Venezuela Hikes Minimum Wage 30 Percent in Midst of Economic Meltdown

This weekend Venezuelan President Nicolás Maduro announced a 30 percent increase in the minimum wage. This marks the twelfth increase since he took over from Hugo Chavez in 2013, and comes on the heels of a 25 percent increase March 1. The minimum wage is now up to roughly $13.50 at the black market inflation rate. That’s not an hourly minimum, but $13.50 per month.

Due to disastrous economic policies and the recent fall in the price of oil, Venezuela’s economy, already teetering on the brink of a crisis, has plunged into full-fledged collapse in recent weeks. Venezuelans face dire shortages in everything from food to soap to toilet paper.  Rampant inflation makes it hard to find the basic necessities they need to survive even when they spend hours in lines hoping to buy them.

Venezuela, once one of the richer countries in the Americas due to its oil, has had the ignominy of topping the Misery Index, a project from Cato’s Steve Hanke which scores countries on unemployment, inflation, lending rate and change in real GDP per capita.

Right-to-Know Payroll Tax Reform

I met with a group of House Republicans last week to talk about tax reform. Ways and Means chairman Kevin Brady is laying the groundwork for a major tax restructuring next year, and so GOP members are boning up on reform ideas. I discussed income tax reforms with the members, including the creation of Universal Savings Accounts. And, on payroll taxes, I proposed reviving the Right-to-Know National Payroll Act, a bill that passed the House back in 2000 but died in the Senate.

The federal payroll (or FICA) tax that funds Social Security and part of Medicare imposes a huge burden on workers and the self-employed. Liberals are right when they note that the 15.3 percent tax costs moderate-income people far more than the income tax does. In addition to the large burden, the problem with the payroll tax is that half of it (7.65 percent) is collected from employers and hidden from citizens because it does not appear on worker paystubs or annual IRS W-2 forms.

Economists agree that the “employer” half of the payroll tax actually falls on employees in the form of lower wages. Thus the tax reduces wages of American workers by $550 billion a year without them even knowing it. For transparency in taxation, Congress should change the administration of the payroll tax so that the full 15.3 percent is clearly visible on worker paystubs and W-2 forms.

Japan: The Way Out

“Helicopter money” started out as, and long remained, nothing more than a heuristic device — and a brazenly counterfactual one at that — employed by monetary economists as a means for gaining a better theoretical understanding of the consequences of changes in the stock of money.  “Suppose,” the analysis went, that instead of increasing the monetary base by buying bonds in the open market, central banks dropped new supplies of currency from helicopters, thereby instantly increasing everyone’s money balances.  What would that do to spending and, eventually, to prices?

Lately, however, helicopter money has made its way from the inner recesses of economics textbooks to the financial pages of major newspapers and magazines, where a debate has been joined concerning its merits, not as an abstract analytical tool, but as an actual policy tool for relieving Japan, and perhaps some other economies, of their deflationary woes.  Look, for some examples, here, here, and here.  And see as well this recent blog post by our dear friend Jerry Jordan, written for the Atlas Foundation’s Sound Money Project.

Yet for all the controversy surrounding the suggestion that Japan should actually try dropping money from helicopters (or something close to that), my own response to it consisted, not of either surprise or dismay, but of a strong sense of déja vu.  For I myself wrote an op-ed proposing helicopter money for Japan in the spring of 1997, that is, almost exactly 19 years ago.  I never tried to publish it, in part because I myself couldn’t quite decide just how firmly my tongue was poking my cheek as I wrote it, and because I had then as I do still an abiding dislike of  “clevernomics,” which is the sort of stuff economists write to show just how clever they they can be, rather than because they are seriously trying to help the world along.  Worried that I was myself lapsing into that sort of thing, I stuffed the essay into a file cabinet, where it has been buried ever since.

All the recent writing on the subject has, however, emboldened me to resurrect my dusty old essay and to publish it hereunder its original title.  I don’t pretend that it adds anything to what recent commentators have had to say on the topic.  Consider it a bagatelle, if you like: you’ll get no argument from me.

China Needs a Foreign Policy which Makes Friends

Rising powers tend to be cocky and pushy. They believe their time has arrived and they want their just deserts—now. So it is with China.

Alas, there’s a downside, which Beijing has discovered. Rising powers don’t make many friends.

If you listen to the debate on the U.S. presidential campaign trail—not recommended for the faint-hearted!—you’d think America was a helpless Third World state, besieged by enemies deploying vast armies and armadas. The truth is, the United States dominates the globe. Among its advantages is being allied with every major industrialized state, save China and Russia, and is friendly with many other states as well.

The latter point underscores America’s extraordinary global reach. There are many reasons Washington has so much international clout. Much of this has is because U.S. policy has emphasized making friends and acquiring allies.

