The latest salvo in the never ending attack on common sense is this idea that McDonald’s employees can’t earn a living getting paid the minimum wage.  The sniveling Marxists are now demanding 15 dollars an hour for exploited fast food workers.  This comes on the heels of last week’s report that the City Council of Washington D.C. demanded that Walmart pay its workers a 12.50 minimum wage if they wanted to build stores in the nation’s capital.

The socialist mind, set afire over these last 5 years, literally has gone into full-blown mindless emotionalism.  These economic illiterates care so much more than normal people, that no matter how illogical and fundamentally wrong their arguments are ; they will not be dissuaded.

Here is the socialist argument in a nutshell:  People who work at McDonald’s don’t make a lot of money; they can’t afford a home and a car; they can barely pay the bills; so therefore, the government should FORCE McDonald’s to pay 15 dollars an hour to someone working a drive-through window.

In other words, in typical leftist fashion, people who know nothing about business, nothing about restaurant management, nothing about what is a fair wage for incredibly low-skilled employees, still want to dictate to the experts in the food industry what they should pay for that incredibly low-skilled employee.

Ugh.

1.  Forcing fast food establishments to pay artificially high and arbitrary wages of 15 dollars an hour will force the fast food industry to lay off workers or dramatically raise prices.  And who will that hurt?  The lower middle class folks who work and eat at these establishments!

I just watched a pasty-faced socialist on my television state she would be glad to pay double the price for a Wendy’s hamburger if it meant people working there got a living wage.

This is nonsense.  People will get laid off.  Also, no one in their right mind is going to pay big bucks for McDonald’s or Wendy’s.  It is not going to happen.  All this woman’s idea will do is bring more misery and more poverty.  (She’s probably a vegan)

2.  Socialists always like to wrap their wage arguments in emotional appeals.  They care so much they are willing to use government force to compel evil fast food restaurants to pay workers 15 dollars an hour.  If you are against that idea – you don’t care enough.  You are part of the problem.

But why stop at 15 dollars an hour?  Couldn’t we care enough to force fast food employers to pay 20 dollars an hour?  Why not 25?  Personally I think we can all find it in our hearts to demand they get paid 35 dollars an hour.  In fact – if the union bosses and left-wing economists really cared they’d support 35 dollars an hour for McDonald’s employees.

Newsflash:  There is a good reason why hourly workers at fast food establishments get paid 7.25 an hour (the current national minimum wage).  That is what they deserve to get paid based on their incredibly low skill levels.  These are not jobs that you are supposed to hold in order raise a family.  They are entry-level jobs for high school kids, people with low skill, etc.  If you are working at Wendy’s making fries or working the drive thru window – you should be working hard there while working hard at finding another job. I get it, you want to make a fortune building Egg McMuffins, but guess what?  No one will pay you a fortune to do that!

No, you cannot raise a family and own a home by cooking fries at Burger King.  I don’t care how good you are at making those fries, it isn’t worth more than 7.25 an hour (in fact it probably is worth less than that).

So yes, Karl Marx probably would support 15 dollars an hour for fast food workers.  Why?  Not because he cared, but because Marx wasn’t smart enough to run a fast food restaurant.  He was an exhausting boorish utopian nincompoop – which is why he became a leading leftwing economist instead.

It paid better.

-cj cheetham

Copyright © 2013 cjcheetham

How Immigration Reform Will Explode the Welfare Rolls

And cause millions more to enter the U.S. illegally

***

When considering “comprehensive immigration reform” I want to encourage you to do something that makes the Washington D.C. political class very nervous.  Yes – I want you to think rationally.

The question that must be answered is – since the United States has sustained high unemployment for the last several years (about 8% and when you factor in those who have stopped looking it’s in double digits) – why is there a demand for illegal alien labor?  What is it that illegal immigrants bring to the labor market that employers cannot find elsewhere, especially among the nation’s unemployed?

To answer this question we have to look at competitive advantage.  What trait do illegal aliens have that make them so attractive to employers?  It doesn’t take an economist to surmise what that trait is.

The Competitive Advantage of Illegals in a Labor Market

The reason employers like to hire illegals is very easy to understand.  Illegals are willing to work for lower hourly wages.  There is no minimum wage for illegals.  Illegals are willing to work without a health insurance plan.  Employers do not have to pay taxes on illegals; no social security or Medicare taxes to worry about.  Illegals are not covered by OSHA requirements.  Illegals do not get paid overtime.

In fact, when you look at the issue with any degree of common sense – you don’t have to be a business genius to realize that hiring illegals saves big money.  The rich figured this out long ago, hiring illegals to do lawn work, clean swimming pools, or perform nanny duties.

Illegals have a huge advantage when competing with U.S. citizens in the labor market.  They can simply underbid Americans.  Even if a U.S. citizen would agree to work for a lower wage, the government would never allow the minimum wage laws, insurance requirements, and taxes to be ignored.

