Maybe it’s time to drop the picket signs and pick up a copy of The Road to Serfdom

It was with great interest that I watched Facebook catch fire with support of the calls for picketing and sick-outs at Wal-Mart stores across the country on Black Friday. From what I could tell, most of those supporting the calls were liberals who attacked the company with claims that it doesn’t pay “a living wage”, “exploits” its workers, or owes its workers health care. I even saw one fantastical claim that a majority of Wal-Mart employees are on food stamps. The suggestion was that Wal-Mart should be forced (via government itself or indirectly via unions) to change completely how it deals with its employees in terms of salary and benefits.

To set the record straight, according to Business Insider, Wal-Mart pays its workers an average of $11.75 per hour, just slightly below retail’s national average of $12.04 and well above the federal minimum wage of $7.25. The company itself states that the average non-manager employee earns between $10 & $12 per hour.

Those wages are at least sufficient to make Wal-Mart the largest employer in the country, with a current headcount of over 1.4 million employees. And no one forced those employees to take those jobs. One of the beauties of freedom is that employees are free to work at Wal-Mart or they can take their labor and sell it to someone else… or better yet, they could start their own businesses.

I couldn’t help but think back to the nonsensical Occupy Wall Street protests of a year ago. Many of the participants were carrying around signs decrying Wall Street for its profit mongering and the harm big businesses were inflicting on small businesses and the little guy. Of course their solution of choice was more regulation. Naturally.

Both of these instances reveal more about the protesters than it does about the companies being pilloried. The very regulations they seek are one of the reasons big businesses are so successful verses small businesses in the first place.

It’s a simple example of liberals either not knowing or ignoring basic economics. Take economies of scale. One of its benefits is that you can spread fixed costs out over a larger volume. It works for rent as well as for regulations. Let’s imagine there are two widget stores operating next to one another with identical rents of $10,000 per month. With everything else being equal, the store selling 2,000 widgets a month can build a $5 cost per widget into his prices, whereas the store selling only 1,000 widgets per month has to build in a rent cost of $10 per widget. As such, the store selling more widgets will likely be more profitable, successful and eventually may be able to buy out the second widget store and start its journey to becoming a hated big business.

The same holds true for regulations. Frequently large businesses not only influence regulations to their benefit, but they can also absorb the costs of such regulations far more easily than can their smaller brethren, even if they were unable to influence their writing. Take the tax code for example. At 75,000 pages, a five billion dollar company can easily afford to hire a phalanx of lawyers to find ways to reduce its taxes or lobby for changes. Such luxuries are rarely feasible for small businesses.

According to the Small Business Administration, big businesses with more than 500 employees pay about $7,755 per employee to comply with federal rules each year, while small businesses with fewer than 20 employees pay $10,585 per employee. That is almost 50% more that small businesses have to pay per employee than do large businesses. All because of regulation.

This push for regulation is simply another example of the left using the cover of populism to disguise its real agenda: more government control over business. Whether using the fig leaf of environmentalism to further the nonsensical, inflation causing ethanol mandates or the lie of “the rich don’t pay their fair share” to push for higher taxes, the left rarely lets facts get in the way of their pursuit of a socialist, statist agenda.

Which brings us back to the Wal-Mart protests of Black Friday. The real goal of liberals is not to improve the lot of Wal-Mart employees, it’s control of the company via unions and their government enablers. In doing so they would be able to use government regulations to not only take money out of the pockets of Wal-Mart workers, but more ominously, they could harness the power of the NLRB to impose a wide range of costs, controls and dictates on the company.

To put a cherry on top, take Wal-Mart’s misguided and calculating support of Obamacare – calculating that it would impose greater costs on its small competitors – that has now resulted in the company itself dropping healthcare coverage for many employees while drastically raising the premium costs for others. By pushing such utopian, economically illiterate regulations as Obamacare, the Community Reinvestment Act, ethanol mandates and higher taxes for the rich, liberals not only fail in their stated objectives, but they also invite a wide range of unintended consequences, none of which ever seem to be good. Maybe it’s time to drop the picket signs and pick up a copy of The Road to Serfdom.

