Quotulatiousness

October 2, 2017

Is it becoming time to let the NFL’s “chips fall where they may”?

Filed under: Business, Football, Law, Media, Politics, USA — Tags: , , , , — Nicholas @ 03:00

The modern NFL as we know it enjoys a legal privilege through an act of Congress, allowing the league to negotiate TV rights as a single organization and sharing the revenue equally among all the constituent teams. In City Journal, Steven Malanga recounts the history of how that privilege was granted:

Many sports fans know that Major League Baseball has a unique exemption from the nation’s antitrust laws, thanks to a 1922 Supreme Court decision, which perplexingly ruled that baseball teams do not engage in interstate commerce. Less well understood, however, is that the National Football League retains its own federal exemption through legislation that has allowed the league’s teams to cooperate on television contracts — a gift from Washington that has been crucial to the development of the modern NFL. Over the years, the exemption has proved controversial, though bipartisan calls to revoke or narrow it have never gained much traction. The exemption deserves a fresh look with the players’ extreme politicization of the league, in which they have been aided and abetted by the owners, who have allowed and even taken part in unprecedented partisan posturing — broadcast to the nation via Congress-approved TV deals.

According to NFL mythology, the league’s success is the result of the vision of its mid-1950s and 1960s leadership, including the marketing savvy of former commissioner Pete Rozelle. But the real cornerstone of the NFL’s rise was successful Washington lobbying by league leadership, after a court ruled in 1961 that NFL teams could not negotiate broadcasting rights as a group, because such power would violate antitrust laws against monopolization. Rozelle got a New York congressman, Emanuel Cellar, who chaired the House Judiciary Committee’s Subcommittee on Anti-Trust and Monopoly, to introduce what’s become known as the Sports Broadcasting Act of 1961, which provided limited antitrust exemption, allowing teams to pool their efforts for the sake of negotiating TV deals. When President Kennedy signed the legislation, it permitted a $4.65 million broadcast deal that the NFL had crafted with CBS for the rights to televise football games. The price of broadcasting packages quickly accelerated, especially after the merger of the NFL and the old AFL, and the antitrust exemption allowed for such singular NFL successes as Monday Night Football, introduced in 1970.

Though the act also applies to professional baseball, hockey, and basketball teams, its significance to the NFL came to outweigh the benefits to other leagues, because pro football—with many fewer games per season—exclusively and collectively sells all its TV rights through monopoly pooling, then distributes the revenues to teams equally. Without this exemption, each team would have to negotiate its television contracts individually, which would be fine for powerful teams like the Dallas Cowboys that could probably arrange to have all their games broadcast nationally, but less advantageous for weak teams such as the Cleveland Browns, which might struggle even for local coverage.

[…] The majority of companies in America would not, and do not, allow demonstrations at work by individual employees on political issues unrelated to their employment — just the sort of demonstrations begun last year by former San Francisco 49ers quarterback Colin Kaepernick, and carried on through this weekend by more than 200 players. That the owners have tolerated and lately even encouraged such protests over an issue — charges of police brutality — that divides many Americans is a business risk that they seem willing to take. But the league’s use of its platform — created by its federal antitrust exemption — to broadcast its message across the country is more than a simple business matter. It represents an improper use of resources made available to the NFL by special federal legislation. It’s past time to revoke the Sports Broadcasting Act — and let the “chips fall where they may.”

August 27, 2017

Why The Rich Like High Taxes

Filed under: Business, Economics, Government, USA — Tags: , , , , — Nicholas @ 02:00

Published on 16 Aug 2017

When politicians raise taxes on the rich, what do the rich do to protect their $$$? This Prof. shows how high taxes actually made America less equal.