In fact, there is really no other advantage to hiring illegals.  If illegals were not incredibly cheap, they would not be hired.  Why would an employer hire an illegal, a drifter who speaks and writes English marginally, if he had to pay that illegal the same wages and benefits as a U.S. born worker?  Anyone looking at the issue honestly would agree – the only reason illegals get work is because illegals are incredibly cheap.

How the “Pathway to Citizenship” Is Actually a Plan That Will Put Millions on Welfare.

Proponents of comprehensive immigration reform do not understand competitive advantage.  They do not understand basic economics.  How else can you explain a plan that will drive an estimated 11 million illegals toward the welfare rolls?

Let me explain.

When the 11 million illegals “come out of the shadows” and are granted resident alien status they will be for the first time living legally in the United States.  Sponsors of the immigration bill proudly point out that the resident aliens will have to “pay taxes and fines” just like everyone else.

In other words, the comprehensive immigration reform plan will take illegal aliens who find work because they work for low wages and turn those same people into resident aliens who NO ONE WILL HIRE.  Once an illegal has to be paid minimum wage, insurance, payroll taxes, etc. – they are no longer worth hiring.  When employers are faced with low-skilled, non-English speaking resident aliens that cost just as much as a U.S. born worker – employers will look elsewhere for employees; the market for resident aliens will collapse.

Proponents of the bill are literally taking away the one thing that makes illegals competitive:  Cheap Labor!

Another Wave of Illegal Aliens Comes Next

So where will employers find cheap labor that they still demand?

The same place they get it now – illegal aliens.

Once you have 11 million “documented workers” who cost just as much as anyone else to employ – there will be a new demand for new illegal aliens.  We will see a new wave of illegals flood into the United States for the same reasons they have come in the past – they are willing to work below minimum wage, without insurance, taxes, etc.

The new wave of illegals will have a competitive advantage against the old wave of illegals (the newly documented aliens).

There will be absolutely no improvement in the job market, no reduction of illegals flowing into the United States, and no reduction in the number of illegal aliens that no one can account for.  Even worse, the illegals (now living in the shadows) will be in the open and unemployed.  They will be wards of the state – collecting welfare, food stamps, and other hand-outs; because welfare is still better than returning to Mexico.

The False Promise of “No Welfare for Documented Aliens”

One of the most often repeated claims from proponents of the comprehensive immigration reform bill states “no resident alien will be eligible for welfare, food stamps, health care, etc.”   Unfortunately, this is simply not realistic and it is highly deceptive.

Consider this – an illegal alien becomes a “documented guest worker” and is forced to pay fines and taxes.  Are you seriously asking me to believe that someone who is required to pay taxes is not going to be eligible for the government programs his taxes are funding?

How long will it be before a lawyer is arguing in federal court that his client, a resident alien, pays taxes and is denied “equal protection under the law?”  In fact, it is entirely plausible, and should be expected, that aliens paying taxes will not only get access to welfare, but also the right to vote.  A lawyer will make that argument based on “no taxation without representation.”  Heard that one before?

Economic Laws Will Not Be Denied

Economics is common sense.  The law of competitive advantage is a law.  It will not be denied by political word-twisting, spin machines, and lawyer-games.  Economics cannot be willed away by politicians looking for votes in 2016.  This bill will explode welfare rolls and encourage more illegal immigration to the United States.

-cj cheetham

Copyright © 2013 cjcheetham

This Easter weekend I was reflecting on the horror and brutal sadness of the crucifixion.

In human terms, I was wondering just what that scene must have been like – especially for the followers and friends and family of Jesus.  Here is the man who you have loved; your teacher, your healer, your friend, being brutally executed.  The wailing and sorrow must have been horrific.

But for some reason this year, it was Saturday, not Good Friday that really captured my imagination.  I was struck with thoughts and imaginations of how difficult that Saturday must have for the disciples of Jesus.  They must have spent that day full of guilt for not standing up for their Lord.  They must have spent that day full of sickening nauseous pain in their stomachs as they remembered the physical brutality they had witnessed.  They must have hated themselves.  They must have doubted God.  They must have spent the day in fear, wondering will the next knock on the door be the Romans come to crucify me too? 

On Saturday, all was lost.  Everything they had believed; everything they had worked for; everything they had hoped – lost.  There would be no triumph for the followers of Jesus.  It was all over. 

Except that it wasn’t over, because on Easter Sunday, God changed history.

Have any of you ever thought about that Saturday?  11 defeated disciples cowering in fear with a handful of supportive women.  Their Master lying in a cold tomb. 

If you haven’t thought about that – please do.  And reason in your mind how this cowering broken band of 11 men managed to change the course of human  history. 

People say they don’t believe in miracles – and it makes me smile.  These 11 had more influence on Western Civilization than any king, general, or philosopher.  A group of regular guys – ordinary people, changed the world because they were divinely appointed by God to do that.  The odds of that happening are impossible – would anyone have said on that saturday before Easter – “You know what’s gonna happen now?  These 11 and their followers are going to change the world.”  Who would have said such a thing?

