Power & Market
President Trump’s decision earlier this month to assassinate Iran’s top military general on Iraqi soil — over the objection of the Iraqi government — has damaged the US relationship with its "ally" Iraq and set the region on the brink of war. Iran’s measured response — a few missiles fired on an Iraqi base after advance warning was given — is the only reason the US is not mired in another Middle East war.
Trump said his decision to assassinate General Qassim Soleimani was intended to prevent a war, not start a war. But no one in his right mind would think that killing another country’s top military leader would not leave that country annoyed, to say the least. Senators Mike Lee (R-UT) and Rand Paul (R-KY) said that the Trump Administration’s briefing to Congress on its evidence to back claims that Soleimani was about to launch attacks against the US was among the worst briefings they’d ever attended.
After initially claiming that Soleimani had to be taken out immediately because of "imminent" attacks he was launching against the US, Trump Administration officials including Secretary of State Pompeo and Defense Secretary Esper have been busy walking back those claims. Esper claimed over the weekend that he had not seen the intelligence suggesting an attack on US embassies was in the works. If the Secretary of Defense did not see the intelligence, then who did?
No doubt the Iraqi leadership recognized these kinds of deceptions: the same kinds of lies were used to push the US into attacking their own country in 2003. So it should not have come as a big surprise that the Iraqi government met last week and voted for all foreign military personnel to leave Iraqi soil.
Then a funny thing happened when the Iraqi prime minister attempted to communicate to the US government the will of the Iraqi people through their democratically elected officials. On Thursday Iraqi Prime Minister Mahdi phoned Pompeo to urgently request that Washington enact a US troop "withdrawal mechanism" in Iraq. American troops are in Iraq by invitation of the Iraqi government and the Iraqi government had just voted to revoke that invitation.
The State Department responded with a statement titled "The US Continued Partnership with Iraq," in which it essentially said that the US would not abide by the request of its Iraqi partners because the US military is a "force for good" in the Middle East and that as such it is "our right" to maintain "appropriate force posture” in the region.
The US invaded Iraq based on Bush administration lies, and a million Iraqis died as a result. Later, President Obama ramped up the drone program and also backed al-Qaeda-affiliated terrorists to overthrow the secular Syrian government. Obama also attacked Libya based on lies, leaving the country totally destroyed. Trump is assassinating foreign officials and threatening destruction of Iran.
And the State Department calls that a "force for good"?
The United States can be a true force for good, however. End the military occupation of the Middle East, end foreign military aid, stop using the CIA to overthrow governments. Allow Americans to travel and do business in any country they wish. Lead by example and demonstrate how free markets and peace benefit all. A "force for good" means not forcing others to bow to your will.
Americans have witnessed people picketing in support of a $15 minimum wage. It’s called “The Fight for $15.” Florida citizens will even vote on embedding a $15 minimum wage in their state constitution in the November 2020 election. A minimum wage plebiscite is pending in Idaho in 2020. If the past is any indication, the prospects for the Florida Idaho initiatives are good. Of the 27 state minimum wage votes since 1988, 25 passed. The two that were rejected, Missouri and Montana, were in 1996. For the 25 that have passed, electoral margins have almost always substantial. For information about these ballot initiatives, see ballotpedia.org.
Interestingly, Floridians first put a minimum wage in their constitution in 2004 when it was set at $6.25 and indexed to inflation each year. That’s the reason Florida’s current minimum wage is $8.46, an otherwise curious number. Florida’s 2020 amendment proposes increasing Florida’s current minimum wage to $10.00 in September, 2021, and thereafter in $1.00 increments to $15.00 in September 2026.
Idaho’s plebiscite, if enacted, will raise the current $7.25 minimum wage to $12 by 2024. Moreover, and particularly important for what follows, it will eliminate a current provision that allows people under age 20 to be paid $4.25 an hour for their first 90 days on the job.
Media accounts of the “Fight for $15” are supportive. They typically offer numerical exercises showing “inadequate” earnings of people working full time at the minimum wage. The accounts are laced with terminology such as “fair” and “living” wages, a tactic surely designed to evoke public sympathy/support for those struggling economically. It also seizes the high moral ground for supporters since it puts their opponents in the untenable position of appearing to favor “unfair” and “non-living” wages. It always helps to control the terminology used in a debate, doesn’t it?
Sympathy and terminology without knowledge can be dangerous, or as the saying goes, “the road to hell can be paved with good intentions.” Or as University of Chicago Nobel Laureate in economics George Stigler once put it: “Whether one is a . . . churchman or a heathen, it is useful to know the causes and consequences of economic phenomena.”
