Monday, April 18, 2016

As a California Democrat, you must praise the $15 minimum wage and ignore the evil of Apple - it's all very confusing and very wrong

“No one who works full time should live in poverty,” said California Senate President Pro Tem Kevin de León, a Democrat expressing his pride in the new $15.00 minimum wage bill.

I'm a California Democrat and I've always thought the minimum wage should be tied to the consumer price index, but I have a problem with Kevin de León's statement

The "California" part of being a "California Democrat" is important. California is a state that - because of the size of its economy, population, and geographic area - could easily be a nation-state:
  • Out of the 200± nations in the world, we would have the world's eighth largest economy. 
  • We would be the 38th largest country in population, about the same as Poland and larger than Canada.  
  • We would be the 60th largest country in area, about the same as Paraguay and larger than Germany. 
In theory California is a politically liberal state. We Californians live in a "Trifecta" state, meaning that Democrats control both houses of the state legislature and the Governor. A 65% Democratic majority controls the State Assembly and the State Senate.

Our Congressional delegation has a total of 53 members, with 39 Democrats (including House Minority Leader Nancy Pelosi) and 14 Republicans.

In addition to the Governor, all other statewide elected offices - two U.S. Senators, Lieutenant Governor, Attorney General, Secretary of State, State Controller, State Treasurer, Insurance Commissioner, and State Superintendent of Public Instruction - are Democrats.

Being large in area has even resulted in a California Red-Blue divide with a "Left Coast" and "Inland Right" - here's the map of the last Governor's election by county which is fairly consistent with most statewide elections:

(One piece of trivia is only two Republican members of the House of Representatives have coastal districts, Darrell Issa and Dana Rohrabacher, both of whom a number of times have been panel members on "Real Time with Bill Maher.")

As noted in the beginning, the Democratic leader of the State Senate told us “No one who works full time should live in poverty.” Notice that he didn't say "No one should live in poverty." This statement didn't seem to bother anyone in the press but it bothered me.

Because of his phrasing, he seems to imply that someone should live in poverty - specifically all those who don't work full time. And that gets me to my point about the apparent shallowness of our political leadership.

Is a higher minimum wage a Democrat's idea of shifting wealth from the notorious 1% to the working poor???  Did resetting the minimum wage  really deserve all that self-congratulations??? Not in my mind.

Where exactly do these Democrats think most of the minimum wage workers work??? And where do these Democrats think these minimum wage workers shop??? Whole Foods or WalMart??? Do these Democrats really believe prices on things the working poor buy won't go up???

Then there's the problem of who is going to get that minimum wage raise? More than half of those in poverty are in a household where no one has a job, so raising the minimum wage is of no help to them. Many of the working poor are already earning over the minimum wage but are stuck in poverty because they are not employed full time.

All the available statistical data indicates that just 12 percent of the benefit from raising the minimum to $15 will go to poor families, but 38 percent will go to people in families with incomes at least three times the poverty level.

Is raising the minimum wage a bad thing? Of course not. It needed to be done. And much to my surprise it was adopted with a built in future cost of living increase so it won't continue to be stuck at some historical level.

But let's keep in mind that a person working full time for minimum wage will see an increase of $4 a day - less taxes, which start with 30¢ deducted for Social Security and Medicare. Good grief! A minimum wage increase will increase the amount the minimum wage working poor contribute towards the care and feeding of middle income old people like me.

Let's be clear. Even though it needed to be done, an increased minimum wage isn't a solution to what's wrong with our economy. For instance, it certainly doesn't even distribute to shareholders some of that Apple offshore money we all know about.

In fact California's Apple Inc. and its legion of fans are part of what's wrong with our economy.

Apple is California's preeminent company. Democrats by the millions buy and swear by Apple products. And as reported by the New York Times:
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
When an upper middle class Democrat smugly embraces his or her very expensive Apple product, that ultimately confirms there is no personal thought of commitment to make retail spending choices that support the American worker.

Further, as noted recently in many news stories, in its SEC filings Apple reported holding $181 billion offshore, making it among the top American companies doing so. In If Apple didn’t hold $181B overseas, it would owe $59B in US taxes it is noted:
"Losing ... potential tax revenues every year is a very big deal," Neil Buchanan, a professor at George Washington University, said by e-mail. "That money could be used to reverse recent cuts in Head Start, and/or assistance to state governments to fund education at all levels, or increase the Earned Income Tax Credit, and on and on. Politicians who respond to proposals to fund these programs by saying that ‘we can't afford it’ are simply saying, ‘I'd rather cut Apple's tax bill than educate our children.’"
That also is a loss of about $15-20 billion in California tax revenue, money that could have been used to assist the poor.

