Economic Illiterates Pounce on Wal-Mart Again

June 9, 2013

The Wal-Mart haters are at it again.  The token lefty at Forbes.com, Rick Ungar, has a piece on that site accusing the nation’s largest private employer of amassing huge profits at the expense of American taxpayers.  Citing a report issued by the Wisconsin Medicaid program, Ungar claims that for every 300 employee Wal-Mart Supercenter store in Wisconsin alone the company’s “sub-poverty” level wages costs American taxpayers about $904,000 per year.  The total is the result of government subsidized health care and housing, and food stamp payments needed to keep families afloat financially.

It’s the same tired old story with a new twist – not only does Wal-Mart harm its workers, but it is a financial burden to taxpayers as well.  What’s even more alarming is that California and other states are considering fining employers like Wal-Mart up to $6000 for every employee of theirs that ends up on state subsidized health care plans.

In the first place and at the foundation of the issue is the fact that no one is forced to work for Wal-Mart and accept the company’s so-called “sub-poverty” wage.  The last time I checked the 13th Amendment to the Constitution banned slavery and involuntary servitude.  If workers don’t like the wages they receive or can’t make ends meet working at Wal-Mart, they can look for work with another employer.

But many do not and thus we have the crux of the problem.  Retail jobs require few if any advanced skills and they certainly do not require a college degree.  Thus, they don’t pay very well.  Traditionally, they have been ideal starting positions for young folks to give them work experience and gas money.  I remember applying for my first job with a family pharmacy when I was 16.  The toughest question I encountered during the interview was, what is the final price of an $.89 box of cough drops if the sale price for the day is 10 percent off?  And today, retail clerks have it even easier as all they have to do is pass the item over a scanner to get the final price.  The bottom line is that retail positions are not made for folks who are supporting families or have adult commitments.  Customarily, folks with these responsibilities have turned to manufacturing and professional jobs.

However, the great irony is that the myriad federal and state regulations which were meant to benefit workers have actually hurt them more by chasing jobs overseas to lower cost venues.  Since 1979, when manufacturing jobs in America peaked at 19.5 million, we have lost close to half of them to overseas competition.  Currently, about 11.5 million Americans work in manufacturing jobs which is the lowest amount since 1941. Now, with far fewer manufacturing jobs for workers to turn to, the same folks who gave us this condition are demanding that retailers raise their wages so workers can meet their financial responsibilities.  But, it doesn’t work that way.  In our economic system, Wal-Mart pays wages based on what the market will bear.  Instituting a higher minimum wage or mandating that retail companies provide health care coverage for their employees will cause more unemployment and hurt the very people those directives were meant to help.  We are already seeing Wal-Mart and other companies gearing up for Obamacare by cutting employee hours to circumvent the law.

In the final analysis, hasn’t government intervention in our economy done enough harm already?  Besides obliterating our industrial base through enormously costly regulations, the Federal Reserve has destroyed the purchasing power of the dollar by monetizing huge sums of federal debt and expanding the money supply ad infinitum .  The very commodities that the working class spends so much of their disposable income on – health care, housing, and food are the very things that have increased in price the most.  More federal and state mandates will only make the matter worse.  We need a return to free markets and sound money.  Folks literate in economic theory understand this.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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Government’s Benevolence Equals Higher Costs

July 31, 2009

Have you ever noticed that our federal government is always venturing out of its jurisdiction in trying to make things more affordable for all of us?  Our paternal/maternal leaders in D.C. never pass up a chance to try to do something to make our lives easier.  Their examples of benevolence are many and always end up in disaster.

Take education for instance.  Uncle Sam has lavished grants and loans on us in an effort to make a college education affordable for most Americans.  However, has the price of college decreased? Ever?  The answer is no and in fact it can be argued that government grants and loans have actually contributed to the perennial increase in college tuitions.  When students qualify for federal largess it makes them less likely to comparison shop based on cost.  By eliminating cost competition in the college market institutions of higher learning have less incentive to lower costs.  Perhaps this is why the rate of defaults on student loans is so high.  Like subprime mortgages, instead of shopping around for economy, people commit to loans that they ultimately can’t afford to pay. 