The Myth of Equality in the 1950s (video): Another myth of the 1950s is that there was economic equality. Prof. Brian Domitrovic explains why this is a myth. https://www.youtube.com/watch?v=wLl9wOivHdc
How Cronyism is Hurting the Economy (video): Prof. Jason Brennan explains why cronyism, like the tax cuts for certain businesses in the 1950s, is bad for the economy and argues why limiting the government’s power would help solve the problem. https://www.youtube.com/watch?v=gSgUENZ9O94
The Good Ol’ Days: When Tax Rates Were 90 Percent (article): Andrew Syrios compares the tax rates in the 1950s to those of the 1980s and today https://mises.org/library/good-ol-days-when-tax-rates-were-90-percent

TRANSCRIPT:
For a full transcript please visit: http://www.learnliberty.org/videos/why-the-rich-like-high-taxes/

June 12, 2017

QotD: The reality of political limitations

Filed under: Government, Politics, Quotations, USA — Tags: , — Nicholas @ 01:00

The main obstacle to getting what [the Republicans] want is not the lack of leaders who are willing to fight; the main obstacle to getting what they want is that what they want is well outside the ZOPA [zone of possible agreement]. I’m not saying this to taunt my conservative friends; I agree with many of the things they want. But I recognize that there is a wide gap between what I (we) want, and what can be foisted upon the American public by its elected representatives. If I want outcomes closer to my preferences, then the primary problem is not the folks in office, but the preferences of the average American voter. Focusing your attention on politicians, instead of the hearts and minds of your fellow citizens, is like attempting to fix a faulty car engine by swapping out the dashboard gauges.

Megan McArdle, “Let’s See What Republicans Learn From Losing Boehner”, Bloomberg View, 2015-09-25.

May 1, 2017

QotD: How to negotiate badly (unless you’re in a movie)

Filed under: Europe, Government, Media, Politics, Quotations, USA — Tags: , , — Nicholas @ 01:00

Does the [Republican congressional] caucus nominate a leader who will be itching for more such fights? This would be bad for America’s already dilapidated political institutions and civil society. It would also, I must point out, be bad for the Republican Party, which still shows lingering signs of infection by the dreaded “Ask for the Stars, You’ll Get the Moon” bargaining strategy. (Ever notice that’s so beloved by Hollywood, and by almost no one who actually has to negotiate deals for a living?)

The idea behind this is that you will eventually settle for something about halfway between your initial demands, and what the other side is asking for. The winning strategy is therefore to ask for enormous concessions, include unrealistic demands as bargaining chips, and convince the other side that you’re just crazy enough to walk away if they won’t make a deal.

As it happens, we have just had a demonstration of this technique — a live drama, no Hollywood effects: Greek Prime Minister Alexis Tsipras tried it with the EU. This strategy worked so well that he ended up with a worse deal than the original offer, plus a banking crisis that is still unspooling. Somehow, this never happens in Hollywood movies.

It’s easy to see why Hollywood loves this strategy: It’s really easy to explain without chewing up screen time, and it’s dramatic. Why don’t real-world negotiators more often do this?

Megan McArdle, “Let’s See What Republicans Learn From Losing Boehner”, Bloomberg View, 2015-09-25.

April 14, 2017

QotD: How to negotiate

Filed under: Business, Politics, Quotations, USA — Tags: , , — Nicholas @ 01:00

All negotiations are defined by something called the ZOPA: the Zone of Possible Agreement. The boundaries of that zone are defined by another buzzword, the BATNA: the best alternative to negotiated agreement.

The ultimate deal has to be better for both sides than their BATNA. Anything that either side considers worse than no deal at all is outside of the ZOPA, and no amount of strategery is going to get you there. Getting rid of Social Security and Medicare: outside of the ZOPA. Raising tax rates to Danish levels: outside of the ZOPA. Single-payer health care: outside of the ZOPA. Defunding Planned Parenthood: outside of the current ZOPA.

Is the ZOPA fixed? Nope. If a Republican president were in the White House, and a few more Republicans were in the Senate, defunding Planned Parenthood might well be feasible. The massacre at Newtown moved the ZOPA on gun control leftward. The financial crisis made all sorts of previously unthinkable things — like TARP and a nearly $900 billion stimulus bill — eminently feasible. The ZOPA moves all the time, which is why we’re no longer debating the free and unlimited coinage of silver at a ratio of 16 to 1.

But note that these movements didn’t come from some sort of deft negotiation strategy. They came from external events that changed the BATNA of one side or the other. Note too that even though the ZOPA had shifted in his favor, President Obama lost on gun control because he included an assault weapons ban in his list of demands as a bargaining chip, and the other side decided to walk away instead of negotiating a deal.