The Source of the Problem
Whether intended or not, increases in the minimum wage doom those whose economic value to employers is between the current minimum wage and the proposed higher minimum wage. The lower rungs of peoples’ economic ladders are cut off. They lose their jobs regardless of the intentions of their supposed supporters. Their supposed supporters are actually their enemies. They need to “help” less.
It is unfortunate when we read that the person who filed Florida’s ballot initiative said: "In life, I think that you’re supposed to do the most, for the most with the least. ... I did [the ballot initiative] in a way that would be business-friendly, and not just throw them in the deep end.” Similarly, an official in the “Idahoans for a Fair Wage” says "I think this would stimulate the economy, and our goal really is to help lift working Idahoans out of poverty. We’ve found that a lot of the people that this would really help would be people pretty much 35 and under."
In truth, the bills only makes many low-wage workers now legally unemployable. This is an odd way to “stimulate the economy.” And as noted at the outset, eliminating a sub-minimum wage for workers under 20 is a way to hurt, not help, those who are less productive workers. Just because a worker has relatively low productivity is no reason to outlaw that person's job. But that is what minimum wage increases do.
- "How Minimum Wage Laws Increase Poverty" by George Reisman
- "Outlawing Jobs: The Minimum Wage" by Murray Rothbard
- "Bernie Sanders Shows Us How a Minimum Wage Hike Hurts Workers" by Ryan McMaken
Last month, the United Nations released its Human Development Index , which is a report that attempts to quantify the quality of life in world's nations in a way that looks beyond purely economic measures. According to the report:
The underlying principle of the HDI, considered pathbreaking in 1990, was elegantly simple: National development should be measured not only by income per capita, as had long been the practice, but also by health and education achievements.
Ranking countries by their HDI value trans- formed the development discourse and dethroned income per capita as the sole indicator of development progress.
The Economist sums up the method in more detail:
The index combines four simple measures: life-expectancy at birth; gross national income per person; average years of education; and expected years of school. First, each variable is normalised on a scale of zero to one; next, the two education variables are averaged; and finally, the index is calculated as the geometric mean of its three components.
In other words, the index is an attempt to answer the often-hard criticism that there's more to life than measures if income.
Of course, there's also more to life than aggregated numbers on life expectancy, education, and income, as well.
And, as Daniel Mitchell has often noted, these sorts of ranking schemes created by organizations like the UN and the OECD tend to be created in a way that looks good to the international bureaucrats who create them. And needless to say, these people aren't exactly known for a dogmatic preference for laissez-faire.
Nevertheless, if viewed with the proper skepticism, HDI is an interesting look into what UN researchers think is important, and how different countries stack up in this particular case.
When we list the top 30 countries ranked in terms of HDI, we find Norway at the top, Estonia at the bottom, and the United States close to the middle:
The only Western European countries that don't make the top 30 are Portugal and Andorra which are ranked at 41 and 35, respectively. Greece, which is an EU country, and traditionally considered to be part of "the West" is ranked at 31.
If we were to extend the list to the top fifty, we would also see Poland, Latvia, Chile, Hungary, Argentina, Croatia, and Russia, among others.
Where Does the United States Rank?
From what I can find, not a single major news outlet other than The Economist has commented on the new report. This may be in part due to the fact that the rankings don't lend themselves to any snappy observations about how the report "proves" that the United States is gravely deficient in some sort of quality-of-life indicator, and that all the US's problems will be solved if only it embraces more government intervention.
It is no doubt disappointing then, that the United States is not especially remarkable in the HDI. It ranks 13th between Canada and the United Kingdom. The US is two notches below Denmark and two notches above Finland.
France, Spain, and Italy, however, rank remarkably low, coming in at 24th, 26th, and 28th respectively.
It's conceivable, of course, that believers in the myth of the Scandinavian socialist utopia might point to this as further "evidence" that more interventionist states are "better off" than the supposed hyper-capitalist United States.
Moreover, if having a highly interventionist state is the prescription for success, why do countries like Italy, Spain, and France rank so far below the United States? Those countries all have enormous welfare states and profligate government spending. Indeed, if the Scandinavia is our model, why does the US rank above Finland, and barely below Denmark? After all, the US's HDI value is 99%the size of Denmark's. There's really not much of a difference here between the US and the supposed promised lands of northern Europe.