On that Saturday – they were broken, scared, and ready to quit. 

Don’t quit.

Happy Easter.

http://www.youtube.com/watch?v=wC6RXAJpPjo

-cj cheetham

This sequester chatter has been all-encompassing this week.  So in the spirit of shared sacrifice (and let’s face it what is more up lifting than sharing in misery) I sequestered myself today.  I wanted to know first-hand just how draconian and painful a 2% cut can be.  It was an across the board cut too – I wasn’t about to allow any easy off ramps.  There were times I wasn’t sure I’d survive the day.   

I typically go to bed at 11pm and wake up at 4:40 am.  That’s 340 minutes of blissful sleep that I selfishly consume each and every night.  But if you are really going to embrace sequester, you’ve got to start your day right – with a savage 2% cut.  So I got up seven and a half minutes early this morning.  When my alarm went off at 4:32, I was surprised that I felt fresh.  I quickly thanked God for our public servants in Washington and then hit the showers.

A guy doesn’t need a ton of time to shower.  I can usually knock it out in 10 minutes.  Get in there, lather up and rinse off.  There is no need to rinse and repeat – forget the conditioner.  I am all business.  600 seconds and I am ready to tackle the day.  However, today I had to take a sequester shower.  How could I possibly get clean with a 2% cut?  A 2% cut with a meat clever off of my 600-second shower is 12 seconds!   So somehow, I managed to get my 10 minute shower done in just 9 minutes and 48 seconds.  Sometimes I surprise myself with how resilient I am in the face of horror.

Off to breakfast.  I keep it simple; a couple bowls of cereal and a couple of cups of coffee is all I am really looking for.   I checked the label on the cereal and did some quick calculations – two bowls of cereal with milk was coming in at 280 calories.  That meant I would have to drastically trim my breakfast by 5.6 calories in order to be sequester compliant.  I figured that was about one spoonful of cereal.  It probably would have made the most sense to eat all the cereal except for that last soggy spoonful, but what kind of sacrifice is that?  Instead I took the first scoop and dumped it straight in the trash.  It hurt to see that nice crunchy cereal go down the disposal, but I felt pretty special when I choked down that last mushy scoop of Cheerios.

The coffee was a bit tougher to calculate:  two cups for a total of about twenty ounces.  I was going to have to find the strength to trim two fifths of an ounce from my java intake.  Sure, it was less than a gulp – but it was brutal to dump a teaspoonful of hot coffee in the sink.  I had some real reservations about whether I’d be able to function after enduring such a massive cut from my caffeine budget.

My commute to work is about 30 minutes (1800 seconds).  It’s not so bad when you have the radio on.  But today’s commute was the dreaded sequester drive and required a 2% radio cut.  So, I slashed my radio listening by 36 seconds.  I know.  You are thinking – “how could he put himself through that kind of torture” but you haven’t heard the best part.  Rather than employing what the news media calls a “targeted cut” and turning off the radio during a commercial, I indiscriminately turned off the radio during a great song.  I didn’t even allow myself to whistle or hum during that interminable half of a minute.

By the time I reached my desk, the personal sequester experiment was taking its toll.  What kind of maniac could endure a two percent cut?

In a typical day, I’ll get at least fifty e-mails that need a response.  But this was not a typical day.  In order to cut my e-mail responses by two percent, I would have to ignore one of those fifty e-mails.  As my computer came to life I made a commitment that would make a white house budget analyst proud.  I decided the very first e-mail of the day – no matter how important would simply be deleted.

Imagine my surprise when I saw the subject line on that first e-mail:  HOT!! Budget Sequester Guidance. 

To make matters worse it was from my boss.  I suppose some will say “gee, how ironic.”  But all I did was mindlessly delete that e-mail.  No sense in actually looking at my entire inbox and picking the least important e-mail to delete.  Where’s the shared sacrifice in prioritizing?  Besides, I would have missed an offer for free Cheesy-Bread from Dominos.

I think you are getting the idea.  My work day under a 2% personal sequester was a living hell.  I had to cut my water intake (normally 3 quarts) by a whole two ounces.  My lunch hour was hacked down by 72 seconds!    Instead of using 6 post-it notes (54 square inches) I had to trim a square inch off one of them – I used a hatchet to do the cutting for dramatic effect. 

When I got home I tried to explain to my wife just how brutal my day was under a withering 2% across the board sequester.   But how do you explain the impact of such inhuman austerity?

We ended up watching a movie tonight  – one of my favorites actually, Hoosiers, starring Gene Hackman.  It’s a great basketball story with a thrilling ending.  But its 114 minutes long – so I couldn’t watch two minutes and 18 seconds of it.  I know – you are thinking “well the credits of a movie usually run a couple of minutes, so just skip that.” 

Do you still not understand sequester?

