Wednesday, September 7, 2016

September, 2016, Political Class Insanity, Part 3: Wishing Terrorism Away, Too Much Cheese, and More

It is the beginning of another month which means it is again time to review the latest political class insanity from Washington and around the world. Political class insanity takes many forms including the wasting of taxpayer wealth, criminal fraud within government programs, inane and stupid political quotes and actions, the inability to create and implement effective and efficient government programs, stupid and ill performing economic policies and strategies, and other forms of insanity that continue to evolve and surprise and shock us.

The current monthly record for the number of days needed to cover one month's worth of insanity is ten. We almost equaled that record last month when we needed nine days to cover one month’s worth of political class insanity. There is a very good chance that the ten day record could fall this month since as we get closer and closer to the election, the volume of ineptness grows almost exponentially. 

But today and for all of the posts this month, let’s start off with a welcome piece of honest political dialog. It comes from a State Department spokesperson, Mark Toner, who is about to start the daily State Department press briefing. In a joking matter, he makes the following quote: "Welcome to the State Department. I think we have some interns in the back. Welcome. Good to see you in this exercise in transparency and democracy." 

He then burst out laughing at his own quote, indicating he also knew what a joke the Obama administration has been, especially Mr. Toner’s State Department, when it comes to cover ups, lack of transparency, denial of Freedom of Information Act requests, the prosecution of whistleblowers, etc. But at least it was a little refreshing to finally hear some actual honesty out of Washington as we see from the actual clip of the news conference:

With that context of honesty, let’s see what other insanity has been going down:

1) Two days ago we discussed the reality that politicians basically have no intelligence when it comes to economic principles and strategies. Specifically, we discussed what happens when politicians impose a very high minimum wage on businesses and the market: some employees get pay raises but a lot of employees get laid off because the businesses and industries affected by a sudden increase in their wage expenses have to make business cuts, including reducing the number of employees, to remain viable.

Specifically, we discussed what happened to American Apparel in Los Angeles, a thriving apparel business, when the state government of California made the minimum wage $15 an hour. Almost immediately, 500 LA American Apparel workers were laid off and their work sent to other, more profitable manufacturing options.

This insanity is repeating itself in the Washington DC area according to a recent Washington Free Beacon article by Bill McMorris on August 24, 2016. In DC, restaurants are going through the worst hiring period in the past 15 years. There were 1,400 fewer restaurants jobs in the city in the first six months of 2016, a rate of about 8 lost jobs every day in the first six months of 2016. This is a 3% overall decrease and the worst loss of jobs since the 2001 recession. This analysis comes to us courtesy of Mr. Mark Perry of the American Enterprise Institute.

Conversely, restaurants in the DC suburbs added almost 3,000 restaurant employees during the same period. Could it be that the wages mandated under minimum wage laws in DC, which are usually about 30% higher than minimum wage levels in the suburbs, have anything to do with this difference? According to Perry: “The preliminary evidence so far suggests that DC’s minimum wage law is having a negative effect on staffing levels at the city’s restaurants. If the DC restaurant industry can’t easily absorb an $11.50 an hour minimum wage without experiencing the greatest job losses over the last six-months than in any comparable period in 15 years, just imagine the troubles adjusting to further labor cost increases of more than 30% (and $3.50 an hour) for minimum wage workers in the coming years to the full $15 an hour.”

And things might soon be getting even rougher for DC restaurant employees as the DC government recently decided to adopt a $15 minimum wage level which would put DC’s minimum wage differential even higher vs. the suburbs. Imagine the job losses under this new working requirement. Again, same old economic insanity: the good news is that you now have to be paid at least $15 an hour. The bad news is you longer have a job. Economic insanity courtesy of your economically illiterate political class.

2) We have often pointed out that the Social Security Administration is often one of the worst run, most wasteful Federal government entities in existence. A recent Washington Free Beacon article by Elizabeth Harrington lends credence to this observation. 

The Social Security’s inspector general recently completed an audit which found that the Social Security Administration had paid dead Federal workers $1.7 million over the past several years despite the fact that they were DEAD. These dead people received SSA benefit for an average of seven years after they passed away.

And this $1.7 million was paid out to only 35 people, 35 dead people. The SSA so far has only been able to recover $112,557 out of the $1,720,464 that they mistakenly paid out. This is a recovery rate of less than 7%.

