States push for higher minimum wage, while Washington stalls

A national debate rages about the minimum wage.

One side argues the current federal minimum of $7.25 an hour yields a family income below the poverty line.  On the other side, businesses argue they cannot afford to raise wages without raising prices and losing sales.

Each side can find reputable economists to support its position.  However, it’s easy to conclude that many economists make up their minds on the issue first and then develop studies supporting their views.

All of this goes on in a charged political atmosphere.  Democrats generally support increasing the minimum wage, while Republicans usually oppose any increase.

The federal minimum was last set in 2009 and has not kept up with even the relatively modest inflation since then.  Traditionally, the federal rate has only been revised when it had lost some of its purchasing power as the result of inflation.

Attempts to raise the federal level have failed, because the GOP has the votes to block any increase from passing Congress.  President Obama has issued an executive order raising the minimum to $10.10 for some federal contract workers.  The Labor Department said the order could affect hundreds of thousands of workers.

Many states set a minimum wage above the federal $7.25.  Maine’s is $7.50, but, with a referendum pending, it is likely to be raised.  Impatient with Washington inaction, some states have decided to phase in higher rates and automatically link them to the rate to inflation.  California just set its rate for 2022 at $15, the highest in the country.

Most economists agree on at least some characteristics of the minimum wage.

The income produced by the federal minimum wage will likely keep families poor.  They will seek public assistance to help meet their basic needs.  Higher incomes would reduce their eligibility for such assistance.

Businesses required to pay a higher minimum wage may reduce profits, raise prices, lay off workers or adopt a combination of these measures.

People receiving an increased minimum wage are likely to spend the added income rather than save it.  That should boost business, though not necessarily the same businesses paying higher wages.  

Increases in the minimum wage come so seldom that it lags behind climbing living costs caused by inflation, constantly eroding the buying power of low-income people.

And we can identify those jobs that are most affected.  Many of them are in restaurants among cooks and wait staff.  Women and young people are more affected than men.

Even if these points may be generally accepted, problems arise when economists try to measure the impact of each of them. 

At what point do higher wages result in fewer people being hired?  That point would show the value of labor, but it varies by the type of business and even by area.

How much do prices have to increase so that a business will lose sales?  For example, if the price of a specialty hamburger goes up from, say, $2.75 to $2.85, will people buy fewer of these burgers?

In fact, the biggest debate when it comes to proposals to raise the minimum wage is about the effect of increased labor costs on sales.  It may seem logical to assume that any increase in costs will result in a decrease in sales.  But that linkage may not kick in immediately, and it varies by industry.

Whatever the resolution of these questions, one aspect of the minimum wage has become more obviously in need of repair.  Right now, employers are allowed to pay less than the federal minimum wage to workers receiving tips – at a wage level that has not be changed since 1991.

Investigative reporting has found that some tips added into credit card charges never make their way to the intended recipient.  And there’s no sure way of knowing if the tip income makes up for the loss in wages unless employees report all their cash tips to the boss.

To end a system in which there are plenty of reasons to cheat, employees receiving tips should also receive the minimum wage, as is required in California.  That would help retirees be assured of fair Social Security benefits because of correct employer and employee contributions.

Federal Reserve policy seeks a two percent annual inflation rate to provide a cushion to keep a slowdown from throwing the economy into reverse with a loss of jobs.  Shouldn’t the minimum wage keep pace with this planned inflation?

Given the unresolved economic debate, the minimum wage issue calls for a political agreement on the correct current rate and then a permanent inflation adjustment that could finally halt the endless debate.

Poltical Thoughts 8 -- Conventional wisdom

Though important primaries remain in both parties, there is now an unusual focus on the conventions.  It seems at least some of the candidates don’t fully understand their own party.

By way of background: delegate selection.  There is no single method and the two parties differ.  Important to remember that the selection of the candidates is not an official government function.  The parties are essentially private organizations that get to set their own rules.  The same is true for the conventions.  They are not continuing bodies, so they get to set their own rules each time they convene.

It may seem self-evident to many, but the selection of nominees is a political process, meaning that 

politicians will try to turn it to their advantage.  Nothing unusual about politicians being political, right?  Not governmental (though that’s pretty political, too).