I intentionally turned off the movie near the very end – before anyone could find out if Jimmy Chitwood hit the winning shot; before anyone would learn if little Hickory High School won the state title.   

Boy!  Was my family ever angry!  You guessed it, the kids all yelled at me.  “Dad!  What are you doing?!”  

I answered them calmly – “Sequester kids; had to cut the last two percent of the film.  When you grow up and learn about fairness; well, you’ll understand why it had to be this way.”

“It was the best part!” My son protested.

“All the more reason to cut it, Son.”

You’re right.  No one is talking to me tonight.  I am winding down my personal sequester day alone in my living room.  I’m sitting here drinking beer and typing.

I decided to not cut beer the two percent.  That’s an entitlement program – and not subject to cuts.

But I am coming up on 1200 words in this little story.  So now I am going to have to cut 24 words from my conclusion.

A real pity because I am just getting to the best part.  The most important thing about the sequester, that you all need to know is….

-cj cheetham

Seriously, I am sitting here trying to enjoy a cup of coffee and I am reviewing the predicted impacts of a 2% cut in the federal budget.  Listening to the political leadership (and their friends in the media) cutting TWO cents out of every dollar spent will:

-Destroy education leaving millions of children wandering the streets starving because they haven’t had a school lunch in days

– Leave our military so decimated that we will be forced to surrender to Sri Lanka by the first of May

– Result in all law enforcement being laid off, leaving citizens to band together, “Mad Max Style”, to form armed bands of hunter gatherers to go grocery shopping (thank goodness we still have guns!)

– Eliminate all TSA screeners (why is this bad?)

Yes, a TWO percent cut in spending is about to do what the Mayan Calendar never could – namely, it is going to destroy society.  There will be mayhem in the streets.  We will be forced to eat tainted beef (no inspectors) while our children sit idle and mute (no teachers) and Grandma, seized by a heart attack,  convulses on the living room floor without help (no first responders).  Our banks will collapse, the temperature will go up, zoo animals will run wild, and let’s face it we are all going to die.

***

Stop and ask yourself this question:  If a TWO percent cut in government spending is going to result in wholesale layoffs, military collapse, starvation, and pestilence – what exactly is the government doing with the other 98% of the money that is NOT getting cut?

Can you imagine a private enterprise pulling this with the shareholders? 

Picture yourself at a board meeting for Apple.  The board says – “we need to cut operating expenses by 2% this year.”

The CEO, fresh from a 900,000 dollar golf vacation,  looks at the team and says, “well if we cut 2% from the budget we will not be able to make iPods, Computers, iPads or iPhones.  I think I can keep the iTunes division up and running but we will have to dramatically cut the music offered – all we’ll be able to offer is South American Folk music.”

I’m pretty sure no one at Apple would believe that guy.

-cj cheetham

 

 

 

 

In Defense of Summer

When I remember my childhood, I first think of summer; for summer reminds Americans that they are free.

I read a horrid little article this morning entitled How Summer is Making U.S. Kids Dumber and Fatter.  The author, Peter Orszag, is apparently a big deal; not only is he a Vice President for Global Banking at Citigroup, but he is also the former director of the Office of Management and Budget under President Obama.

Mr. Orszag is very troubled by summer vacation.  He cites “studies” that show that American children not only get dumber during their blissful summers away from the watchful eyes of teachers, but apparently the kids become porkers because government planners aren’t around to tell them to eat celery and do some deep knee-bends in gym class.

Like most nosy-parker control freaks, Mr. Orszag is not just complaining about the horrors of summer – he has a plan to fix summer.  His plan?  Pretty simple really.  He wants to lengthen the school day and lengthen the school year.  Mr. Orszag simply cannot sit idly by while kids frolic and play, without rigid instruction from responsible members of society, namely school teachers, counselors, and administrators.

Kids need to spend more time in the classroom, according to Orszag, in order to avoid dreaded “summer learning loss.”

The horror!

Imagine a nation of children swimming, fishing, and playing with friends on joyful summer days – and each day they are forgetting the difference between a stalactite and a stalagmite; kids enjoying popsicles and sunshine but not a thought of a scalene triangle; and the tragedy of afternoons of Wiffle Ball with friends but not a single discussion of Egyptian mummification techniques.

Mr. Orszag has it completely wrong.

There is no recession of knowledge in a child’s summer vacation.  In fact, kids learn a lot of incredibly important things in summer time.  They learn to catch bugs and climb trees.  They get together with friends and form teams, make up games, and somehow kids figure out how to apply rules to those games, without umpires and most importantly, without meddling adults to govern everything.

Kids in summertime learn that sometimes the lawn needs mowing before they head off to the fishing hole.  They learn to settle arguments, make a rope swing, ride a bike, and throw a curve ball.  Some days, usually when it rains, they learn how to overcome boredom without the endless orchestration of school administrators, by reading a comic book.

Are those not worthwhile things to learn?

