Public Choice in Action

The Washington Post ran a story today that could be a case study in a Public Choice textbook, “Maverick Costco CEO Joins Push to Raise Minimum Wage.”

The chief executive of Costco Wholesale, the nation’s largest wholesale club, yesterday became the most prominent member of a new organization of business owners and executives pressing Congress to approve an increase in the federal minimum wage.

Wow, Costco’s Jim Sinegal must be a really moral and public-spirited CEO. Sinegal “said he signed onto the effort because he thinks a higher minimum wage would be good for the nation’s economy as well as its workers.” The CEO explained: “The more people make, the better lives they’re going to have and the better consumers they’re going to be… It’s going to provide better jobs and better wages.”

Who does Sinegal think he is fooling? His real aim is to use the government to squash any low-end competition. 

Costco, of Issaquah, Wash., would suffer no direct impact from a higher minimum wage because its lowest-paid employees now make about $11 an hour, Sinegal said, adding that the average worker in the company’s 504 stores in the United States makes $17 an hour.

The Global Market for Kannadian Call Centers

“How can I help you, today, eh?” 

No, not that Canada. Kannada: the native language of 70 percent of Karnatakans.

Karnataka is the Indian state whose capital city, Bangalore, has been described as “the back office of the world.” Bangalore is awash in call centers, boasts over 200 high tech companies, and is reported to have the highest number of engineering colleges of any city in the world. Bill Gates has made a promotional and recruiting trip to the city.

Bangalore’s economic success rests not simply on its wealth of skilled technicians, but on their ability to work in English. There is no global market for Kannadian call centers. There is a global market for English ones.

And that’s where two visions of India’s educational future collide. On the one hand, we have the School Choice India campaign of the New Delhi-based Centre for Civil Society. This campaign would like to see independent schooling brought within reach of every family in India, and the overwhelming majority of non-government schools in that country teach all their classes (other than, of course, native language classes) in English. They do so because that is what their customers demand.

On the other hand we have the government of Karnataka, and the highly influential linguistic nationalists who wish to promote the use of Kannada and who see English as tainted by its association with India’s colonial past. Back in 1994, the Karnatakan government passed a law – not initially enforced – banning English-medium schools. According to recent reports, it plans to start enforcing that ban in April of this year, under pressure from Kannadian activists, shuttering any schools that refuse to comply.

If the ban goes ahead, it will undoubtedly be short-lived, as Bangalore’s businesses start making plans to relocate to other Indian cities and the full economic ramifications are more widely grasped. The fact that it is even being contemplated is just one more excellent example of why centralized control over the curriculum is a bad idea, eh.

One Reason Why RomneyCare Costs So Much

According to the Boston Globe:

Employees of the new state agency established to provide health insurance to the state’s low-income residents have been hired at an average salary of $111,000 a year, with 12 of the 22 staff members making more than $100,000 and six earning more than Governor Deval Patrick and his Cabinet secretaries…

Eventually the Commonwealth Health Insurance Connector’s administrative costs will be funded by insurance companies through a surcharge . . . of 4 to 5 percent on the premiums they collect as a result of the program. Some have raised concerns that insurers will pass along the cost to consumers in higher premiums.

According to the article, the salaries are so high because the “Connector” is a species of quasi-independent state bureaucracy with the power to set its own salaries.  Former Gov. Mitt Romney once “railed against [such agencies] for their overly generous compensation packages” – that is, until he created one.

The Invaluable Gina Kolata Strikes Again

Read the story of her running injury here.

My interpretation of her story is that the market will often deliver a better diagnosis and more efficient treatment than that specialist who happens to be in your network.  But the market has to be able to experiment with new approaches, such as telemedicine.  And the patient has to care about the money she’s spending.

For more, read Arnold Kling’s Crisis of Abundance.

Running for Preacher

In the unlikely event he gets elected president, would former Arkansas governor Mike Huckabee hector the country to death about cutting carbs?  Maybe, but he seems to have an even more ambitious goal than slimming us down.  As he put it on Meet the Press Sunday:

I think America needs positive, optimistic leadership to kind of turn this country around, to see a revival of our national soul.