Which brings me to Bernie Sanders, a Democratic politician who would fit right in the shallow California Democratic political scene. Bernie recently attacked G.E., a company that for a myriad of reasons has completely restructured itself, spinning off or selling its banking, insurance and finance arms and its retail appliance subsidiary. The process hasn't been kind to American workers who were employed in those subsidiaries, angering unions.

There are no angry union voters associated with Apple. Plus a vast number of Bernie supporters have spent a lot of their disposable income on Apple products. So Bernie would have to tread lightly about Apple.

Let's rage against G.E., which last year "repatriated" about $36 billion in foreign earnings from the sale of GE Capital, paying about $6 billion to the Internal Revenue Service. Let's rage against G.E. because it is politically safe. No Bernie supporter is going to be offended because he/she recently bought a GE railroad locomotive or aircraft engine. Bernie just has to avoid pointing out how hypocritical his supporters are if they own anything made by Apple.

His supporters would be, of course, democratic socialists so long as they didn't have to give up their expensive shiny iProducts. But they can't be American socialists and buy Apple products. Apple finds American workers undesirable, studiously avoids paying American taxes, and pays its retail employees less than $15 an hour.

At least the new California and New York $15 minimum wage laws will increase wages paid to many Apple store employees as discussed in Apple’s Retail Army, Long on Loyalty but Short on Pay and Apple Retail Workers Sue Over Unpaid Wages, Overtime. Yep. The Apple Store employee who sold you that expensive shiny iProduct was paid the same as employees at WalMart, another company Democratic politicians feel comfortable criticizing.

Here's a new catchphrase: When you think of Apple think of WalMart.

For our Democrat-led, Democratically-controlled California government, a number of political choices existed to supplement the income of people who live in poverty. One of those specifically would transfer money mostly from the  poor and middle classes to some members of the working poor - raising the minimum wage

Governor Jerry Brown signed California's first-ever earned income tax credit into law in June 2015. Flying under the news radar was an actual new-to-California program to help the poor adopted by California Democrats - and a miserly program it is, estimated to cost $380 million out of a total budget of $122 billion, hardly reminiscent of the party of Franklin Roosevelt.

Let's put this into perspective. In this state run by Democrats, poverty statistics are grim. The state has the highest child poverty rate in the nation. In adopting that EIC law, California joined twenty-five other states and the District of Columbia that have earned income tax credits. You know, left right wing states like Kansas which has had an EIC law since 1998 and Oklahoma which has had an EIC law since 2002.

Since we can't get that tax money from Apple, one way of using the tools of government effectively this year, in 2016, would have been to raise the state income tax rates 4% generating the extra $2 billion and then increasing the state's expenditure on the earned income tax credit by a factor of 5.

Of course, there would be instant opposition from middle class Democrats and, because it's an election year, their elected representatives even though the impact would not be significant for most Californians.With a 4% increase here's what the tax impact would be:

Funding a tax credit increase with a 4% increase in income tax rates would disproportionately take income from the notorious 1%. But it would require a family making about $65,000 a year before deductions to pay about $60 as their share to help the poor, a tax increase which many of these California Democrats would object to even though a family pulling down about $1 million year after deductions would pay $4,100 a year as their share.

Instead of one that is truly miserly, California could have implemented an EIC that broadly supplements the income of low and moderate income families, even better than the federal system. But that would have required our politicians to take risks.

This election year they bravely raised the minimum wage which costs the taxpayers nothing and will cost the 20% of  upper income earners little. Basically shuffling some money around within the ranks of the low-to-moderate income households, this allowed Democratic rank-and-file to feel really good about themselves so that they could reward themselves by buying the latest shiny Apple iProduct.

Maybe both Donald Trump and Bernie Sanders have exposed the one problem making American government unworkable - the two existing political parties. The 19th and 20th Century populist and socialist ideas being bandied about this election year by Trump and Sanders - protectionist trade policies for example - will not improve the human condition in 2050.

Whether led by Jerry Brown in California or Bernie Sanders in Vermont, I don't see evidence of a Democratic Party that is willing to transform our economic system into something that will work for everyone in the 21st Century. It may be it is time for new ideas from a political party willing to take risks.

In the meantime, I cannot be comforted knowing my state's Democratic party believes the justification for the long-overdue increase in the minimum wage is that "no one who works full time should live in poverty.

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