Mr. Orszag doesn’t think so.  He’d like to see year round school – and of course large salary increases for teachers (as a former director of OMB, I’m sure he’s convinced himself that higher salaries and year round school will save taxpayers money).  He’d like to see more organization; more programs; more rigid direction.  He’d like to see children shepherded daily.  No need for those kids to get an antiquated summer break.  Mr. Orszag would much rather the institutions keep a sharp eye on the lazy American butter-balls and stifle them with more hours of diagraming sentences.

Summer and the State of Nature

John Locke in his Second Treatise on Government wrote, in the state of nature all men are “free to order their actions, and dispose of their possessions and persons, as they think fit, within the bounds of the law of nature.”   This is a bedrock principle of the American Way.  That ultimately, individuals are free to act and interact without the oppressive coercion from others – particularly the coercion that comes from governments and tyrants.

Ultimately, what Mr. Orszag is peddling is coercion and control.  He wants your kids’ summers.  Why?  Because he and his planners know better.  They know exactly how to structure your kids’ lives.  Your children don’t need to be free to explore the wonderful land of summer.  They need to be in school – and they had best better listen!  Because Mr. Orszag and his friends have a lot of important information these children need to accept and memorize.

Locke’s brilliant treatise was something I studied in college – but Locke’s principles on freedom I learned long ago on summer days far from the governance of school.  Summer is a kid’s state of nature.

Let it always be so.  Let our children have summers without structure in order to learn other important things.  Allow them freedom to learn that they don’t always need an adult with a clip board and a whistle ordering their existence.

***

In his classic book, The Lion, The Witch, and The Wardrobe, C.S. Lewis writes of a sad, totalitarian world where it is “always winter, but never Christmas.”

Let us not have a world where it is always school time but never summer.

-cj cheetham

Note:  Let me head off complaints that all kids do is play video games; we parents can fix that without destroying summer.  Once summer is given to government – it’s gone forever.

Posterity!   You will never know how much it cost the present generation to preserve your freedom! I hope you will make a good use of it. If you do not, I shall repent in Heaven that I ever took half the pains to preserve it.

– John Adams in a Letter to Abigail Adams  (27 April 1777)

In case anyone was wondering, it was the generation of Adams, that fought for our freedom, that was truly the Greatest Generation.  Men who were committed to ideals.  Men who were committed to freedom. 

Learned men who understood what liberty truly was and the dangers of ceding freedom to any government.

Posterity!  You have much to account for on the 236th anniversary of our independence. 

The sacrifices made by our founding fathers were not small.  They spent decades struggling to deliver our nation a heritage of liberty.   

Have we made good use of it?  I imagine that posterity would struggle to look Mr Adams square in the eye.

-cj cheetham

The new America:

Government:  You must buy high top sneakers.

Individual:  I don’t want high top sneakers.

Government:  We have passed a law – you must buy high top sneakers.

Individual:  I have rights – I don’t want to buy high top sneakers and you cannot make me.  I am free.

Judge:  Excuse me.  I agree with the citizen – you really can’t make him buy high top sneakers.

Individual:  Thank God.  I thought I was becoming a serf.

Judge:  However, if you don’t buy high top sneakers and you can’t prove you own high top sneakers, the government can tax you and then force you to buy high top sneakers.

Individual:  Huh?

Judge:  Trust me, I’m a lawyer.

Government:  You must buy high top sneakers, Serf.

Serf:  I will obey. 

Government:  That’s a good Serf.

Have any of you noticed that the government is always ordering you to buy things?  For example – if you want to buy a car, the bureaucrats have created so many regulations regarding that automobile, that you have to get certain safety features and you have to get a certain amount of fuel efficiency.  Do you need a light bulb?  Guess what, soon government will order you to buy (very expensive) fluorescent light bulbs, because they are in essence outlawing the incandescent light bulb from the market place.  Likewise, the government is forcing people to buy toilets that use less water and a standard flush toilet with some serious water pressure will soon be a thing of the past.

Of course, when the government orders free citizens to buy certain products the bureaucrats and politicians tell us “the new product is better, that is why people must buy it!”  Likewise, when your government bans the sale of a product, they do so because (they claim) that product is inferior, dangerous, wasteful, and expensive.  The product is so bad; we won’t allow consumers to buy it.

So, maybe we should ask ourselves.  Do we really need to be ordered to buy good products?  Do we really need to be prohibited from buying inferior products?  The answer is a resounding, no.

I was listening to music quite a bit this weekend.   I simply hit shuffle on my IPod and it played all weekend without repeating a song.  It’s an incredibly convenient device.  The digital music revolution has truly improved the lot of music fans.  I couldn’t help but remember a key point – no one in the government ordered me to buy an iPod for “my own good.” 

In fact, my decision to go digital was a completely free choice.  I still own hundreds of Compact Discs, but I long ago copied that music to my iPod as well.  It is a better way to deliver music to consumers.  Sure, there will always be the fans of vinyl albums and compact discs, both of which offer tactile joys.  However, the music industry is dominated by downloaded music these days.

