Trending

Advertisement

Hemphill: The world of dynamic economics

Share

I really have to admire the Walmart ad that declares, “A raise in pay raises us all.”

‘Tis true. It raises not just all of the minimum wage earners, it raises the pay of everyone above them who will demand that the differential between the lower wage earners and themselves remain.

Know what else it raises? The cost of hamburgers, and plane tickets, and rents, and...

Know something else? The minimum wage workers at the bottom of society will remain at the lowest rung of the ladder, and Walmart will have made a cost-free PR move that makes them look good in the eyes of those who never took – or who failed – Econ 101.

The U.S. is filled with economic illiterates. It appears that some of them work for Walmart, unless, of course, everyone is just playing to the crowd without concern for results.

Appeasing the mob just leads to the mob demanding more, but their position on the ladder doesn’t change because they did not suddenly get better skills or more education.

But the marketplace will respond. It is not static.

Remember when Motel 6 was $6 a night? (And my first home in San Diego cost me $17,300.)

This is the second half of my comment on Walmart: Liberals believe in static economics, but the world operates on dynamic economics.

The great example was the “luxury tax” (1991-1993). Liberals multiplied the number of yachts, autos, furs, jewels and private airplanes times the tax and predicted a huge tax income. Of course it brought in almost nothing in additional taxes as luxury auto sales dropped, yacht buyers went to Spain, Sweden and Hong Kong, and plane buyers went to Brazil, almost bankrupting Cessna.

One break, in what was to be a five-year tax, came when yacht builders in Maine and Massachusetts told Senators George Mitchell of Maine and Edward Kennedy of Massachusetts that their business was off 77 percent and the U.S. had laid off some 25,000 employees. Viking Yachts, the nation’s largest yacht builder, went from 1,400 employees to 68 employees.

Senators Mitchell and Kennedy, who were quoted as saying that the luxury tax would make the rich pay their fair share when they led the fight for the tax, quietly voted for the repeal of that tax several years early when it was obvious to everyone that the tax was a job killer, and a net tax killer as well, when unemployment benefits were figured in.

Economics does not appear to be a Democrat Party strength, although economic demagoguery certainly is ... and, although I suspect the political leaders know better, they just can’t help themselves when it comes to committing demagoguery for votes. After all, there are new generations who have never heard of the 1991 luxury tax, the state of public education being what it is.

Of course you can argue that demagoguery for votes is an equal opportunity political animal, occupying both political camps – sending troops into foreign wars without national and political support, and even more importantly, premature evacuation.

We are in deep, deep trouble.

Advertisement