Tag: State of the Union

Minimum Wage Laws Kill Jobs

President Obama set the chattering classes abuzz after his unilateral announcement to raise the minimum wage for newly hired Federal contract workers. During his State of the Union address, he sang the praises for his action, saying that “It’s good for the economy; it’s good for America.[1] Yet this conclusion doesn’t pass the economic smell test; just look at the data from Europe.

There are seven European Union (EU) countries with no minimum wage (Austria, Cyprus, Denmark, Finland, Germany, Italy, and Sweden). If we compare the levels of unemployment in these countries with EU countries that impose a minimum wage, the results are clear – a minimum wage leads to higher levels of unemployment. In the 21 countries with a minimum wage, the average country has an unemployment rate of 11.8%; whereas, the average unemployment rate in the seven nations without a minimum wage is about one third lower – at 7.9%.

Nobelist Milton Friedman said it best when he concluded that “The real tragedy of minimum wage laws is that they are supported by well-meaning groups who want to reduce poverty. But the people who are hurt most by high minimums are the most poverty stricken.”[2]


[1] Barack Obama, State of the Union Address, New York Times, January 28, 2014.

[2] Milton Friedman, The Minimum Wage Rate, Who Really Pays? An Interview With Milton Friedman and Yale Brozen, 26-27 (Free Society Association ed. 1966), quoted in Keith B. Leffler, “Minimum Wages, Welfare, and Wealth Transfers to the Poor,”Journal of Law and Economics 21, no. 2 (October 1978): 345–58.

The State of the Union Is…Irrelevant

Kevin Williamson has your red-meat, small-r republican rant on the State of the Union over at NR. He’s right that the once-modest Annual Message has become as bloated and ridiculous as the presidency itself.   

Like Williamson, I used to fume and fume about our latter-day Speech from the Throne, but lately I’m no longer sure it’s worth the bother. For the speech to be worth getting worked up about, somebody would have to be listening. But as I point out in the Washington Examiner today, the polling and poli sci evidence suggest that POTUS is basically howling into the void: 

“There is overwhelming evidence that presidents, even ‘great communicators,’ rarely move the public in their direction,” writes George C. Edwards III, a presidential scholar at Texas A&M University. “Going public does not work.” In a 2013 analysis of SOTU polling, Gallup found that “most presidents have shown an average decrease in approval of one or more points between the last poll conducted before the State of the Union and the first one conducted afterward.”

(For more on that point, see Table 2.2 from Edwards’s book On Deaf Ears: The Limits of the Bully Pulpit or this review of the evidence by Ezra Klein) 

Nor does the president usually fare any better trying to use the SOTU to bend Congress to his will. As this Associated Press analysis puts it, the speech is “high volume, low yield” in terms of generating legislative action.  Contra TR, the bully pulpit isn’t so “bully.” 

None of that is to deny that the modern president has powers vastly greater than he was ever intended to have—or than one man should ever have. The danger isn’t his “power to persuade”: it’s what he can get away with under the “living Constitution” version of Article II: waging war worldwide, reshaping the law through “royal dispensations,”  taking care that his secret laws are faithfully executed. What he does matters; what he says in this stage-managed spectacle is the least of our worries. 

Many of us at Cato will watch and read the speech tonight because it’s sort of our job. If the spirit moves you, follow along on Twitter, hashtag #CatoSOTU. Otherwise, it seems to me that the late Justice Rehnquist had the right attitude

When asked why [he planned to skip the SOTU], he explained that it conflicted with a watercolor class at the YMCA. An incredulous law clerk said, “You can’t miss the State of Union Address for a watercolor class.” Rehnquist responded that he had spent $25 to enroll in the class, and he was going to get every benefit out of it.

 

Who Cares If Pre-K Would Work?

The following is cross-posted from the National Journal’s Education Experts blog:

This week’s introduction says that, when it comes to President Obama’s preschool proposal, “the only problem, as always, is that these investments cost money.” These proposals certainly would cost money – dollars Washington doesn’t have – but even discussing cost is seriously jumping the gun. The fact is that right now, regardless of cost, there is almost no meaningful evidence to support massive expansion of federal pre-school efforts. Indeed, the evidence calls much more loudly for the opposite.