How did this happen? Because the bargaining chips you include send signals about your intent, and how serious you are about negotiating — and they can therefore change the facts on the ground in ways that hurt you rather than help you.

Imagine that you tried negotiating for a car by announcing that you intended to pay no more than $2,400 for a fully-loaded new truck. Would this improve your bargaining position? Of course not; the salesman would decide that you were wasting his time, and go find another customer. Similarly, if the car salesman announced that he wanted $100,000 for a well-used Camry, that wouldn’t make you more willing to pay $30,000 for it; it would make you go seek a dealer who wasn’t obviously crazy.

Megan McArdle, “Let’s See What Republicans Learn From Losing Boehner”, Bloomberg View, 2015-09-25.

March 31, 2017

“You can’t buy my internet data. You can’t buy your internet data. That’s not how this works“

Filed under: Government, Liberty, Technology, USA — Tags: , , , — Nicholas @ 04:00

At Techdirt, Mike Masnick bravely attempts to tamp down the hysteria over this week’s vote in Congress to kill broadband privacy protections (which, as he notes, hadn’t yet come into effect anyway):

People are rightfully angry and upset about this. The privacy protections were fairly simple, and would have been helpful in stopping truly egregious behavior by some dominant ISPs who have few competitors, and thus little reason to treat people right. But misleading and misinforming people isn’t helpful either.

[…]

But here’s the real problem: you can’t buy Congress’ internet data. You can’t buy my internet data. You can’t buy your internet data. That’s not how this works. It’s a common misconception. We even saw this in Congress four years ago, where Rep. Louis Gohmert went on a smug but totally ignorant rant, asking why Google won’t sell the government all the data it has on people. As we explained at the time, that’s not how it works*. Advertisers aren’t buying your browsing data, and ISPs and other internet companies aren’t selling your data in a neat little package. It doesn’t help anyone to blatantly misrepresent what’s going on.

When ISPs or online services have your data and “sell” it, it doesn’t mean that you can go to, say, AT&T and offer to buy “all of Louis Gohmert’s browsing history.” Instead, what happens is that these companies collect that data for themselves and then sell targeting. That is, when Gohmert goes to visit his favorite publication, that website will cast out to various marketplaces for bids on what ads to show. Thanks to information tracking, it may throw up some demographic and interest data to the marketplace. So, it may say that it has a page being viewed by a male from Texas, who was recently visiting webpages about boardgames and cow farming (to randomly choose some items). Then, from that marketplace, some advertisers’ computerized algorithms will more or less say “well, I’m selling boardgames about cows in Texas, and therefore, this person’s attention is worth 1/10th of a penny more to me than some other company that’s selling boardgames about moose.” And then the webpage will display the ad about cow boardgames. All this happens in a split second, before the page has fully loaded.

At no point does the ad exchange or any of the advertisers know that this is “Louis Gohmert, Congressional Rep.” Nor do they get any other info. They just know that if they are willing to spend the required amount to get the ad shown via the marketplace bidding mechanism, it will show up in front of someone who is somewhat more likely to be interested in the content.

That’s it.

* Amusingly, Rep. Gohmert voted to repeal the privacy protections, which makes no sense if he actually believed what he was saying in that hearing a few years ago…

H/T to Amy Alkon for the link.

On a related note, LifeHacker posted a recommendation for “The Laziest, Cheapest Way to Circumvent Your Snooping ISP“. (Spoiler: it’s Opera). I use Opera, but not exclusively … I also use Brave, Chrome, and Firefox on a daily basis.

March 14, 2017

“Most policy ideas are bad” (especially in US healthcare)

Filed under: Government, Health, Politics, USA — Tags: , , , , , — Nicholas @ 03:00

Megan McArdle says that the best plan the Republicans could come up with to deal with Obamacare is to do nothing, at least in the short-term:

For a policy columnist, “Don’t do that” is the easiest column to write. Most policy ideas are bad. If you simply blindly oppose everything that anyone ever puts forward, you’ll end up being right most of the time.

However, that’s not very useful for politicians. If they just sit around Congress playing tiddlywinks all day, voters will get cranky. Congress is supposed to do things. So, having spent a few days saying unkind things about the Republican health-care plan, it probably behooves me to state what I think they should do.