The SSA tried to downplay the lost $1.7 million by claiming that this amount is an “extremely small number.” Two things wrong with this type of attitude. First, if the inspector general did an audit, he or she likely took a sample, they probably did not have the time or resources to look at every SSA recipient. 

So that $1.7 million may ro not be a small number relative to the sample that was taken. For example, if the sample size of the audit was 70, then if 35 of the 70 were getting improper payments it is a big number since 50% of everyone in the SSA population could be assumed to be getting paid unnecessary funds, based on the percentage from the audit.

Second, $1.7 million is a large number. Imagine how veterans could get the medical care they are not getting today for that $1.7 million. Imagine how many meals that $1.7 million could buy for hungry Americans. Imagine how many drug addicts could be treated for that $1.7 million. How much shelter could be provided to our homeless for that $1.7 million. To slough off that $1.7 million as an extremely small number ignores the fact that this extremely small number could bring a lot of relieve and aid to a lot of hurting Americans.

3) Although we have quoted a lot of inane politicians in this blog making a lot of inane comments, there are several that constantly stick out as being the most inane. People like Harry Reid, Nancy Pelosi, and Secretary of State John Kerry provide a steady stream of insanity to this blog.

John Kerry continued to cement his place on this list with the recent comment on terrorism and the media: “Remember this: No country is immune from terrorism. It’s easy to terrorize. Government and law enforcement have to be correct 24 hours a day, 7 days a week, 365 days a year. But if you decide one day you’re going to be a terrorist and you’re willing to kill yourself, you can go out and kill some people. You can make some noise. Perhaps the media would do us all a service if they didn’t cover it quite as much. People wouldn’t know what’s going on.” 

“People wouldn’t know what’s going on.” Huh? Is he saying it is better to be ignorant of the threats around us so that we do not know what danger we could be in? Is he saying that if we ignore terrorists they will somehow magically disappear? Is he saying that if a potential terrorist will not get his name in the appear he will not commit an act of terror? Is he saying that I have no idea what I am talking about?

In order to best resolve a problem, you need to have the best and most accurate view of reality in front of you to make the optimal decision. Ignoring fatds or keeping people ignorant and oblivious of reality is no way to resolve problems, particularly a problem as bad as terrorism. This has to go down as one of his most stupid comments ever.

4) One last piece of insanity for today. Venessa Wong, recently writing for Buzzfeed, reported how there is a massive surplus of cheese in this country. Yes, we have too much cheese sitting in cold storage around the country. This is the biggest cheese surplus in 30 years. On a side note, can you believe that someone in the Federal government, someone being paid with taxpayer wealth, actually knows that there is more cheese in the country today than 30 years ago? What a waste of money.

Apparently, the dairy industry screwed up a few years ago when dairy farmers increased the size of their herds to take advantage of high milk prices at that time. However, since then the price of milk dropped substantially and the dollar's strength vs. other currencies depressed dairy exports to other countries. As a result, we have lots of good yet unused cheese stocks piling up.

But do not fear, the Federal government, using taxpayer money, is essentially doing a bailout of the dairy industry by buying a lot of the cheese, which will then be distributed to food banks. Which causes me two problems:

  1. Why should the American taxpayer bailout an industry that made a bad business decision? Much like the taxpayers should not have bailed out the auto and banking industries in 2008 and 2009, there should not be a bailout of dairy farmers who made bad business decisions. Live with it and if you want to off load some cheese, donate it to your local food bank without taxpayer subsidies.
  2. Second problem: according to the article, the U.S.government is going to waste $20 million taxpayer dollars to purchase 11 million pounds of cheese. But the surplus is 1.25 BILLION pounds of cheese. Thus, the government purchase is less than a measly .8% of the surplus. Not 8%, .8%.
So, the Feds are spending $20 million to relieve less than 1% of the surplus. No way this makes any difference in the bloated inventories of the dairy industry, it only wastes $20 million for virtually no market or economic impact. This is doing something just for the sake of doing something, no matter how dumb it is.

Now, you might say that the 11 million pounds will help feed the needy, which is correct. But let the dairy industry donate that 11 million pounds and get a tax write-off for far less than $20 million. The taxpayers should not be bailing out an industry, especially a bailout that is too small to make any difference. 

Day three of this month’s insanity is in the books. Another bailout, trying to wish terrorism away, more Socka Security incompetence, and killing jobs while granting wage hikes. Just another day of how many different ways politicians can find to screw things up. More tomorrow.

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