Making Sense of Minimum Wage Increases

The purported greatest monetary mind of the century, Alan Greenspan (before his sellout to the Fed), has stated,"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." From http://www.safehaven.com/article-4285.htm

Now wait a minute. We have two very important statements from Greenspan before he was Chairman: the first is “there is no way to protect savings from confiscation through inflation” and the second is “Deficit spending is simply a scheme for the 'hidden' confiscation of wealth.” We are going to look at both those statements, but Wow! The “HIDDEN CONFISCATION OF WEALTH”, now there is a heady statement for you if there ever was one. What does that mean?

Common Sense vs. The Politicization of Money

Let’s take this a step further and apply a little common sense. Think long and hard about the reality of what happens when the Congress increases deficit or regulation. Let’s say that they issue a ruling that says that minimum wage has to be raised in an attempt to “stimulate economy”. The banner is raised, the people applaud, the pressure is on, the companies lobby, the bill goes up for a vote, millions of other pork is attached, and the bill passes and becomes law. Right?

Not exactly, or perhaps a better way to put it would be it’s not the end of the story.

The rest of the story is that companies comply with the new law requirement, as they have no choice, jobs are lost because expenses go up, prices go up to cover losses. Nevertheless, the money the minimum wage maker earns goes no further than it did at the previous level after the first couple of paychecks, and more often than you realize, you actually lose money. Why, because the prices of goods and services, which let’s face it, we all consume, are increased by the companies in order for the companies to be able to absorb the new wage requirement. It sounds greedy of them, but I promise I will show you that it is not greed, but a necessary fact of life.

This next paragraph is very important to remember for future discussion:

In a nutshell, this is the core of the issue; the government has a corner on the money supply, and to answer that second point Greenspan made: The Government can and does use inflation as a hidden tax, selling it to the masses as an increase in their ‘personal profitability’ or in other words – a hand out. When in reality, it's the magic tax from the government’s point of view because nobody understands it and many people want it. Who doesn’t like the idea of something for nothing?

In the case of any number of this type of a bill, it receives resistance mainly by the companies that are affected, as they tell the government this means they will have to raise the prices of manufactured goods or services to cover shortfall, and the masses take another sip of Kool-Aid and say, “this is just big money talking”.

Power yourself back to that 16th Amendment and the Federal Reserve Act, and take a good look at it. Yeah it’s big money all right, but not of the type you are thinking. It is the governmental big business big money talking, not the little ma and pa shop. These people are hungry and they want more taxes. The companies that are “too big to fail” and the government who has to make up shortfall somehow, win back confidence of the voters, improve morale and all the other “dance of the seven veils” items they do to keep us , well… to put it bluntly, quiet. It is the quintessential panacea to the masses.

”We must keep printing money. We must keep taxing wages.” is their Mantra. However, they can’t ALWAYS say they are doing that…especially when the candidate now in office promises he won't.

But…If they raise your income, you pay them more taxes without them ever having to push through a bill for an increase. It makes you feel good, it makes them look good, but I promise you, it is Kool-Aid. I will help you understand this statement in the following subsection, but first let’s take a second to review exactly who the small businesses are and what they do you for you.

According to the National Federation of Independent Business (NFIB), small businesses:

• Produces roughly half of the private Gross Domestic Product (GDP) and creates, on average, about two-thirds of net new jobs annually.

• Are the greatest sources of new employment in inner cities, comprise more than 99 percent of your local establishments, and carry more than 80 percent of total employment.

• American small business is the world’s second largest economy, trailing only the United States as a whole.

• Employs more than half of private sector employees.

• Ninety percent of small businesses employ fewer than 20 people.

• Small firms represent 99.7 percent of all employers.

• Nearly 16 million people operate a small business as their primary occupation in a year.

• Women-owned firms have grown at around two times the rate of all firms; minority-owned firms have grown at around four times the rate of all firms.

The people who are small business and are affected by this scenario are your Barber Joe, your best friend Sally’s Deli down at the corner where you eat lunch every day, and your neighbor Tom who just started his own landscaping company. You are affected too though, in some cases even worse than small business because you as a wage earner can’t raise any new money on your own without taking a 2nd or even 3rd job. You only have to think about it for a minute or so before you see it, but I promise you, this will make sense because I’m going to play out the whole scenario for you now.

Headline: Congress Today Announced Plan for Minimum Wage Increase

You see the headlines on the front page over morning coffee. The bill to increase minimum wage has been introduced to the Congress at 50 cents an hour. “Well, that’s good.” you think to yourself. “I could sure use that!” You see the headlines the following week as they shout “Companies Lobby Congress for Relief. Says No to Minimum Wage Increases” You just shake your head and think, “Leave it to big business.”

You and your friends hang out at lunchtime that day and say, “These rich companies and their fat cat buddies don’t want to give us a raise, and they’d rather keep us down so they can keep the profits for themselves and make money off the sweat of our backs. The greedy creeps!”