Well, boy, that’s a hard question. Here’s the thing: For all the unkind words I’ve said, I get the forces that have brought Republicans to this point. As I wrote Thursday, Democrats built a shoddy and unworkable structure out of the political equivalent of concrete: nearly impossible to repair or renovate, and darned expensive to demolish. The task is made even harder by the fact that Democrats currently control just enough votes in the Senate to keep Republicans from passing any sort of clean, comprehensive bill.

[…]

What would I do in this situation? Well, the first thing I’d do is accept, deep in my heart, that there are no great outcomes possible at this point. The second thing I’d do is remember that nothing is always a policy option: If you can’t do something better than the status quo, don’t do anything. It’s what I said to Democrats in 2009, and it’s what I’m saying to Republicans now.

So what would I do to minimize the damage, within the constraints of political reality? Well, I foresee two potential futures for the current status quo. One, the exchanges where individuals buy policies could fail, leaving people unable to buy insurance. Or two, the exchanges don’t fail, and we’re left with an unsatisfactory but still operational system.

In either case, the Republicans’ best option is to wait. Why? Because what they can do now — hastily, without touching the underlying regulations that have destabilized the individual market — is worse than either of those outcomes. The partial-reform structure they think they’ll be able to get through the Senate is likely to make the problems in the individual market worse, not better. And the fact that they’ve tinkered with the program means that Republicans will take 100 percent of the blame.

She also re-iterates her own ideal solution (which she admits wouldn’t fly with the American public):

Longtime readers of my column know that my pet proposal is a radical overhaul of the whole system in which we zero out all the existing subsidies and just have the government pick up 100 percent of the tab for medical expenses that exceed 15 or 20 percent of a family’s adjusted gross income: basically, a single-payer catastrophic-care system for expenses that no one can realistically save for. Let people buy insurance for expenses below that, or, if it’s not too expensive taxwise, let people set aside more money tax-free in Health Savings Accounts. And make some more generous provisions for people closer to the poverty line, such as prefunding Health Savings Accounts for them. That’s the whole program. It fits on a postcard, though the finer details — like which cancer treatments we’re actually willing to pay for — obviously aren’t.

However, this is completely politically infeasible, because voters don’t want genuine insurance, by which I mean a pool that provides financial assistance for genuinely unforeseeable and unmanageable expenses. Voters want comprehensive coverage that kicks in at close to the first dollar of spending, no restrictions on treatments or their ability to see a doctor, nice American-style facilities, and so forth. They are also fond of their health-care professionals and do not wish to see provider incomes slashed and hospitals closed, nor do they want their taxes to go up, or to pay 10 percent of their annual income in premiums. This conflicting set of deeply held views is one major reason that Obamacare — and American health-care policy more generally — has the problems it does.

March 13, 2017

“It’s not really a debate over Obamacare, it’s a debate over Medicaid”

Filed under: Government, Health, Politics, USA — Tags: , , , — Nicholas @ 04:00

Robert Tracinski explains why the Republicans are having such a hard time with their oft-promised “repeal” of Obamacare:

House Republicans have released their proposed measure to “repeal and replace” Obamacare, and the whole enterprise is already losing steam right out of the gate. The measure is too small and incremental, less a repeal of Obamacare and more of a repair of it, keeping numerous basic features intact.

If you want to know why Republicans have bogged down, notice one peculiar thing about the Obamacare debate so far. It’s not really a debate over Obamacare, it’s a debate over Medicaid. That’s because Obamacare mostly turned out to be a big expansion of Medicaid. The health insurance exchanges that were supposed to provide affordable private health insurance (under a government aegis) never really delivered. They were launched in a state of chaos and incompetence, and ended up mostly offering plans that are expensive yet still have high deductibles. Rather than massively expanding the number of people with private insurance, a lot of the effect of Obamacare was to wreck people’s existing health care plans and push them into new exchange plans.

Ah, but what about all those people the Democrats are claiming were newly covered under Obamacare? A lot of them — up to two-thirds, by some estimates — are people who were made newly eligible for a government health-care entitlement, Medicaid. But shoving people onto Medicaid is not exactly a great achievement, since it is widely acknowledged to be a lousy program.