"Adjusting" for Inequality
If you have a habit of reading reports like this, though, you can probably guess where this is headed.
The UN's own report points toward a very high level of quality of life in the US both in terms of education, life expectancy, and income.
However, as has become popular now among agencies like the UN, the report must be "adjusted" for inequality.
(If you're interested in how they do this, see here .)
The US is quite large and diverse (in terms of geography demographics, and more) compared to every other country with a "very high HDI." Not surprisingly, then, we find more diversity in the US than elsewhere.
The UN researchers then "adjust" for this by discounting the US's HDI score in accordance with its inequality level.
Thus, the US HDI value falls from .92 down to .79. Now, rather than being near the top, this puts the USA much farther down the list near France (.80), Hong Kong (.80), Israel (.78), and South Korea (.77).
Now, instead of being ranked 13th, the US is ranked 24th.
Of course at this point, we're reaching labyrinth-like levels of aggregation and adjustment. We've reduced every country to a single number, and then we've adjusted it further to account for inequality.
In spite of this rather improbable method of reducing numerous countries of many millions of people into a single number, rankings like these nevertheless tend to pop up in international lists of "happiest" countries or "the best country to live in."
The US Is Too Big for These Comparisons
The whole endeavor strikes me as rather suspect, especially when dealing with a country as enormous as the United States. After all, the US is, by far, the largest country in the top rankings. With 320 million people, the US isn't really comparable to even the next-biggest "very high HDI" country, which is Germany with 80 million people. Other comparisons are far worse. Norway, for example, has 5 million people, and is thus 1.5% the size of the US.
A far more meaningful ranking system would be to account for differences across political sub-units and regions, such as the US states. As we've already seen in numerous cases, such as with incomes, life expectancy, and crime, variations are quite large across states. Some US states are places where residents enjoy remarkably low crime, low mortality, and high incomes. Other states do less well.
One aggregate number of the entire US actually tells us very little.
Aram Roston reports on how Mideast dictatorships now hire former US military personnel to form what are essentially death squads designed to eliminate the regimes' enemies:
The revelations that a Middle East monarchy [UAE] hired Americans to carry out assassinations comes at a moment when the world is focused on the alleged murder of dissident journalist Jamal Khashoggi by Saudi Arabia, an autocratic regime that has close ties to both the US and the UAE. (The Saudi Embassy in the US did not respond to a request for comment. Riyadh has denied it killed Khashoggi, though news reports suggest it is considering blaming his death on a botched interrogation.)
Golan said that during his company’s months-long engagement in Yemen, his team was responsible for a number of the war’s high-profile assassinations, though he declined to specify which ones.
Where do these kill teams come from and where do they get their training and experience? They get it from the US military and the US taxpayer.
Last month, I wrote on how the US military is becoming increasingly reliant on mercenaries to staff military operations. This makes it easier for the Pentagon to ratchet up military conflicts while still claiming that it is reducing boots on the ground. It can do this because the Pentagon doesn't report details on how many mercenaries it's using or where they are. Essentially, mercenary forces are a sort of human slush fund which allows the Defense Department more leeway in doing whatever it wants, while sharing precious little information about it with Congress or the taxpayers.
Thus, the US treasury subsidizes the creation of these mercenary forces that then become adjuncts of foreign governments. Roston concludes:
The long US wars in Afghanistan and Iraq have relied heavily on elite special forces, producing tens of thousands of highly trained American commandos who can demand high private-sector salaries for defense contracting or outright mercenary work.
He's right about that, but then makes a rookie mistake: he refers to the movement toward mercenaries as a "privatization" of war, saying, "War has become increasingly privatized, with many nations outsourcing most military support services to private contractors, leaving frontline combat as virtually the only function that the US and many other militaries have not contracted out to for-profit ventures."
I see this mistake made over and over, and everyone needs to stop calling this sort of thing "privatization." When the government hires a construction firm to build a government highway, is that "privatization" of the highway system? No one thinks that, and for good reason. Similarly, it is not privatization when a state — whether its the US government or the UAE — hires a private firm to execute some aspects of the government's wars. These wars are state-on-state wars. There may be some truly private organization at play, but they're on the receiving end of the mercenaries' violence.
Historically, we call private military forces "irregulars" or "guerrilla" forces. There's gray area there, but, broadly speaking, truly private military forces don't have a legally enforceable contract with an officially-recognized regime. They're often not loyal to any extant state, and they often don't even get paid by any organization recognized as a state. Clearly, this doesn't describe these American mercenaries who likely have a signed contract with the UAE dictators, and money is paid in return for certain killings.