Then on the evening News things are heating up. You sit up with interest as you watch the guy you voted for a several other people line up and run to the podium. “We are here for your benefit,” they cry. “The American people need help and we want you to know that we work for you and WE HEAR YOU! The rich companies have got to pay our poor workers more!” The people in the audience welcome and cheer and rally around with open arms, glad slapping each other and jumping up and down in their spot, because their paycheck is now about to get bigger.

Then the other side climbs up to the podium and screams, “This is partisan politics! This is “tax and spend” policy. This will hurt our economy! In the long run this will hurt you, your kids, and your company!”

“Huh, what?” the people say in return. The booing starts.

You yell at the TV, “Dude! I just need more money! Those guys before you made sense and they just gave me the ‘rah rah’ speech and it made me feel real good! You want me to give a hoot about how my little 50 cent raise is going to hurt the economy!? Are you kidding me? It’s the economy that hurts me, Buddy, and I am done with your partisan politics! So, welcome to the real world Mr. Hoity Toit. I need to feed my kids!” You get disgusted and turn the channel to the baseball game to ease your worried mind.

Yet, have you noticed we still have a hard time getting ahead? Why is that? We as a people are completely unaware that it really goes no further than that ‘rah rah’ speech, because while the money looks bigger on the paycheck, we are still having the same trouble meeting our obligations as we did before, maybe even more. We might walk around with great big question marks hanging over our head and worry weighing heavily on our mind, but we don’t really care to explore it because we are too busy making ends meet. The poor are still with us.

Let’s take a minute to do some fuzzy math.

The bill passed and you are into your 3rd week of your new wage increase. God Bless America. Let’s assume for our little experiment that the average paycheck is taxed at 25%. Your 50-cent raise just became 37.5 cents.

Your best friend Sally at the deli sits down next to you with a stack of letters in her hand as you are eating your sandwich and just starts talking. She tells you that she is worried. Her deli has to pay her 4 full time employees 50 cents more an hour and she is open 7 days a week, so her expenses just went up by $16 dollars a day at a minimum, not including overtime or part time employees, or $112 per week. She says her milk delivery company apparently has the same problem on a larger scale because his employees have to be paid more too and he has 50 employees. This morning, she continues, the deliveryman told her that the milk delivery service is increasing 2 cents a container for delivery. Since she buys 200 containers, 2 cents times 200 containers a week is $4 a week.

She was okay with that at first, but she goes on to say she that she just opened the mail a few minutes ago and now she’s getting scared. It looks like it’s the same with the milk bottling company who supplies the milk delivery company, and the dairy farmers who supply the milk to the bottling company. She lifts up her hand to show you the stack they just sent her; the top one says NOTICE OF INCREASE. She says that the total milk price itself goes up another 5 cents times 200 containers or $10.00 a week. Sally, almost to tears now says that just with those things, her expenses are now $126.00 more a week than they were last week. That’s not all though, it’s the same with the meat sellers, the vegetable grower, her pie maker, her utilities, and everything has to go up to cover losses. All those little amounts are going to add up to about $200.00 a week. “That’s $800 a month!” she exclaims angrily.

Now she is your best friend, you know she only brings in about $800 a week after expenses, and she has the house and the kids. She says she is going to have to do something too so she can feed her kids, because she just lost $200 of that $800 a week because of a 50-cent law. She says, “Some of the other owners were in earlier and it’s the same with the Joe the Barber, Sal the grocer, and Tom the landscaper.

Every company has to pay higher wages and their expenses increase as their suppliers have to raise prices to cover their expenses. They were all talking about how they would have to raise their prices. “None of them want to do it, but gosh, what else can we do? You know Lee died last year he didn’t have life insurance. I have the 3 kids to feed, not to mention my dogs! That house to upkeep. What am I going to do?” she asks, getting misty eyed while she is waving all these increase notices around in the air.

“Uh oh”, you think. You feel real bad for her. She was your best buddy’s wife and she does have it hard, you know that. But did she just tell you that everyone was talking about raising prices? What does that mean for you? You still have to get your haircut, that big tree trimmed and buy food, right? You have an awareness that something just doesn’t bode well that you didn’t when the political posturing was going on, so you decide to check it out.

Taking the Math Home

So let’s say for arguments sake, it’s been a few weeks and you have some actual figures you can add up. How much more has all this has cost you, now that everything has settled down some? You pull out your calculator. That total cost you pay extra for all your goods and services a week is going to be about $20.00 once you figure it all up. Since your actual increase is only 37.5 cents an hour and you work 40 hours a week, your increase actual, after income tax, is $15.00 a week. $15.00 -$20.00 = (-$5.00) right?

Wait a darn minute! Did you just discover that you lost $5.00 a week of income because you are making 50 cents more an hour? You drag butt back to work and start talking about it to your friends there.

