Sunday, May 4, 2014

Democrats Look to Venezuela for Economic Policy?

from IBD
President Obama has vowed to "punish" the GOP at the ballot box for thwarting his proposed 39% minimum-wage hike in Congress this week. All he's really doing is plugging Venezuela's banana-republic economics.

Lashing out against Republicans who filibustered a Senate bid to jack up the minimum wage to $10.10 on Wednesday, the president vowed to make it an election issue come November.
"If there's any good news here, it's Republicans in Congress don't get the last word on this issue," he declared. "You do. The American people. The voters."

And it's true — polls show that about two thirds of Americans do support raising the minimum wage.

While there's little doubt the president will try to milk that political momentum, he can't change the economic reality of a rising cost of living that is fueling the public perception that wages have to rise.

The only reason raising the minimum wage has any traction at all in the political sphere is that the cost of living has risen sharply in the Obama years. Obama likes to blame employers for not paying workers enough.

But it's Obama's pattern of big-spending policies that have hurt the lowest-wage earners the most.

Purchasing power has fallen 8% in the past decade, a result of inflation for everyday goods. And such erosion hits the working poor the hardest.

The consumer price index suggests a 2% to 3% average annual rise in prices over the past decade. But the real picture is far worse.

Big-ticket purchases like homes are overcounted in our inflation data — while the mundane things people eat and wear each day are undercounted. Food, clothing, water, electricity, gasoline have all risen sharply.

The latter goods get lost in the averaging. But for some, they make up the bulk of their purchases. That's precisely why those at the lowest end of the pay scale — about 4% of American workers — are so severely squeezed in the Obama economy.

Combine all this with a record five-year buildup of public debt, and the net result is an incredible tax on the working poor to pay for big government.

Understandably, people want the lowest-wage earners to see some relief. But the private sector can't do much to alleviate this pain except lay off workers to pay for a wage rise. The Congressional Budget Office says up to 1 million workers will lose jobs if the minimum wage rises to $10.10. So much for worker solidarity.

It just goes to show the cynicism of governments who create high living costs and then blame the private sector for reacting, as they must, to their profligacy.

Skip Obama for a minute and take a look at the shambling country to our south, where raising the minimum wage is done easily by dictatorial decree as a matter of policy, with no opposition — Venezuela.

As the Senate Republicans halted the arbitrary rise to $10.10 on the eve of the Marxist May Day holiday, the Caracas government raised its minimum wage 39% to ease the pain that the orgy of government spending and 59% inflation rate have inflicted on Venezuela's poor.

Having Chicago-ized the electoral system, the government is less concerned with elections than with the poor man's means of protest — riots. Since February, Venezuela has been engulfed by them.

Venezuela's wage hike follows a 10% rise in January and several hikes the year earlier — all in an increasingly futile bid to keep up with government-fueled inflation. Now, Venezuelan sources tell IBD, as things unravel, the next stop may be a political coup.

Luckily, the U.S. isn't in such a dire position. But that doesn't mean the misery isn't real for our poor. It is. And that leaves us vulnerable to demagogues and despots.

As we've noted before, minimum wage hikes are a political tool. They don't create wealth or boost incomes. They merely kill jobs.

We hope Congress refuses to follow the failed Venezuelan model of Caracas-style economics.

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