Really: is our national soul in such a parlous state that its last, best hope is… Mike Huckabee?  I thought it was the Left that was supposed to believe America was in decline. 

More to the point, even if there was such a thing as a “national soul,” tending to it is not part of the president’s job.  In the taciturn and businesslike language of the Constitution’s Article II, you won’t find anything making the president our national pontiff–any more than you’ll find the language that supposedly makes him Supreme Warlord of the Earth.   

This isn’t just a complaint about the Republican party, or the Religious Right, or even about religion in politics.  I’m not sure Hillary Clinton was talking about religion in her ”politics of meaning” speech diagnosing America’s “sleeping sickness of the soul,” our deep existential angst stemming from our inability to redefine “who we are as human beings in this postmodern age.”  I’m not sure what she was talking about, but whatever it is, it doesn’t sound like something bold executive action can or should fix. 

And Barack Obama’s “Audacity of Hope” isn’t a specifically religious concept.  Instead, judging by his 2004 Democratic Convention keynote speech, it seems to refer to the continuing promise of redemption through presidential politics.  Belief in that ideal would require a leap of faith far beyond anything demanded by the world’s major religions.

Reviving our “national soul,” healing our spiritual malaise, unifying the metatext and subtext of our postmodern age–none of this is the president’s business.  He or she is a constitutional officer, charged with faithful execution of the laws.   

Former Senator Phil Gramm’s 1996 run for the G.O.P. nomination was a colossal bellyflop, but he had at least one moment of glory.  Pushed by Focus on the Family’s James Dobson to talk up values issues on the campaign, Gramm snarled: “I’m not running for preacher.  I’m running for president.”  How many of today’s candidates can tell the difference? 

Tax Reform Is the Right Way to Lower the So-Called Tax Gap

Many politicians in Washington think they could get a lot more money to redistribute if Americans could be compelled into being fully compliant with the internal revenue code. Yet the world’s leading expert on the underground economy estimates that the United States has less evasion than any other nation [.pdf]. Moreover, the Wall Street Journal notes that the vast majority of noncompliance is the result of tax code complexity, which is why the only pro-growth way to generate more revenue is lower tax rates and simplification:

The “tax gap” is the difference between what the Internal Revenue Service thinks taxpayers should be paying and what it collects. The IRS currently estimates this at about $290 billion a year. Ask any Congressional chairman how he intends to close the deficit, expand the Medicare drug benefit, reform the Alternative Minimum Tax or subsidize college education, and the answer is invariably “close the tax gap.” Last year the Senate held some half-dozen hearings in search of this pot of gold. …We suppose politicians are allowed to dream. But it’s worth recalling that Washington has searched for this revenue Atlantis for decades without success. …Nina Olson, the IRS’s taxpayer advocate, told Congress last year that IRS auditors have found that an estimated 94% of noncompliance is the result of honest mistakes by tax filers who simply don’t understand the 17,000-page beast of a tax code. One obvious answer would be to simplify the code (more on that later). But this requires political will, so Congress naturally prefers the easier route of ratcheting up taxpayer regulation and enforcement. …Our personal favorite would require that Americans withhold taxes from any cash payments they make to such individual contractors as babysitters, gardeners or plumbers. They’ll love that one in the suburbs. Implicit in all these new plans is a much bigger IRS staff to monitor and chase tax miscreants. Here’s another bad idea: Many doctors and lawyers who are incorporated under subchapter S will often pay themselves lower wages but higher dividends, in order to reduce self-employment taxes. The law is vague on the limits of this practice, and it is undoubtedly abused. But the Joint Tax Committee’s preferred solution is to make all professional income – even dividend payments – subject to self-employment taxes; this is nothing more than a backdoor tax hike. …There is a better way. The more complicated a tax system, the more likely taxpayers won’t understand, or will try to dodge, the rules. Simple tax regimes, such as a single flat rate, encourage compliance and efficiency, not to mention economic growth. This has been the experience of many Eastern European countries after they imposed a flat tax, and the U.S. had similar jumps in reported tax income from “the rich” following the 1986 tax reform that cut rates and closed loopholes.