How about letting members of the Fortune 500 run America's welfare programs?

Imagine what you could do with a quarter of a trillion dollars. You might buy a new house, maybe a new car and maybe even take a trip to Hawaii or Australia. Nice.

Seriously, what can $750 billion accomplish? Well, that all depends on who’s spending the money.

According to the Congressional Research Service the federal government spent $745 billion in 2011 on welfare payments.

That means that government took 20% of every dollar it extracted from citizen’s wallets (or borrowed on their behalf) and gave it to somebody else. Not in exchange for part of a system they have paid into like Social Security or Medicare, or earned such as veteran’s benefits, but simply because they, the recipients were deemed poor. What’s more, virtually every element of the welfare state has gone up by double digits over the last 3 years: Healthcare up 37%, cash aid up 12%, education (college) assistance up 57%, energy assistance up 67% and who knows how much “Obama phones” have grown. Those numbers are simply staggering. That welfare spending, when combined with the $300 billion states have to pay for federal programs, brings total welfare spending to $1.03 trillion, fully 7.5% of the American economy.

To put that spending in perspective, in 2011 the 500 companies that make up the Fortune 500 list earned a total of $825 billion in profit on revenues of $11.2 trillion for a profit margin of about 7%. (1/3 of that revenue came from outside the US)

It’s interesting to see what, in the right hands, upwards of ¾ of a trillion dollars can do.

Of course in the private sector it’s profits that drive the activity. Entrepreneurs often start companies because they’d like to make a profit doing what they love. Investors invest in companies because they believe the potential for profit outweighs the risk of losing their money. At its core profits are what drive a prosperous society.

So what did those 500 companies do to earn their $825 billion? They directly employed 17 million Americans and indirectly employed tens of millions more both in the United States and around the world. What’s more, they touched the lives of virtually every person in the country in one way or another: Utilities – PG&E and Georgia Power; cable TV – Cablevision and DirectTV; Food – Wal-Mart and McDonalds; Healthcare – HCA and Pfizer; Information – Google and TimeWarner; Entertainment – Disney and CBS; Insurance – State Farm and Aetna; Communication – Apple & ATT; Transportation – Ford and American Airlines.

The US revenue from these 500 companies represents about 50% of our GDP and improved the lives of virtually every man, woman and child in the country in the form of a paycheck or cheaper products or more efficient services or more effective treatments. They are the top performers in an economic system powered by innovation and experimentation and has generated unprecedented prosperity. All driven by $800 billion in profit…

Now contrast that with the government spending $745 billion. From food stamps to cell phones to housing assistance to healthcare, government spending on welfare programs have been growing for decades and have taken off like a rocket ship under the Obama administration. Surely with that much money spent the results must be phenomenal. With $20 trillion spent over the last half decade surely there must be no more poverty anywhere and no more hungry children.

Of course that’s not quite how things have worked out. Today there are 47 million Americans on food stamps, record levels of poverty and the most downtrodden communities are plagued by violence, broken homes, failed schools and double digit unemployment. Not so surprisingly the food stamp program is so well run that earlier this year Congress felt the need to prohibit EBT cards from being in strip clubs and stories of EBT cards being used for everything from liquor, to cigarettes, to porn to casinos are legion.

At the end of the day however, welfare is not supposed to be a profit driven endeavor. (Of course there’s nothing in the Constitution that gives the federal government the power to run a welfare program in the first place, but why quibble about technicalities…) The government created welfare programs were supposed to support those in difficult circumstances until they were able to get back on their feet. It, the welfare state, has been an abject failure for everyone involved, from the people whose money is taken to fund it to the recipients themselves, sometimes generations of them. This failure has been catastrophic, both in terms of the lives lived in misery or those not lived at all, as well as in terms of the loss of human capital in the pursuit of prosperity.