Conservative health care wonk Avik Roy explains why: “[T]he program’s dysfunctional 1965 design makes it impossible for states to manage their Medicaid budgets without ratcheting down what they pay doctors to care for Medicaid enrollees. That, in turn, has led many doctors to stop accepting Medicaid patients, such that Medicaid enrollees don’t get the care they need.” Partly as a result, a test in Oregon found no difference in health outcomes between those with access to Medicaid and those without.

March 3, 2017

The key difference between written and oral communication

Filed under: Media, Politics, USA — Tags: , , , , — Nicholas @ 05:00

Megan McArdle, discussing the uproar over the Attorney General Jeff Sessions “did he or didn’t he lie to congress” debate, took time to clarify why we don’t (and can’t) parse spoken communications in the same way we do with written work:

If you read the latter part of this exchange extremely strictly, chopping off the preamble, then you can argue that Sessions was technically untruthful. The problem is that this is not how verbal communication works. The left is attempting to hold the attorney general to a standard of precision that is appropriate for written communication, where we can reflect on preceding context and choose exactly the right word.

Oral language is much looser, because it’s real time. Real time means that we don’t have 20 minutes to puzzle over the exact phrasing that will best communicate our meaning. (For example: Reading this column aloud will take you perhaps five minutes. It took me nearly that many hours to write.) On the other hand, our audience is right there, and can ask for clarification if they are confused.1

Demanding extreme clarity from an oral exchange is unreasonable. Moreover, everyone understands that this is unreasonable — except, possibly, for the chattering classes, who spend their lives so thoroughly marinated in the written word that they come to think that the two spheres are supposed to be identical. Most ordinary people understand very well that there’s a big difference between talking and writing (which is why most people, even those who are dazzling in conversation, have a hard time producing fluid and lively prose).

That’s not to say that it’s wrong to investigate the Trump administration’s ties to Russia. Investigate away! If the Trump campaign knew about, or colluded with, the hack on the DNC, then Trump should be impeached. But at the moment, we have no evidence that Sessions committed a crime, much less attempted to cover it up. The court of public opinion is probably going to require somewhat better facts to convict.

    1. One reason that we writers spend so much time thinking about precise wording, and larding our prose with extra paragraphs meant to clarify exactly what we’re talking about, is that language is rife with ambiguity. This is why, at one time, Annapolis cadets were required to take a class in which they would write orders, and their fellow cadets would tear them apart looking for ways that a simple order could be misunderstood. It’s also one reason so many people get into so much trouble on Twitter: they write like they talk, but stripped of cues like context and facial expression, what they say is very easily taken the wrong way.

February 23, 2017

Words & Numbers: The CBO Can’t Count

Filed under: Economics, Government, USA — Tags: , , — Nicholas @ 04:00

Published on 22 Feb 2017

In this episode, Dr. Antony Davies, Professor of Economics of Duquesne University in Pittsburgh, and Dr. James R. Harrigan, Senior Research Fellow at Strata, in Logan, Utah discuss the way the Congressional Budget Office works, and outline its history of failure at accurately forecasting increases in the national debt.

Find out more about the CBO and debt projections here:
https://fee.org/articles/the-congressional-budget-office-cant-count

here:
http://www.usnews.com/opinion/economic-intelligence/articles/2017-02-01/the-cbo-federal-budget-predictions-are-dangerously-optimistic

and here:
http://www.huffingtonpost.com/entry/58a0810be4b0e172783a9daa

Plus, check out this great 360 Video from Learn Liberty with Antony Daves that helps put the massive scale of the current US Federal debt into perspective: https://www.youtube.com/watch?v=ErUZjM16r1M

And track the National Debt in real time here:
http://www.usdebtclock.org/

November 17, 2016

Deregulation’s return

Filed under: Business, Economics, Government, USA — Tags: , , , , — Nicholas @ 02:00

I rarely say nice things about Jimmy Carter’s term as president, but he should get more credit for the deregulation that happened under his administration — the lifting of restrictive and obsolete rules over things like railroads, long-distance trucking, and (most important to drinkers) enabling the rebirth of craft brewing — many of the economic benefits were later attributed to Reagan, but Carter did the heavy lifting on several important issues. It’s a hopeful sign that S.A. Miller says Congress and the Senate may be in a deregulatory mode after Trump’s inauguration:

Sen. Rand Paul said Wednesday that he expects a flurry of repeals of Present Obama’s regulations by the next Congress and President-elect Donald Trump.

