin: “It’s the biggest boondoggle ever. It’s hemorrhaging money every year and has less-than-stellar performance.” 
  • In case you wondering if this is partisan politics talking, O’Malley and Brochin are both Democrats.
  • The hotel was originally supposed to attract revenue from a theoretical untapped convention market in Baltimore, but most conventions passed on Baltimore, and this hotel, for other locations such as nearby Washington, D.C.
  • Even the heavily Democratic Baltimore city council opposed the project with only three out of fifteen supporting the project.“In my district, I can’t get funding to fix vacant houses,” Councilwoman Mary Pat Clarke told The Baltimore Sun in 2005. “I’m worried about the financing and the kind of precedent this is setting.”
  • “The government shouldn’t be in the business of owning businesses. It was a catastrophic economical mistake by O’Malley, and the whole thing is ridiculous,” said Brochin.
  • O’Malley claimed back before the project was approved that the hotel venture would be “risk free.” Missed that forecast by a little bit, didn’t we?
  • How bad was this concept? Although it was located next to Camden Yards, the home of the Baltimore Orioles, a team that drew 2.4 million fans to home games in 2014, the hotel still managed to lose $5.6 million that year.
Don’t you think that professionals within the hotel industry would have built a hotel there on their own without taxpayer support if it was a good idea? What made O’Malley think that he knew something that the professionals in the hotel industry did not know? Just more insanity from the American political class, butting their noses and taxpayer dollars into things they no nothing about and wasting time and money in the process. For Baltimore citizens, hundreds of millions of dollars wasted away with nothing to show in return except for annula hotel operasting deficits.

And the real insanity? This man wants to bring this type of defective financial expertise to the White House.

2) Most of the time when a politician puts his or her foot in their mouth it is silly, stupid, or inane. Sometimes, though, it is heartless, cruel, and pathetic. Such was the recent case when an Illinois Congressman, Luis Gutierrez, should have just shut up. Gutierrez is a big fan of illegal immigration and thus, is a big fan of so-called ”sanctuary cities.” 

Sanctuary cities have openly declared that illegal immigrants are welcome within their city borders and that local governments will disobey Federal immigration laws concerning the arrest, detaining, and deportation of illegal immigrants. Unfortunately, a young American citizen, Kate Steinle, was murdered in a sanctuary city, San Francisco, by an illegal immigrant who had been convicted of seven felonies and had been deported five times. 

This failure to execute Federal law resulted in this unnecessary death of a young American citizen, of which the Congressman had the following reaction: “Every time a little thing like this happens, they use the most extreme example to say [sanctuary cities] must be eliminated." Someone’s unnecessary death is a “little thing” to this cold hearted political bastard. I am sure that her murder was not a “little thing” to her parents, her brother, her boyfriend and her friends and other family members. 

I am sure it would not be a “little thing” if it was his daughter who had been gunned down for no reason. This is how low the American political class has sunk, an American’s death is a “little thing” compared to their political plans and ambitions. Pathetic.

3) We have often lamented the sad lack of understanding and usually total ignorance politicians have when it comes to economic theory and consequences. They are like that Holiday Inn Express commercial campaign, they have no economic training or experience but think they can dictate rationale economic policy because they stayed in a Holiday Inn Express last night.

Nowhere is this ignorance been more prevalent lately than in the Seattle area where their political class recently voted to raise the minimum wage to $15 an hour. The selling point these politicians tried to make is that a $15 hourly wage would lift these workers out of poverty. But as always when politicians play economists, there are unintended bad consequences:

  • Many of the Seattle workers that will now get higher wages are pleading with their employers to give them LESS working hours since their higher wages and same working hours will leave them above the income line that makes them eligible for government welfare, food, and other assistance.
  • Of course, this was the whole purpose of those who advocated for higher wages, to get these workers off of the reliance and addiction to government handouts and welfare, lift them out of poverty.
  • But as is often the case, a political action has resulted in the exact OPPOSITE of what was intended.
  • For example, LA Mayor Eric Garcetti claimed recently that LA’s $15 minimum wage would lift 6000,000 people out of poverty, which is unlikely to happen if LA workers want to stay poor, work less hours, have a higher wage level, AND receive welfare.
  • Seattle’s KIRO-TV recently interviewed a nursing nonprofit organization and found that some workers are trying to cut hours and earn less to avoid losing government assistance. In another case, a local radio station has been talking about the story: “If they cut down their hours to stay on those subsidies because the $15 per hour minimum wage didn’t actually help get them out of poverty, all you’ve done is put a burden on the business and given false hope to a lot of people,” said KIRO-FM’s Jason Rantz said.
  • Restaurants in Seattle, the industry most affected by the $15 minimum wage level because of their tight operating margins, are either adding a hefty surcharge to their prices to cover the increased labor costs, closing down, or moving in order to stay in business.
  • Some Seattle restaurants who have closed down pointed out that the higher wage levels put their labor costs over 50% of their total operating costs, making their business unprofitable.
  • Other restaurants have started making employees pay for the food they eat at their place of business, which used to be free, in order to save costs. 
  • Other businesses have taken away perks that used to be free but now cost employees since their employers have to cut costs to cover the higher labor costs. So the net/net of higher wages but fewer perks is a wash for employees, something those in favor of the higher wages never foresaw, likely because they are ignorant of basic economic theory and realities.
Thus, the minimum wage increases in certain cities are functioning much like the failed Obama Care legislation: much disruption in the lives of citizens and business owners, higher operating costs, fewer jobs, business closures, and ending up exactly where we started before the political class intervened in the marketplace. Sounds about right, insanity for no societal benefit.

More insanity for the next week or so in all kinds of areas, none of which makes any of our lives any better or less expensive.

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