They’re a little shocked by what you are saying. Jim says, “If we only got to keep the whole 50 cents, at least we would have gotten a little something maybe.” Jerry nods his head and says “Yeah, man but do you know what Tom told me this morning as he was fixing that tree of mine? He said the government just got 12.5 cents an hour for every single minimum wage worker in America for every hour of work they do and they sold it to us as a benefit even though the word tax increase never passed their lips”…..

Let’s assume there are 10 million workers just like you in this country times 12.5 cents an hour. That’s $1,250,000.00 MORE AN HOUR THE GOVERNMENT IS PULLING IN OFF YOUR WAGES WITHOUT A TAX INCREASE!

You can bet ‘The Fed’ has those presses heating up and they are printing a whole bunch of new money. Money that has a big risk of halving itself once it hits the market, because although it is a “good”; it acts different from other goods. There is little behind it except that you keep your job and that they hope they can actually count on your wages for their windfall or fiat money. What is fiat money again? Fiat Money is intrinsically useless and is used only as a medium of exchange.

Can you hear me now? Do you see it? This is an oversimplification, but you get the point, I’m sure.

Every time anything of this nature occurs, whether it is an increase in Social Security distributions, minimum wage increases, healthcare reforms, welfare increases or pork barrel funding - Americans dependence increases on our government - our desire is for getting a little break for all our effort, yet it goes no further.

No one stops to ask why.

This is the crux of the statist ideology. It is a welfare State mentality, rather than a free enterprise mentality and we continue to become more apathetic the longer this goes on. The proper definition of a statist is the practice or doctrine of giving a centralized government control over economic planning and policy. No wonder they say that free enterprise doesn’t work. It isn’t allowed to work!

We say we are a democratic society, which actually we aren’t, we are a Republic according to our Constitution, and there is a distinct difference between those two forms of government. A democracy is ruled by the majority without protection for the minority at all. What the majority says, goes, unequivocally. A republic however, is meant to CONTROL the majority while ensuring the inalienable rights of ALL people. For this point though, neither of those forms of government function well when ruled by statism, yet we are statist society.

Why, you ask? Simply because we don’t understand what goes into all these monetary laws and amendments and so the government and the candidate’s get to tell us what we don’t know in any form they think will get them what they want. The candidates act like the School Council member running for President, promising anything and everything they can to try to be elected!

If that means that they pass a hidden Magic tax off as a benefit, and we don’t understand what they are saying, then we lose. They get to feed us the definition and we know no better. We don’t understand it and we don’t think we want to take the time to understand.

Apathy feeds dependence and dependence feeds bondage, yet we continue to stare at the headlines with the dull stare of a dairy cow - whose price just increased a little bit.

There are reasons Woodrow Wilson said what he did 6 short years after passing the 16th Amendment and the Federal Reserve Act, and this is one of the major ones.

I read in another part of my study; “The fiat standard cannot do what a well-run, or poorly run gold standard can do, which is not attempt to tailor the money supply to any political constituency's demand. Fiat requires philosopher king-bankers. Commodity money requires mere humans.” It is not a perfect system, as a gold standard specie can still cause havoc. There was a gold standard before the great Depression, and it did not prevent the government from inflating the money supply after the Federal Reserve Act because we became a “mixed currency”. Nevertheless, it controlled them better than Fiat Money.

The printing of money is what caused the "lack of faith" in the governments, and as a result speculative attacks on the currencies through options trading and shorting money, companies, and commodities. People may not know why, but they know whether something feels credible or not.

The solution is as simple as it is complex: disallow the practice of issuing fraudulent money. All circulating currency must be backed by existing gold. This is a gold specie standard. And stop the practice of handing out money willy nilly to the less fortunate, but protect them by law and focus where the issues are, in education, in true job creation, in bringing back the American dream through jobs in America rather than overseas. Do what the UK did in part in going back to the gold standard after the war, just at today’s dollar rather than 1971’s dollar.

We are probably entering into a Depression anyway, choose the bondage we are about to enter to fix the problem, don’t just react to it in a single vote and then run for cover and complain when it didn’t quite turn out the way promised or way worse than expected. Do we really know what affects the Healthcare bill and Cap and Trade will have? We do know that promised money from Stimulus stands at $23.7 TRILLION dollars right now and we do know that if we spent $1,000,000.00 a day every day since the day Jesus was born, we wouldn't YET hit spending of $1 TRILLION dollars. We can't even possibly deal with the kind of money these guys are spending. It will ruin our nation, just as it ruined Rome.

Completely severing state and money would be the best solution but that is probably impossible. However, the Government through private bankers has no business being in the manufacturing of money, other than in punishing fraud. We need somewhere to start this process and personally people way more skilled than I believe that “somewhere” is gold specie.

If you aren't in Washington on 9/12, you are just asking for trouble.