GOP.  Republicans select delegates state-by-state.  Some are winner-take-all if the leader gets more than 50% of the vote.  Some states select delegates both statewide and by congressional district. Some use proportional voting.  Many really select delegates to county or state conventions who are supposedly pledged to a presidential nominee.

Trump.  Apparently, he thought delegate selection was like a public election, and he should get the national delegates proportional to his popular vote.  He protests that isn’t happening.  (Funny, I don’t remember hearing him protest Bush-Gore 2000 result.)  He has had too little campaign organization and probably failed to have a staffer working on delegates one-by-one.  That would have ensured people selected as Trump delegates were really loyal to him.  In fact, they may be bound to vote for him for one ballot but can desert him afterwards.  In fact, his share of delegates is higher than his popular vote share.

(A pause here for Civics 101.  In the presidential election, we vote for Electors who formally vote for the president.  (Maine gets 4.)  Even they can and sometimes do renege on their commitments.)

Cruz.  He seems to think he can snare some Trump delegates, infuriating the Donald.  About the best Trump can do is win even bigger majorities.  Cruz also wants new GOP convention rules to favor his selection.  The rules will be written by a committee dominated by whoever is the frontrunner and decided on the floor.  Cruz obviously believes he needs better rules because he won’t have enough delegates.

The Ryan Rule.  When he took his name off the presidential table, Speaker Ryan said the nominee should be someone who has contested for the nomination.  In theory, that could be anybody from Fiorina to Carson to Christie to JEBush.  What he probably meant was Kasich.  The statement went a long way to legitimizing the continued campaign of the Ohio governor who has only won in one state.  Guess?

The GOP Convention.  More people say it will be contested.  I continue to say that it either will go to Trump or be negotiated.  If negotiated, that will take place before the first ballot based on commitments, many of which will not be kept later.

Democrats.  Have masses of superdelegates who don’t have to run for the honor.  State delegates awarded proportionately.  The purpose of the superdelegates is to replace the “smoke filled room” by people who have to face their own re-elections and don’t want to be sunk by an impossible presidential nominee (see GOP, though it actually has a handful of similar delegates).  The media have pushed the myth they will simply go along with the candidate having the most elected delegates.  May have worked that way in practice but not a rule, though it will again work that way.

Clinton.  Unless I’m wrong about superdelegates, all Clinton has to do is win a reasonable share of the remaining delegates to be elected.  If this matters to anybody, she has more popular votes than any other candidate in any other party.  Barring a major gaffe (minor ones will pass), she has it locked up.  Probably will slide on the emails, unless somebody can prove harm was done.  Oddly, she’s probably protected by Snowden’s revelations.

Sanders.  He was a better candidate when he was free to be decent because he thought he had no chance.  Unless he steps hard on his friendly PAC, it will look like he thinks it’s all right to harass Clinton delegates, who are loyal.  Does not ingratiate a candidate with his (is it his?) party.

Democratic Convention.  Boring.  But looking forward to Sanders’ speech.

Sanders seeks major Democratic "revolution"

The Republicans are torn by the struggle among the establishment, tea partiers and the forces of Trump.  But the Democrats also have an identity war.

Don’t forget: the Democrats have a long history of including widely differing opinions.  Also, no matter what the GOP says, not all Democrats are liberals.

In fact, there’s a good deal of overlap between moderate Democrats and establishment Republicans.  That similarity is what led to the conservative takeover of the GOP and liberal complaints about candidate Hillary Clinton.  It is also what has produced congressional action.

A relatively clear liberal-conservative split exists on so-called social issues: abortion, same-sex marriage and guns.  Those issues divide Democrats and Republicans, as do differences over the Affordable Care Act.

Clinton and Bernie Sanders are usually seen on the liberal and Democratic side of these issues.  But not all Democrats agree, while a few Republicans may quietly side with them.

The real split among Democrats comes on economic issues and the role of government.  The current campaign has revealed a strong effort to turn the party away from its drift toward support for smaller government, more power for the private sector, and continued low income taxes.

Sanders has adopted a forthright liberal approach.  He sees an essential role for government and the need to raise taxes.  He blames most of the country’s problems on the superrich and major financial institutions.

His support for bigger government, a tax increase and breaking up the biggest financial institutions would likely lead to his being labeled a socialist, but he has diffused the charge by saying he is one.  Besides, the government role he advocates is considerably less than the quasi-socialist regimes of Scandinavia.

