What Is Seen and What Is Not Seen

“Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.” — Mark Twain

The great French economist Frederic Bastiat observed that “In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

The same is true in the sphere of public policy. The bad economist or the thoughtless politician (but I repeat myself) sees only the direct effect of a law; he doesn’t foresee the indirect effects. In many cases the politician may consider only the short-term effects that might help him win the next election; he may not consider at all the long-term effects.

Bastiat noted that “it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa.” So when a politician urges a great new solution to some problem – or typically, the same old ineffective solution to a problem – the long-term result very often is more harm than good.

One such example was alcohol Prohibition almost 100 years ago. The problem of alcohol may have been bad, but Prohibition made the problem much worse, to the point that Prohibition was later repealed. Another example was a luxury tax on yachts to “soak the rich”. Even a mediocre economist or a slightly thoughtful politician could have foreseen the disaster it turned out to be. The tax collected virtually nothing from the rich but did send many blue collar boat builders to the unemployment line. Two years later Congress repealed the law.

With the greatest intentions of reducing poverty, politicians have enacted policies that, in the short-term, help people survive one month until the next government check, but the unseen long-term effect is to trap people in poverty, sometimes for generations. If we truly care about helping people – and I think most of us do – then wouldn’t it be better to find long-term solutions that help people escape poverty?

As long ago as the 1980s, better economists and more thoughtful politicians saw the indirect effects of the welfare system – it “fostered a permanent underclass dependent on government handouts.” In 1996, a Republican Congress and Democrat President Clinton passed welfare reform with the goal of reducing the dependency trap and helping people escape poverty. Ten years later, The New Republic, a liberal magazine, looked back and editorialized that the reform “worked much as its designers had hoped [foreseen].” Since then, less thoughtful politicians seeing only the easily visible effects of welfare, and not seeing the long-term consequences, have undone most of the successful reform.

Our disability system likewise helps disabled people survive month-to-month but traps them in poverty. Wouldn’t it be better to find long-term solutions, using some amazing modern technology to help them overcome their disabilities, become productive, and no longer trapped in poverty?

Some short-sighted politicians want to extend the length of unemployment benefits beyond 26 months, but the long-term effect can be permanent unemployment. Studies have found that someone unemployed for more than six months has very little chance of ever getting a job.

Other bad economists and thoughtless politicians suggest raising the minimum wage. The immediate effect would be to slightly raise the pay for a small number of people – but cause others to lose their jobs. The long-term consequence would be to destroy many more entry-level jobs, making it harder and harder for teenagers to enter the work force.

When was the last time you saw a full-service gas station? That used to be a good first job for many young kids. Washing dishes was another good first job. Kids learned the self-discipline of showing up on time every time. While on the job they often picked up skills from the auto mechanics or cooks around them. But as the minimum wage rose, machines replaced those jobs. If it continues to rise, we will see machines taking orders for fast food, flipping burgers, and delivering the goods. The long-term effect of raising the minimum wage is disastrous for millions of young people.

Some politicians saw ObamaCare as a good idea; they did not foresee the terrible consequences. Today, some people think we will see good effects if we adopt the ObamaCare expansion of Medicaid. Not only do they fail to see the indirect, long-term terrible effects, they don’t even see the bad effects that have already occurred elsewhere. To put it simply, Medicaid is an inefficient, incredibly expensive program that provides even worse health outcomes than for people who are uninsured. Expanding it would cost even more than now predicted and would lead to much higher taxes.

To achieve better results – better economy, more good jobs, higher pay, less poverty, lower cost health care – we need to see not just the immediate effects of a policy, but to foresee the long-term effects.

Our Status Quo Governor

Manchester, NH – Gubernatorial Candidate Andrew Hemingway released the following statement in response to Governor Maggie Hassan’s State of the State Address:

“Governor Hassan successfully spoke for nearly an hour without mentioning one accomplishment of her administration. Using the words “solution and innovative” repeatedly does not unto itself mean you have achieved or even proposed an innovative solution. The people of New Hampshire are smarter than that.

“Governor Hassan gave a lot of lip service to the business community, yet every policy she proposed would harm the very community she is praising. Study after study has proven that a hike to the minimum wage harms exactly the people it is trying to help. Increasing the minimum wage causes jobs loss, it drives more people to welfare, it drives up state budgets and raises the cost of doing business. The people harmed the most? Minorities and women.”