It got me to thinking about my music experience over my lifetime.  I can remember in the early 1970s, my mother would be listening to Frank Sinatra on a 33 RPM long playing vinyl album.  At the same time, my sister was listening to the Monkees on a 45 RPM vinyl single.  My brothers and I were fooling around with a reel to reel tape player listening to the Beatles.

Later, in the 70s my oldest brother had an 8-Track player in his car.  Pretty sweet that 8-track player, except for the fact that the best song on the album almost always seemed to be the song that would fade out as the player switched from track one to track two, thereby ruining the song.  This didn’t stop the 8-Track from gobbling up a significant portion of record sales.

By the time I reached high school in the 1980’s I scoffed the 8-track as a relic.  The 45 RPM singles were long gone.  No, we had reached music nirvana with the advent of the stereo cassette.  It was portable, could be slapped in a car stereo or in a portable boom box.  We never had it so good.  Not only was this the apex of music products, but we could now make “mix tapes” – perfect for parties.  I remember wondering why people were still buying vinyl when it was so obvious that the cassette was the better product.

By the end of the 1980s, I was finding it harder and harder to purchase cassette tapes at a record store.  Someone had gone and introduced Compact Discs.  Ask someone under the age 30 if they even know what a cassette tape is and you will probably get a blank stare.  When I would go into record stores in the 1980’s, entire walls were covered with cassettes.  By 1990, the cassette was dead and I was transitioning to the CD.

The quality of the CD, a digital recording, well it was so much better that no one wanted cassettes anymore.  Vinyl albums limped along but the market for vinyl was just about destroyed.  The LP was now a nostalgia piece or worse a novelty item.  CDs ruled the day, and let’s face it; we all thought they would rule forever.  That is until along came digital music, MP3s, and iTunes.  I’d tell you to go to a record store and look for a CD but digital music destroyed music stores along with the CD.

I’ll bet most of you had a similar experience with different forms of music over your lifetimes.  In fact, I’d wager that today most of you have some kind of portable digital music player, or music files on your computer right now – and that you have more music digitally than you do physically in the form of albums, CDs, or heaven forbid cassette tapes.

Now ask yourself something.  At any time in your life did government force you to buy a music product?  For example did bureaucrats announce that they were outlawing the reel to reel tape in favor of the 8-Track?  Do you remember the President or any of his cabinet officials ever getting on television with a somber announcement that the cassette tape was now the only legal music product in America and that it would no longer be lawful to sell 8-tracks?  Was there a ban on CDs announced forcing the advent of iTunes?

Do you remember any of that?  Of course not.

Here’s what really happened.  People like music a lot and they are always seeking the best way to own it and listen to it.  The music industry likes selling music a lot and in order to make money they want to give people what they want.  In other words, the advances in music happened naturally, driven by consumer demand and producer innovation.  That relationship between consumer and producer is free of coercion.

Need another example?  Ask yourself – how did the free world transition from burning wood, to burning coal, to burning oil and gas?  None of that was ordered and that is why it worked so well.  Only when the bureaucrats in government got involved in massively regulating energy did we suddenly stop progressing.  Strange, isn’t it?

This brings me back to the original question.  Do free people have to be forced to buy a good product?  Let’s take a look at that fluorescent light bulb.  If it is a better product, why would any government have to force people to buy it?  Why would government have to outlaw the incandescent bulbs?  Is that what happened with the 8-track tape?

People who are free are also rational actors.  When we spend our money we want good products that offer value and quality.  Free people can figure that out without help.  They do not need to be ordered, threatened, cajoled, begged, or forced to behave rationally.  Our own experience with music proves that.  If consumers are willing to seek the very best products on music, they can handle light bulbs too. Free people can also decide how many MPGs they want their car to get.  People can decide how much flushing power their toilets need.  I could literally list products for days that we do not need to be told how to buy.

Yet, your government and the bureaucrats within that government disagree.  They want to force you to buy the products that they want you to buy.  Of course, they will wrap this brute force up in nice speeches about the efficiency of the new light bulb.  How it will save money in the “long run” and how it is simply a better product.  But we know from our own experience, when something is better, we don’t need to be told to buy it.  We simply buy the CD and forget all about the cassette tape.

So why does government need to use force and law to make you buy a light bulb, or a toilet with no water, or a tiny tin-can of a car? 

Here’s the dirty little secret.  The government is forcing you to buy these products because government knows you won’t naturally, freely buy the products the government wants you to buy.  In other words, the government is actually forcing you to stop buying what you want, to buy what you don’t want.  The government knows that the products they are forcing you to buy are in fact, not better.  It’s as if the government was forcing you to buy 8-track tapes and outlawing iTunes.

Does that make a bit of sense?  No.  Is it how free people should be treated by their government?  No.