There are downsides to this approach. Nevertheless, overall the United States is stronger because it has a cooperative relationship with so many other countries.

In contrast, let’s look at the international response to Beijing’s so-called peaceful rise.

Economics of the Syrian Refugee Crisis

The Syrian Civil War has produced about 5.8 million Syrians seeking refuge or asylum elsewhere–a scale of population displacement unseen since World War II. Although the flow into Europe dominates the news, most of the registered Syrian refugees remain in the Middle East. Lebanon, Turkey, and Jordan are the main recipients of the immigration wave, receiving roughly 1.1 million, 2.7 million, and 640,000 Syrians, respectively. The Gulf States are hosting about 1.2 million Syrians on work visas but they are not legally considered refugees or asylum seekers because those nations are not signatories to the UNHCR commission that created the modern refugee system. Regardless, the humanitarian benefit of Syrians working and residing there is tremendous.

The movement of so many Syrians over such a short period of time should result in significant economic and fiscal effects in their destination countries. Below is a summary of recent economic research on how the Syrians have affected the economies and budgets for Lebanon, Turkey, Jordan, and Europe. 

Lebanon

Syrian refugees are 24 percent of Lebanon’s population–the highest Syrian refugee to population ratio in the world. However, neither the Lebanese government nor the United Nations has established official refugee camps in the country and registration of new Syrian refugees stopped in May 2015. International NGOs provide humanitarian aid that benefits over 126,000 destitute Syrians, but significant funding shortages have left some Syrians living on less than half a dollar per day. To more efficiently provide aid, the United Nations High Commissioner for Refugees has divided the country into four areas: Mount Lebanon and Beirut, North Lebanon, Bekaa Valley, and South Lebanon. Most refugees have settled in the underdeveloped areas of the Bekaa Valley and North Lebanon because the Lebanese in these areas share many family ties with Syrians. Locals in these areas are struggling to accommodate Syrian refugees despite the family ties.

Many Syrians, especially those with more wealth and greater skills, are responding to the poor economic conditions in North Lebanon and Bekaa by moving to South Lebanon and Beirut where there are more job opportunities, higher wages, cheaper rents, and safer communities. Syrian entrepreneurs are also welcomed in these regions of the country.

Second Amendment Rights for Me But Not for Thee

The Fourteenth Amendment guarantees that no state shall “deny to any person within its jurisdiction the equal protection of the laws.” Among lawyers, the buzzword we looking for in an equal protection case is “strict scrutiny,” because chances are that once the court has said that standard applies, the government will lose. Nevertheless, there are plenty of cases—including last term’s Obergefell decision on gay marriage—in which a government action has transgressed even less rigorous levels of scrutiny.

After all, the Constitution doesn’t guarantee the “equal protection of the laws” only to people who fit within certain categories. Instead, it guarantees that governments – federal or state – will not make arbitrary distinctions among the people subject to their laws. For instance, the Supreme Court has said that the government cannot refuse food stamps to people living in a household where not everyone is related (U.S. Dep’t of Agr. v. Moreno). Nor may the government require a special-use permit for the operation of a group home for mentally disabled people (City of Cleburne, TX v. Cleburne Living Center, Inc.). Nor may a state restrict access to its public schools to legal residents, thereby preventing illegal-immigrant children from receiving an education (Plyler v. Doe).

Now there’s a new lawsuit in federal court in California, Garcia v. Harris, that challenges the way that state has structured its Gun-Free School Zones Act. Until last year, state law contained an exemption for people who had obtained a California license to carry a concealed weapon (“CCW”). Due to pressure from the anti-gun lobby, however, the state legislature removed that exemption, nevertheless leaving in place the exemption for “an honorably retired peace officer authorized to carry a concealed or loaded firearm.”

Trade U.S. Military Exercises for North Korean Nuclear Tests

Whatever the issue and occasion, North Korean ambitions loom large. Foreign Minister Ri Su-yong recently opined that the confrontation between the United States and his nation “will lead to very catastrophic results, not only for the two countries but for the whole entire world as well.”

Actually, most of the world doesn’t much notice the Democratic People’s Republic of Korea. Nevertheless, everyone would benefit if international relationships involving the DPRK became more normal.

Interviewed by the Associated Press, Ri defended the right of his nation to possess nukes and blamed American hostility for forcing the DPRK to create a nuclear deterrent in self-defense. The latest missile test, he said, gives North Korea “one more means for powerful nuclear attack.”

However, Ri suggested a potential deal between North Korea and the United States: “Stop the nuclear war exercises in the Korean Peninsula, then we should also cease our nuclear tests.” It’s an idea worth pursuing.

Pyongyang is unlikely to ever agree to fully disarm. It has spent too much developing nuclear weapons. Nukes also offer security against the world’s greatest military power, which has demonstrated a propensity for ousting the regimes of largely defenseless antagonists.