“You’re gong to find that we are going to repeal a half dozen or more regulations in the first week of Congress, and I’m excited about it because I think the regulations have been killing our jobs and making us less competitive with the world,” the Kentucky Republican said on MSNBC’s Morning Joe program.

Mr. Trump, whose surprise win over Democrat Hillary Clinton sent shock waves across the Washington political establishment, pledged on the campaign trail to tackle over-regulation by the Obama administration.

The federal government has imposed more than 600 major regulations costing Americans roughly $740 billion since Mr. Obama took office in 2009.

Mr. Paul said he viewed many of the regulations under Mr. Obama to be unconstitutional because they were issued without Congress’ approval.

January 17, 2016

QotD: The entrenchment of American political tribes

Filed under: Politics, Quotations, USA — Tags: , , , , , — Nicholas @ 01:00

We learned that much of the increase in political polarization was unavoidable. It was the natural result of the political realignment that took place after President Lyndon Johnson signed the Civil Rights Act in 1964. The conservative southern states, which had been solidly Democratic since the Civil War (since Lincoln was a Republican) then began to leave the Democratic Party, and by the 1990s the South was solidly Republican. Before this realignment there had been liberals and conservatives in both parties, which made it easy to form bipartisan teams who could work together.

[…]

But we also learned about factors that might possibly be reversed. The most poignant moment of the conference came when Jim Leach, a former Republican congressman from Iowa, described the changes that began in 1995. Newt Gingrich, the new speaker of the House of Representatives, encouraged the large group of incoming Republicans to leave their families in their home districts rather than moving their spouse and children to Washington. Before 1995, Congressmen from both parties attended many of the same social events on weekends; their spouses became friends; their children played on the same sports teams. But nowadays most Congressmen fly to Washington on Monday night, huddle with their teammates and do battle for three days, and then fly home on Thursday night. Cross-party friendships are disappearing; Manichaeism and scorched Earth politics are increasing.

Jonathan Haidt, quoted by Scott Alexander in “List Of The Passages I Highlighted In My Copy Of Jonathan Haidt’s The Righteous Mind“, Slate Star Codex, 2014-06-12.

December 12, 2015

This is a case where the satire is just too close to the reality

Filed under: Humour, Military, USA — Tags: , , — Nicholas @ 04:00

Duffelblog usually comes up with wild and wacky variations on real military topics that are so way-out-there that even Second Lieutenants (and a few Captains) can often tell that they’re satire. This, on the other hand, is one where it’s hard to determine if there’s any satirical content at all:

“His mistake was announcing facts,” Lt. Gen. Paul K. Van Riper (Ret.) said. “When faced with facts contrary to what the military and Congress wants, the facts must be changed. It’s standard procedure.”

Van Riper was speaking from experience. In 2002 he was the opposing general in the 2002 Millennium Challenge, where he led an inferior foe to victory against American forces. The exercise was started over with rule changes to ensure Van Riper could not win again.

“Politicians want wars to be won with progressive politics and technology made by contractors who donate to their campaigns,” Van Riper said. “Contractors were pitching technology to stop IEDs but war games showed more recon flights searching for people planting IEDs were a better solution. We destroyed those results so we might get some cool laser cannons or something.”

Not all negative results are suppressed. A study found that despite an Army Optimism Program, 52 percent of soldiers had low morale. The Army took quick action to solve this problem by lowering the threshold of what it considered an unhappy soldier. Now only 9 percent of soldiers have low morale.

Pretending a problem doesn’t exist has become the DoD standard, according to senior defense officials. In fact, according to data released by the Secretary of Defense’s office, dozens of commendations have been awarded to commanders in recent years for redefining success. The award, called the “Silver Lining Star” is generally given to leaders who have “made lemonade when life gives you lemons.”