His candidacy has become an effort to gain increased power, maybe even control, over the Democratic Party.  The GOP bred the “tea party” movement.  With Sanders, the Democrats may have spawned the “new revolution” movement, to borrow his term.

Sanders needs a revolution, because, even if he were president, he would depend on Congress to approve his policies.  His allies would have to be elected to Congress, just as tea partiers have been.

The traditional GOP has gradually adopted the tea party’s positions.  Similarly, Clinton has given some ground to Sanders in the course of the campaign.  It is generally thought he has pushed her to the left.

Yet Clinton, like Democratic presidents Carter, Clinton and Obama, clings to her allegiance to what she might consider the moderate center of American politics.  That view has meant a major role for big business and big finance in recent Democratic administrations.

The symbol of Clinton’s sympathies for these parts of what may be a broad Democratic coalition is her refusal to release the texts of highly paid speeches she made to Wall Streeters.  The voter is left to wonder if she buttered up her audience in hopes of later support by them.

The conventional wisdom is that Sanders is foolish in believing that America is ready for revolutionary change that would increase the size of government, raise taxes and weaken major economic powers.

Sanders appears to believe that Republican-driven cuts in government programs have gone so deeply into what people regard as essential services, voters would be willing to support higher taxes or even more debt.

Like Donald Trump on the other side of the street, Sanders believes that conditions have grown bad enough that voters, both traditional and new, are ready to take drastic action.  Obviously, he thinks he offers a fair and workable alternative for the Democrats.

After all, by following their more moderate approach, the Democrats have not fared well.  President Obama gets little credit for the economic recovery, but voters rate him unfavorably because of his health care program and his position on guns.  The Democrats have lost control of both houses of Congress and could lose the presidency.

Even if his new revolution cannot prevail this year, Sanders might reason that a strong showing would exert force on the Democrats just as the tea party did on the Republicans.  It is reasonable to see his campaign, not as a quixotic attempt to win, but the launching of an attempt at historical political change.

 The country abandoned its conservative political tradition in electing Democrat Franklin D. Roosevelt in 1932, believing that his proposals, involving a greatly increased federal government, were needed to end the Depression.

The battle for the Democratic Party now turns on whether there is sufficient concern, especially among younger voters, that political and economic conditions are so bad that a new political revolution is warranted. 

Political Thoughts 7 -- After Wisconsin

Trump.  An analyst wisely pointed out that Trump listens to his own counsel and nobody else’s.  His only concern is winning.  So he freewheels and says whatever he thinks will induce voters to make him the winner.  He does not need advisors, because he does not develop policies in the usual sense.  He has ignored the need to show competent advisors to demonstrate that he would have a competent administration.  He so deeply believes in his own supreme skills that he thinks he can solve any problem once he gets to the White House.  When he says he can act “presidential” that means he can stop saying whatever pops into his mind and suddenly show off his competence.

Signs of gross incompetence are any proposals that would legitimately cause retaliation by other countries against the U.S.  Like interrupting monetary transfers (think how to pay for the Mexican wall), torture, world nuclearization.

That might work in a short campaign, but he is having trouble sustaining it.  He can get himself into difficult political dead ends, contradict himself or even be forced to retract.  All of that weakens his appeal to voters who like his brash and independent style.

Cruz.  He sees himself as the last man standing, the only alternative to Trump.  If he were to succeed, he would represent the triumph of the tea party.  Is the GOP ready to move its establishment that far to the right?  Don’t forget, he alienates a lot of voters and a lot of party leaders.  So, if it succeeds in stopping Trump, does the “stop” movement then move on to Cruz?  Obviously, he doesn’t think so, believing that only he and Trump have the divine right to the nomination based on their primary performances.  Actually, the presidential selection process simply doesn’t work that way.

Kasich.  He stays in the race to pick up the pieces when the GOP rejects both Trump and Cruz.  He wants to be the real last man standing.  But he’s a proven loser, and the GOP might prefer to find a fresh candidate, right off the shelf with no primary losses.  Paul Ryan is obvious, but he is probably serious about not wanting the job right now.  So, notwithstanding Kasich’s hopes, if Trump and Cruz fail, a real possibility, the likely GOP nominee is “somebody else.”