Then, there is Washington’s attempt to make retirement years more affordable.  Social Security checks are mailed to millions of Americans every month to provide supplemental income to seniors.  Because the program has been played up as the greatest thing since sliced bread by the Establishment many Americans have been deluded into believing that they can retire on Social Security alone.  They forego saving for retirement and find when they retire that the monthly payment hardly makes ends meet.  Perhaps this is the reason why many elderly folks sell their homes because they just don’t have the funds to pay the ever increasing costs of property taxes.  Taking into account that the Social Security Trust Fund is empty and estimates for future obligations are about $45 trillion imagine the inflation that will eat further into Social Security income when the Federal Reserve must print dollars to monetize government checks.

By now, we should all be familiar with Uncle Sam’s attempt to make home ownership more affordable for all of us.  This has been primarily attempted through cheap money from the Federal Reserve and loan guarantees from Fannie Mae and Freddie Mac.  But, believe it or not, low rates and easy guarantees increased the demand for housing thereby raising prices and shutting out millions of home seekers.  Of course, in the end, artificially low interest rates and the benevolence of government caused the bubble which popped and placed millions more Americans into foreclosure.

Lastly, and more germane to the topic of this article, is the attempt of Washington to make medical care more affordable for many Americans.  The two major programs to deliver this service since 1966 have been Medicare and Medicaid.  Coincidently, since 1966, healthcare costs have skyrocketed by an incredible 1800 percent!  Naturally, all the costs cannot be blamed on these government programs – our population has aged and new technologies are expensive. But, certainly, since healthcare is the biggest expenditure as a percentage of GDP of the federal government, Washington’s payments through Medicare and Medicaid have required the printing of new dollars which in turn have bid up the price of medicines and medical care.

Now Obama and his fellow statists in Congress want to implement a total takeover by Uncle Sam of our healthcare system in order to make healthcare affordable for every person in the U.S.  The plan would cover everyone including the slothful and those in the country illegally.  It would cost at least $2 trillion over the next decade and probably more given demographics and the inefficiencies inherent in all government programs. As usual, the politicians are talking compassionately while totally ignoring the real causes of the problem.

The fact is that there are tens of thousands of regulations and mandates that health providers and insurance companies must follow.  The costs of adhering to these regulations are staggering.  For instance, all states mandate coverage of certain diseases and disabilities in insurance plans.  This raises the costs of coverage and limits choice for consumers.  Regulations should be reduced and coverage mandates repealed to help contain healthcare costs.

The Food and Drug Administration (FDA) is a major culprit contributing to the healthcare crisis.  To get a drug approved for consumption takes on average twelve years and over $350 million.  This cost and time commitment squelches competition because many small drug firms do not have the long term funding to survive the process.  The FDA should be abolished and replaced with a private Underwriters Laboratories type rating organization.  A private system would encourage efficiency, increase competition, and lower costs.

The third party payer system has not served us well.  Because either the government or insurance companies pay most of the costs of our healthcare there is no incentive for us to shop around for the most efficient health services.  Medical savings accounts (MSA) would allow taxpayers to save money tax free and be able to withdraw it to pay for medical bills.  These plans could allow individuals to save up to $7500 (the per capita amount government spends on healthcare) a year tax free.  Individuals would be responsible for their own medical expenses up to that amount and could opt for a catastrophic plan beyond that.  This would ensure comparison shopping, thereby lowing costs.  Additionally, consumers could save premium dollars by only needing to purchase insurance that covers hospitalization and long-term care.

Lastly, it is no surprise that an article by this writer would not be complete without a call for sound money.  A commodity backed currency would restrain costs in healthcare because the government would be forced to live within its means.  The Federal Reserve would not be able to monetize infinite amounts of debt and this would contain price inflation especially in high demand sectors like healthcare.

Yes, Washington has failed miserably at making anything affordable for Americans.  From education to retirement to housing, everything the politicians touch increases in cost.  You would think Obama, Conrad, Reid, and Pelosi would realize this and scrape their grandiose plan to make healthcare more affordable.