Remember that the next time the government announces how they are going to force you to buy a better product.  Remember, if a politician is forcing you to buy something, it is more than likely an 8-track tape he is pushing.  

Enough with the heavy-handed government; we, the people, can figure this stuff out on our own. 

-cj cheetham

Check out the vintage 8-Track Player Commercial:  http://youtu.be/3PMMGvmnCSE

My wife recently picked up an iPad 3.  It’s a wonderful machine – lightweight, with an HD screen, remarkably fast, with literally millions of apps available.  But I’m not a technically smart person, so I am amazed at something quite different; namely, I am amazed at how cheaply one can buy an iPad 3. 

Depending on the options you want, you can pick up the latest version of the iPad for anywhere between 500 dollars and 800 dollars.  That is a remarkably inexpensive price for a machine that delivers incredible capability to the palm of your hand.  I can’t help but think of my first laptop – that “revolutionary” device cost me 1,600 bucks and could do very little in comparison. 

You get the idea – somehow Apple (and a lot of other companies) continues delivering better products, cheaply to the American people. 

This is not an article on the wonders of technology, but rather the indispensable and wonderful role of prices in a free market. 

Note – Apple did not deliver hand held devices because Congress mandated that they do so.  There was no joint session to discuss ways to make the prices lower for the tablet consumers.  Furthermore, there were no executive orders or campaign speeches pointing out how important computer tablets are to our productivity and competitiveness.  Similarly, the President never asked congress to buy iPads for citizens, or create a low-interest loan system for iPads, nor did he deride the huge profits that Apple is making every year selling these devices to people.

Price – the critical messenger of the economy

A free market is an amazing organism when you stop to think about it.  Every day, millions of pieces of information are transferred between producers and consumers.  Information about the availability of raw materials, the cost of production (power supply, labor costs, etc) are transmitted to producers at a staggering rate.  Furthermore, consumers send direct messages to producers as well – chiefly by indicating how much they are willing to pay for a certain good or service, i.e. what is the price the consumer is willing to pay?

Going back to our iPad example, consumers have sent a very clear message to the executives at Apple.  That message is:  we are more than willing to pay between 500 and 800 dollars for the iPad 3.  Not only that, but we consumers are willing to buy all of the iPads you can produce at that price and we consumers will also camp outside of stores and have a party waiting for you to allow us the privilege of buying your product.

Apple receives that message loud and clear.  When they get that type of reaction, Apple knows that they have created the right product and more importantly, affixed the right price.

Now let’s apply a hypothetical to the iPad 3.  Suppose tomorrow Apple decided that rather than charge 500-800 dollars per iPad – they now want to charge 5,000 to 8,000 dollars per iPad.  What would happen to Apple sales?  It is pretty obvious the sales would plummet.  People, other than the spectacularly wealthy, would not pay that kind of money for a tablet.  Consumers would send a clear message back to Apple on the subject of price.  Attention Apple: either you price the iPad lower or we no longer will buy your product. 

In fact, there is no amount of advertising or celebrity endorsements that could get any of you to pay 5,000 bucks for an IPad. 

This is true of almost all industries.  Anyone selling a good or service, must price their product to please consumers.  There is no other way in a market to get customers.  If I am selling chocolate bars and I am pricing them at 7 dollars apiece – I am not going to be making chocolate bars very long.  What Adam Smith called the “invisible hand” is not invisible at all.  Consumers are very open and honest about price and the optimum price is very visible.  It is blindingly obvious to any producer, what the acceptable price should be for any product.

Price is the great and indispensable communicator in the marketplace.

There is only one problem with all of this.  There is an organization that always wants to meddle with prices.  This organization want to fix prices, drive prices up, propagandize against prices, or artificially set prices too low or too high.  This organization wants to stop the open communication between consumer and producer.  This organization is literally jamming the communications between sellers and buyers.

Yes, you guessed it – that organization is your government.

How government help destroys accurate pricing, sends false messages in the marketplace and ultimately exacerbates the problem

Okay folks – let’s go back to the iPad 3 scenario one more time.  When last we left the scene, we had producers jacking up the price of an iPad 3 to 5,000 to 8,000 dollars per unit.  Consumers naturally were indignant.  Five grand for a tablet?  Take a hike Apple!  We are not paying that.

Under normal circumstances, Apple would get the message.  Executives would see that the sales last month were down to about zero and say “I think we need to lower the price.  People hate the price.  We need to lower the price in order to meet the expectations of our consumers.  If we keep the prices this high – no one will buy our products.”

Enter the government.  The political leaders watching this scene know the iPad 3 is a sweet machine, they also know people, aka voters, wish they could afford it.  So government does what it does best:

Government intervenes in a process it doesn’t appreciate, to distort a market it doesn’t understand, in order to get the votes of people it doesn’t really know.

