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The Minimum Wage and the "Blood Tax"


Tags Taxes and SpendingPolitical TheoryPrivate Property

Just before Christmas I received the following from Joe Fullmer, and submit it to readers for their consideration:

"I am a lay economist — I have no formal training, but I read much, and annoy my friends and associates. So, my comments aren't those of a trained professional economist.

"This morning, in FEE's daily In-Brief email, I am informed that President Bush has endorsed a specific, Democratic plan to raise the federal minimum wage. Bush also announced recently plans to expand the size of the military, by as many as 70,000 troops. I begin to wonder if the two are related in an economic sense.

"Where will these additional soldiers come from? Does the government increase military pay to encourage more voluntary enlistments? Do they impose a draft? Impose stop-loss measures to prevent leaving the military when your time is up (a clear violation of contract, but hey, the government can do what it wants — it's sovereign). Whipping the public into nationalistic/patriotic fervor increases voluntary enlistment for a while, but with waning public support for the occupation of Iraq, the increased patriotic motivation to enlist which followed after 9/11 is fading fast.

"Beefing up the military is raising the 'blood tax' in the country. Those who pay with their lives and blood — the soldiers, and their families (widowed, left fatherless or child-less) — are those that pay this 'blood tax.' Tax collection of the blood tax becomes very unpopular once that tax surpasses a certain level. The draft, is a means of tax collection unpopular with those who pay the tax. And, it's involuntary. Stop-loss measures are just a different flavor of involuntary conscription. Increasing soldier pay to a market rate — the rate at which enough new soldiers voluntarily enlist to meet higher blood tax level — is the most fair means of 'tax collection' of the blood tax, but that diverts money from other uses the political class would rather fund.

"So, how does one raise the blood tax without imposing a draft or a stop-loss, nor increasing soldier pay to the market rate? Could it be that supporting the Democrats' minimum wage increase is a solution to this problem?

"The economic consequence of a minimum wage is that it puts people out of work. The sector most put out of work by it are the less-skilled and teenagers. Teenagers with gloomy prospects for work, become more willing to take Uncle Sam's alternative — join the military! Raising the minimum wage, and thereby putting teenagers out of work so that they volunteer to pay the newly increased blood tax is the perfect, subtle way to obscure/avoid the unpopularity of it (hey, they aren't being drafted, they are volunteering!), and also not have to increase their pay.

"It seems to me that Bush's announcement that he supports the increased minimum wage may go hand in hand with his announcement of an increase to the size of the military.

"I do not assert that there is a nefarious, conspiratorial motivation here. But, to whatever degree government use of inflation to obscure a tax increase is 'calculated,' it seems to me that use of a minimum wage increase, with the corresponding increased unemployment, to obscure a blood tax increase is to that same degree a cold, calculated action.

"I have not read before of any correlation between raising the minimum wage, with its consequent unemployment of the soldier-age demographic, and a period of increasing the size of the military, so the idea is new to me. Others may have suggested it before, but I haven't read it. I don't know if there *is* a correlation. A graph of periods of military increase lined up with a graph of increases in the minimum wage might quickly show if there is an obvious correlation, but if it didn't, it doesn't necessarily discredit a correlation). Nor do I know if there is a causation involved (as in, it's calculated and intentional, as opposed), or if this is just coincidence. It's an interesting possible relation, though.

"Part of the costs of war is the dead and wounded. When the State decides to raise this cost, it can become unpopular, just as it can be unpopular to raise taxes. Just as inflation is used to obscure the fact of an increased tax, increasing the minimum wage may be one means of obscuring the fact of an increased 'blood tax.'"

Tom Woods, a senior fellow of the Mises Institute, is the author of a dozen books, most recently Real Dissent: A Libertarian Sets Fire to the Index Card of Allowable Opinion. Tom's articles have appeared in dozens of popular and scholarly periodicals, and his books have been translated into a dozen languages. Tom hosts the Tom Woods Show, a libertarian podcast that releases a new episode every weekday. With Bob Murphy, he co-hosts Contra Krugman, a weekly podcast that refutes Paul Krugman's New York Times column.

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