Start with the biggest federal pre-K initiative, Head Start. It costs about $8 billion per year, and what are its lasting effects? According to the latest random-assignment, federal assessments, there essentially aren’t any. The program has demonstrated no meaningful, lasting benefits, and is therefore a failure.

How about Early Head Start, which involves children ages 0 to 3? It is a much newer program than its big brother, but it, too, provides no evidence of overall, lasting benefits. As a 2010 random-assignment, federal study concludes:

The impact analyses show that for the overall sample, the positive effects of Early Head Start for children and parents did not continue when children were in fifth grade…. It appears that the modest impacts across multiple domains that were observed in earlier waves of follow-up did not persist by the time children were in fifth grade.

There were, to be fair, some lasting positive effects found for some subgroups, but there were also negative effects. And for the “highest-risk” children – the ones the program is most supposed to help – the outcomes were awful:

Cato Responds to the State of the Union 2013

Cato Institute scholars Michael Tanner, Julian Sanchez, Alex NowrastehSimon Lester, John Samples, Pat Michaels, Jagadeesh Gokhale, Michael F. Cannon, Jim Harper, Malou Innocent, Juan Carlos Hidalgo, Ilya Shapiro, Trevor Burrus and Neal McCluskey respond to President Obama’s 2013 State of the Union Address.

Video produced by Caleb O. Brown, Austin Bragg and Lester Romero.

Thanks, but I’d Rather Keep My Money under This Mattress

If his election rhetoric, or stories about tonight’s State of the Union, are any indication, this evening President Obama will talk a lot about “investing” in education. And that sounds nice, doesn’t it? I mean, who doesn’t want to wisely and profitably put money into the American people? The problem is, such federal spending has never been wise or profitable, unless the profit you seek is political points.

To demonstrate the dangerous folly of federal education spending, I offer the following chart on higher education. And shortly, Andrew Coulson will be delivering a damning graphic on k-12.

What does this chart show? That inflation-adjusted student aid—the vast majority of which came through the federal government—has exploded over the last thirty years, but probably hasn’t made college more affordable. No, it has fueled a more than doubling of inflation-adjusted college prices, all while median household income has been basically flat. Schools have simply raised their prices to capture the aid.

That’s some investment: students and taxpayers are out bigger and bigger sums of money while colleges—and approval-seeking politicians who want to show how much they “care”—reap the big profits. Probably not the payoff most people had in mind.

Obama’s Andrew Shepherd Moment?

Washington Post columnist Richard Cohen today laments what he calls the “cratering of liberalism.” Cohen remembers that the “liberal agenda once included confiscating handguns and abolishing the right to own one.” Yes, agreed, we should remember that. Liberals would really like Obama to channel Michael Douglas, who played a liberal commander-in-chief in the Rob Reiner/Aaron Sorkin film, The American President (excerpt below). Should we do this in the inaugural address or the state of the union? That’s probably the debate among Obama’s speechwriters. 

The President’s Spilled-Milk Joke

One of President Obama’s better applause lines the other night came when he stepped into the unaccustomed public role of a deregulator:

We got rid of one rule from 40 years ago that could have forced some dairy farmers to spend $10,000 a year proving that they could contain a spill — because milk was somehow classified as an oil. With a rule like that, I guess it was worth crying over spilled milk.

I will note for the record that we had made a bit of a hobbyhorse of EPA’s dairy-oil-spill controls, taking note of them in no fewer than four posts as the sort of regulatory overkill the Obama administration should disavow. House Republicans complain that the president is now putting himself at the head of someone else’s parade, since their members had long urged repeal of the rules and the Obama EPA under administrator Lisa Jackson had dragged its heels about going along. But I’m not going to complain. The ability to get out in front of the other side’s parades served President Bill Clinton well, and I just wish President Obama would use it more often.

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