So, in an amazing display of bipartisanship, the congress passes and the president signs a new law providing grants of up to 10,000 dollars to people who can’t afford iPads.  Additionally, since not everyone will be eligible for a grant – the government creates a low interest loan system, where people can get a government backed loan of up to 7,800 dollars to buy an iPad. 

Has government solved a problem?  No.  Will the price of iPads go down?  No.

People will certainly avail themselves of the “grants” and low interest loans to buy iPads.  In fact, there is so much grant money and low interest loan money available that people aren’t bothered by paying 8,000 dollars for an iPad.   Consumers have always been willing to pay 500 – 800 dollars for an iPad, but when consumer contributions combined with loans and grants from government, the new “price” people are willing to pay for an iPad is about 8,500 dollars (7,800 in grants/loans + 700 out of pocket dollars).

The Apple corporate headquarters receives this message.  Consumers, now teamed with government, are willing to pay 8,500 dollars for our product which we could have sold for 800 dollars.  Wow!  What a profit margin Apple is now enjoying thanks to the caring people in government. 

What do you suppose Apple will do with all that profit?  Yes, some will go back into the corporation to find better products to build.  But here is the real insidious part.  Now that Apple has received a clear message in the form of the government subsidized price, Apple is going to do everything possible to make the government grants/loans to buy iPads permanent and larger.  Apple is going to lobby.  Apple is going to donate to campaigns.  Whatever is necessary to keep the price of iPads artificially high with the help of Uncle Sam.

The end result is the government is spending a ridiculous amount of money (tax dollars) to allow Apple to have a ridiculously high price for the iPad.  Additionally, the people are no longer tuned in and are no longer sending their original message about price to Apple.  The people are unhappy about high taxes and high deficits, but they think that is a different subject.  Apple is very happy.  They are selling their product at a hugely inflated price.

Ultimately, in our scenario, Apple doesn’t have to price its product so that people can actually afford it. 

What a disaster.          

Government – the great miscommunicator

Government intervention in pricing is a bad idea.  It creates a destabilizing effect and rather than help consumers, it actually harms consumers.

Don’t believe me?  Take a look at what government has done in the area of college tuition.  The price of college has been rising at a staggering rate for decades!  How is that possible?

When you look at higher education you see that there are an awful lot of schools out there.  There is plenty of competition in the market place.  Competition usually drives prices down.  Additionally, inflation in the United States has been tiny since 1983, yet inflation in college prices during that time is absolutely skyrocketing.     

So why are universities charging so much money to get a bachelor’s degree?  Aside from the very wealthy, no one can afford to buy, with their own money, the product that the universities and colleges are selling.  Does this sound familiar?  It should.  It is exactly what our fictional Apple company did in the scenario above.  Just as the company jacked up the price of tablets so that only the very rich could afford the product; colleges and universities have jacked up their prices.

People cannot afford to pay the tuition.  This is where people would normally stop buying the product.  But instead, government has rushed in with grants and loans.  The consumer becomes numb to the ridiculously high tuition because the “government (taxpayers) are paying.”  The university takes a great deal of the money it earns from grants/loans and lobbies back to the government for more grants, cheaper loans, etc – anything they can do to ensure that the huge tuition payments keep rolling in.  The real message from price in the marketplace is squelched and it has been replaced with a false message from government spending.

Just watch the news this week and listen – the entire focus is on how we get more money transferred from government to consumers, so that the Colleges and Universities will never have to lower their prices.

It is truly insanity.

What kind of a business prices its product so that no one can afford it?  A terrible business, that’s what kind.  If I wanted to charge 50 dollars for a can of soda, or 10,000 dollars for a pair of running shoes, or 26,000 for television, the American consumer would run me out of business in a month.  They wouldn’t buy anything from me.  I would have to be the worst businessman in America to demand those prices.  I’d have no income and I’d be quickly out of business. 

Yet today, America’s colleges and universities intentionally price their product so most consumers cannot afford to pay.  What kind of a business would do such a thing?  Only an industry that is insulated from consumer feedback by virtue of the disastrous intervention of government would do such a thing.

This week, we have political leaders calling on universities to “hold the line on tuition.”  What a strange thing to ask when you are simultaneously using tax dollars to pay whatever tuition the school decides they feel like charging.

Why would any university change that?  They have already priced their product so high that without government grants and loans, most consumers cannot afford to pay.  And despite an over-priced product, the universities enjoy massive incomes and their employees get paid large salaries.  Who would want to change that?

Only consumers would want to change that.  If consumers couldn’t afford to pay tuition – guess what?  They would stop buying the over-priced product.  Tuition would be forced down to an acceptable price that people could afford or schools would go out of business.  Either way, the higher education system would be cheaper and more responsive to their actual customers.

Instead, we have a government subsidized mess.

– CJ Cheetham

*NOTE – Apple seems like one heckuva a great company to me.  They always deliver better, cheaper, faster products to their consumers.  May it always be so!  Apple was only used as a hypothetical example of how government  destroys the critical role of price in the economy.