November 27, 2015

QotD: The myth of the “permanent majority”

Filed under: Government, Politics, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

Many Republicans seem confident that last week’s performance in the mid-term elections bodes the end of the Obama era, and the dawn of the bright Republican future. Many Democrats seem confident that last week’s performance in the midterms was a mere blip on the way to the Emerging Democratic Majority. Both sides would do well to read Sean Trende’s 2012 book, The Lost Majority, which I made my way through this weekend.

To state Trende’s thesis simply: There is no such thing as a permanent majority. Parties are coalitions of disparate groups of voters, and they win by strapping enough different groups together to push themselves across the electoral finish line. Unfortunately, the broader your coalition, the harder it is to hold together. Those different groups may have radically different values and interests; satisfying one may end up alienating the other. Trende suggests that the longest-lived coalition was not, in fact Franklin Delano Roosevelt’s famed “realignment,” which showed large cracks as early as 1937, but the Eisenhower coalition that lasted roughly from 1952 to 1988. As the dates suggest, the reason for unity was the external threat from the Soviet Union. That’s a pretty stiff price to pay for internal unity.

I took two major things away from the book: First, you can’t count on demographics to hand you a victory in such a vast and diverse country, because today’s coalition members may end up as a large and growing pillar of the opposition. And second, although both parties are constantly hunting for a mandate for radical change, the voters almost never deliver one. The party stalwarts may want to tear down the current edifice and start over, but the less ideological coalition partners are usually looking for some light redecorating, perhaps along with a specific personal interest like freedom of conscience in business operations, or less restrictive immigration policy. The harder the parties push on their ideological platforms, the faster the “coalition of everyone” starts leaking supporters to the opposition.

Megan McArdle, “No Party Will Get a Permanent Majority”, Bloomberg View, 2014-11-10.

October 6, 2015

Puerto Rico’s minimum wage experiment

Filed under: Economics, USA — Tags: , , — Nicholas @ 03:00

J.R. Ireland describes what happened to Puerto Rico’s economy when the minimum wage was raised to the mainland level by congress in 1974:

Prior to 1974, Puerto Rico had its own minimum wage and was not tethered to the general American wage. Then, in their infinite wisdom, the US Congress decided to normalize the minimum wage across all US territories and passed legislation making Puerto Rico’s minimum wage the same as the American wage had always been.

Well what happened next, you might ask? The economy imploded. Puerto Rico had an unemployment rate around 12% and an employment to population ratio of approximately 78% pretty much continuously between 1960 and 1974. The numbers had gone up a bit — they had come down a bit — but overall, year in and year out, you could look at Puerto Rico and be sure that the unemployment rate would be between 10 and 14 percent and the employment to population ration would be between 75 and 80 percent. You could set your watch by this kind of consistency.

Then Puerto Rico’s minimum wage was raised substantially beginning in 1974. The Puerto Rican unemployment rate then proceeded to increase for four consecutive years until it peaked at 20%. It roughly plateaued for half a decade or so, and then it went up again until Puerto Rico had an unemployment rate of 25% by 1984. Meanwhile, the employment to population ratio fell from 78% to 60% and has never recovered.

It is not just me pointing out the absolutely catastrophic consequences of the minimum wage increase in Puerto Rico — the National Bureau on Economic Research agrees. According to them:

    Imposing the U.S.-level minimum reduced total island employment by 8-10 percent compared to the level that would have prevailed had the minimum been the same proportion of average wages as in the United States. In addition, it reallocated labor across industries, greatly reducing jobs in low-wage sectors that had to raise minima substantially to reach federal levels. (3) Migrants from Puerto Rico to the United States are drawn largely from persons jobless on the island, with characteristics that make them liable to have been disemployed by the minimum wage. As the Puerto Rican minimum rose toward U.S. levels, the education of migrants fell below that of nonmigrants. (4) Migration was critical in allowing Puerto Rico to institute U.S.-level minimum wages and played a major role in the long term growth of real earnings in Puerto Rico by reducing the labor supply and raising the average qualifications of workers on the island.

In other words, the minimum wage increase caused massive unemployment, forced hundreds of thousands of unemployed Puerto Ricans to flee the island because there were no jobs, and the only reason the entire territory wasn’t rendered destitute is because the poorest Puerto Ricans all moved to Chicago or New York rather than choosing to remain unemployed on the island itself.

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