Sanders - Clinton.  His key to winning is simple.  Win enough states that the superdelegates abandon Clinton.  Highly unlikely.  But, if you see one big name Democratic leader publicly switch, others would feel free to follow and the race will come down to the wire.  Otherwise, Clinton is inevitable partly because her problems are not big enough to make voters prefer Trump (or Cruz).  Against a better GOP candidate, the Dems would remain unlikely to believe Sanders, a real liberal, could win.  The corrective?  If he wins big in New York and California.  The likelihood?  Slight. 

Trump, tea party gain as GOP establishment fades

The Republican establishment doesn’t like Donald Trump.

That’s the common refrain. It ignores the question of whether there is a Republican establishment or even if there is still a Republican Party.

Of course, there are at least remnants of a traditional Republican Party. Its main platform has been pro-business and against government policies that affect the private sector. Its theme has been that jobs result from a thriving private economy not massive government spending.

After passage of the 1964 Civil Rights Act, it also picked up the support of southern conservatives on racial issues and replaced a southern Democratic Party that had become more progressive on civil rights.

That GOP has come under increasing challenge and has struggled against an outright takeover by a new brand of conservatism. Less concerned about helping business and more concerned about social issues and gun rights, it is adamantly opposed to government regulation.

These tea party conservatives either have intimidated most traditional Republicans or defeated them and captured the party’s agenda.

That’s why Sen. Susan Collins could fairly say that she has not left the Republican mainstream, but it has left her. Though she remains loyal, she finds little interest among other Republicans in accommodating her views.

Sen. Ted Cruz is the model tea party Republican. His strict and uncompromising allegiance to extreme conservative policies has led him into conflict with other GOP senators.

Much the same is true for other tea party sympathizers who have gained office around the country. Maine’s Gov. Paul LePage is an excellent example.

Gov. John Kasich comes across as a traditional Republican and consequently a candidate who does not frighten Democrats. Still, he has fallen in line with many rightwing conservative policies like trying to cut down on the size of the electorate.

So where does that leave Trump? He has little regard for either traditional or tea party versions of the GOP. He listens to his own instincts, not to the echoes of party history or the demands of the hard right.

In effect, Trump is not a Republican. The so-called establishment opposes him because his policies depart from traditional Republicanism but also because he is using the Party’s presidential nomination process for his own personal politics.

To him, the Party is a tool, not an institution. He now admits he won’t necessarily support its nominee. Neither will Cruz or Kasich.

How has Trump been able to dominate a major political party for his own ends?

In part, he has gained thanks to the media’s fascination with the notion of a celebrity as candidate. And he has attracted a new group of voters more loyal to him than to the GOP. Neither development was likely to please old-style Republicans.

But a large part of the answer lies in the demise of the Republican Party itself. A political party exists to raise money for its candidates and to organize and deploy party faithful behind candidates and campaigns.

The impact on national political parties of the Supreme Court’s Citizens United decision, which opened the door to massive financial political campaign contributions from a handful of super wealthy people, has mostly been ignored. The wealthy players’ spending reduces the influence of parties.

Most of their money goes to purchasing time on television, allowing candidates to communicate directly with voters without paying attention to party principles and platforms.

Of course, grassroots political organizations still matter, but instead of relying on party faithful as volunteers, candidates can now simply deploy their funds to hire everything they need for a complete campaign organization.

Both Trump’s unique candidacy and the changing nature of politics have made the Republican Party less relevant to its own nominating process. The attempt to stop a complete Trump hijack of the process, including fallen candidates Jeb Bush, Chris Christie and Scott Walker forlornly endorsing Cruz, may be futile.

There seems to be a belief that, if Trump can be stopped, the Republican Party can be saved. The non-Trump Republicans hope the Democratic nominee will be so vulnerable that a respectable GOP nominee, meaning anybody but Trump, would have a chance of winning or at least would not drag down the Republican ticket.

If Trump is thwarted, will the Republicans resume the identity crisis between the fading traditionalists and the unyielding tea partiers?

Perhaps, but the 2016 campaign could finally reveal if the Republicans can survive as a unified party or evolve into something new.

While the Democratic Party survives, it faces its own split between a resurgent liberalism and a moderate, Clinton-style machine. That, too, merits more consideration.