This is government money, spend on a private firm to carry out a government agenda. This is not privatization.
As the number of experienced American mercenaries continues to grow — thanks to 18 years of non-stop American wars, it will be interesting to see how many Americans military contractors have their hands in various assassinations, bombings, and other killings carried out on enemies of far off regimes.
As we've noted here in the past, the Federal reserve in recent months has begun publishing its " Underlying Inflation Gauge " which takes into account a broader measure of inflation than the more-often used CPI measure.
When we say "inflation" in this context, of course, we mean price inflation, and not money-supply inflation. And it may prove to be a useful measure when comparing if we wish to compare price-inflation growth to wage or income growth.
After all, if incomes and wages aren't keeping up with price growth, then it may be that the cost of living is outpacing incomes — and thus real incomes are going down.
One simple way of looking at this is simply to compare growth rates in price-inflation measures against average hourly earnings.
Using the BLS's measure of " Average Hourly Earnings of Production and Nonsupervisory Employees " we can compare the year-over-year growth in earnings to the year-over-year growth in the CPI and the UIG:
In this case, we see that earnings in recent months have tended to outpace the CPI, but have not outpaced the UIG measure.
In fact, in the last 24 months, the CPI has outpaced earnings growth in only 5 months out of the 24. Thus, by t his measure, at least, it looks like real wages are growing.
However, if we compare earnings growth to the UIG measure, we find that price inflation as measured by the UIG has outpaced earnings growth in 16 out of the last 24 months.
Indeed, since 2011, the UIG has either been equal to or higher than earnings growth nearly half the time (in 42 out of 89 months).
In this graph, any time the green line is below zero, that's a month in which UIG price inflation was higher than earnings growth:
Using this measure, we could conclude that earnings aren't keeping up with price inflation a significant share of the time. Naturally, if wages aren't keeping up with inflation, this would point to declining real wages.
Most of the time, however, we adjust income and wage data to the CPI only — and in that case, incomes tends to grow faster than price inflation more often.
In the last two years, we've finally begun to see income and wage growth climb above the old 2007-2008 peak levels. But that's using CPI numbers. Wage growth may not stack up nearly as well if other, broader measures of price inflation are used.
While the coverage of today's 5-4 Supreme Court ruling upholding President Trump's travel ban will understandably focus on how it is a "win" for the current administration, perhaps the most positive revelation from the decision is that it offered a major defeat for President Franklin Roosevelt.
This year marked the 76th anniversary of Executive Order 9066, the executive decree that authorized the US military to detain Japanese Americans and place them in "internment camps." As Ryan McMaken noted this February, the precedent established was still valid:
The U.S. Government has never repudiated the legal principle behind concentration camps, and maintains the legal right to use them again. Often, when libertarians or others point out that the United States is not a free country, the defenders of the status quo point to the fact that people can vote. This magical talisman held out by government apologists, known as “the vote” doesn’t seem to have worked out very well for the Japanese Americans during World War II, who also had “the vote.”
Interestingly, tucked into today's court decision is a full condemnation by the Court of the 1944 case Korematsu v. United States which defending the legality of FDR's policy. As Justice John Roberts wrote:
Finally, the dissent invokes Korematsu v. United States, 323 U. S. 214 (1944). Whatever rhetorical advantage the dissent may see in doing so, Korematsu has nothing to do with this case. The forcible relocation of U. S. citizens to concentration camps, solely and explicitly on the basis of race, is objectively unlawful and outside the scope of Presidential authority. But it is wholly inapt to liken that morally repugnant order to a facially neutral policy denying certain foreign nationals the privilege of admission.. The entry suspension is an act that is well within executive authority and could have been taken by any other President—the only question is evaluating the actions of this particular President in promulgating an otherwise valid Proclamation.
The dissent’s reference to Korematsu, however, affords this Court the opportunity to make express what is already obvious: Korematsu was gravely wrong the day it was decided, has been overruled in the court of history, and—to be clear—“has no place in law under the Constitution.”
Now will today's decision actually prevent a future government from acting in a similar way to FDR? Of course not. It has been proven time and time again that a government, in a time of crisis, will happily dismiss any claim to rights a citizen has- an inherent weakness of constitutionalism. Still, it is good to see the Court acknowledge this past evil, even going so far as to use the words "concentration camps" to describe the Federal government's actions.