“Where exactly are her solutions? She failed to even mention the serious problem with our healthcare situation here in New Hampshire, even though it is arguably one of the largest concerns of our citizens. 22,000 people were kicked off their insurance thanks to Hassan-supported Obamacare; 12 hospitals were removed from the network for anyone on the Exchange, or anyone with individual insurance from Anthem; Anthem is the ONLY provider approved for the Exchange. Where is her plan to bring more insurance providers into the state?”

“On education, Governor Hassan praised Common Core. This bureaucratic mess lowers existing state standards and replaces parents with bureaucrats. Common Core is not right for NH. We have increased our spending on education by over a billion dollars in the past decade; our enrollment is down and our education has not improved. Governor Hassan believes differently than me. She thinks more government control is the solution to everything, I think individual freedom is.”

“We very much are in need of certain transportation improvements for our roads and bridges. I agree with the Governor there. But she failed to tell us how we can pay for that. Just as she failed to tell us how we can pay for her expanded natural gas pipeline, or extending broadband internet. A good idea is only a good idea if you tell us how to make that idea a reality. Governor Hassan didn’t do that.

“Our Governor says absolutely nothing. She maintains the status quo, because as her record has shown, she has no solutions. This ‘do nothing’ leadership is doing nothing to improve things for students, patients or workers.” –Andrew Hemingway, Candidate for NH Governor

Regulation kills jobs

Government policies are stifling young, hungry entrepreneurs,” says Andy Pudzer, CEO of CKE Restaurants. Worst among these is ObamaCare.

About 40% of Mr. Puzder’s employees are part-time and therefore exempt from ObamaCare’s coverage mandates. “That percentage of employees will probably go up. … Through attrition, three full-time employees go away and you hire four part-time employees who basically have the same hours.”

As government raises the price of hiring living workers, by raising the minimum wage and mandating higher benefits, companies find it more efficient to replace humans with machines.

Mr. Puzder also expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks. “You’re going to go into a fast-food restaurant and order on an iPad or tablet instead of talking to a person because we don’t have to pay benefits for any of those things.”

Pudzer’s company is expanding rapidly and now has “3,300 restaurants in 42 states and 28 foreign countries.” It plans 300 new restaurants in the “business-friendly” state of Texas.

One place it is not planning to expand is California because “California is not interested in having businesses grow.” Compare how long it takes his company to get a building permit. In Texas, it takes 60 days; in Los Angeles, 285 days.

California’s cumbersome labor regulations have forced the company to “fire managers who don’t report their work hours because they present a legal risk.” He tells the fired managers “to go to Tennessee or Texas, where we’ll rehire them and they’ll learn entrepreneurial skills.”

Corporations based in California are increasingly moving “where labor and the cost of doing business are cheaper. The ultimate victims are middle-class entrepreneurs, like restaurant managers, and the low-skill workers they employ.”

College graduates in minimum wage jobs

The Wall Street Journal reports that there were 284,000 college graduates in minimum wage jobs in 2012. And 37,000 of those even had advanced degrees.

I have been saying for years that many, perhaps even most, kids would be much better off learning a marketable trade instead of going to college. Learn electricity, plumbing, welding or any other valuable skill and there will be a high demand for your services and you can make a good career for yourself.

Down in Concord

“No man’s life, liberty, or property are safe while the legislature is in session.” — Mark Twain

Down in Concord, our State Reps have filed 581 bills, State Senators 142. Public hearings have been held on 308, another 195 are scheduled for this week. The full House has voted on 26, and will vote on another 49 this Wednesday.

Perhaps none of these bills is a danger to our lives, but many are a threat to our liberty or our property. Some few bills would expand our liberty and protect our property but those likely will not pass. As Thomas Jefferson observed, “The natural progress of things is for liberty to yield and government to gain ground.”
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Charting a “course of misguided extremes”

From Foster’s Daily Democrat:

[T]he House, under Speaker Terie Norelli, is charting its own course of misguided extremes starting with efforts to increase regressive taxes such as those levied on gasoline and vehicle registration. And of late, there is a proposal to increase the cost of doing business in New Hampshire by upping the minimum wage, rather than promoting job growth which makes employers compete for workers and raises wages in honest fashion.