Is it not time to consider a model where the people who bring us everything from iPads to Velcro to overnight delivery to Big Macs are given a shot at solving the problem that government is simply incapable of solving? American private enterprise has driven the improvement of the human condition farther and faster than any economic system in the history of mankind. Is it not time to abandon the failed policies of the welfare state and allow the profit motive to attempt to solve a problem that apparently warrants the spending of a trillion dollars a year of taxpayer’s money on?

If not business per se, then private charities and churches. In his excellent new book “Who’s the Fairest of Them All? – The truth about opportunity, taxes and wealth in America” Stephen Moore discusses a study by Arthur Brooks that shows that private charitable dollars are far more effective in helping the poor than public programs. Moore states

"That is in part because private charity often requires some change in the behavior of the person receiving the aid, such as getting off drugs, working for the aid or helping others. Public charity almost never attaches these conditions".

And that explains why government welfare programs have failed. They don’t require anything from anybody. Private enterprise succeeds because businesses require adapting to circumstances and markets to achieve the goals. Citizens should demand that we harness the innovative power of the private sector to attack a problem that government has been making worse for 50 years. While the country as a whole would benefit from the lower taxes, the bigger benefit would be achieved by those freed from the oppressive yoke of government dependency who would be able to share in the prosperity that has so long escaped them. Now that’s redistribution worth considering.

What does it say about the United States when a Russian president sounds more like a capitalist than the American president?

In preparing for the 2012 election campaign the President said the following: "The proposition that the government is always right is manifested either in corruption or benefits to 'preferred' companies." He went on: The “economy ought to be dominated by private businesses and private investors. The government must protect the choice and property of those who willingly risk their money and reputation." Also: "Corruption, hostility to investment, excessive government role in the economy and the excessive centralization of power are the taxes on the future that we must and will scrap."

Hallelujah! After three years of statist rhetoric a President who understands that it is free markets that create economic prosperity.

Unfortunately however the president speaking was not President Obama, but rather Russia’s President Medvedev. What has become of the world when a Russian president is making a stronger case for free markets than a sitting American President? Is the world standing on its head? Should we now expect the Chinese to declare Falun Gong as the national religion and announce free and fair elections?

As depressing as having a President who’s less of a free market fan than his Russian counterpart is, he’s only the tip of the iceberg. President Obama has plenty of progressive company across the country who fail to understand that freedom and economic prosperity go hand in hand.

And freedom is beginning to exit stage left… Not sure about that? The National Labor Relations Board went to court this week seeking to give unions the power to decide where private companies can invest their money; San Francisco is trying to ban circumcision, and some Chicago schools actually ban students from bringing their own lunches from home.

In a less anecdotal appraisal of our freedoms, the Mercatus Center at George Mason University just released the 2011 edition of its Freedom in the 50 States - An Index of Personal and Economic Freedom. The rankings take into account 150 different measures of freedom compiled into four main measures: Fiscal Policy, Regulatory Policy, Economic Freedom and Personal Freedom. Together they give an overall picture of a citizen’s level of freedom on things like the ease of starting a business, overall tax burden, gun laws and a wide variety of other measures.

The rankings pretty much play out the way you would expect. At the top of the list – most free – are # 1 New Hampshire; # 2. South Dakota; # 3. Indiana; # 4. Idaho; # 5. Missouri. At the other end of the freedom spectrum are # 46. Massachusetts; # 47. Hawaii; # 48. California; # 49. New Jersey; # 50. New York.

I would venture to say that most people are not surprised by these rankings. The notion of freedom to do just about anything you want in places like New Hampshire and Idaho are about as strong as the recognition that California and New York are busybody states that seem to want to regulate everything.

I thought it would be interesting to look at the correlation between freedom in general and economic prosperity in particular. My hypothesis was that the states high in freedom would be significantly more robust economically. I was surprised to discover that on my first datapoint – income level growth – that was not the case. From 2005 – 2009 household income for the five least free states grew faster than income growth by the most free in 3 of the 5 years. And their incomes were higher.

That was the last of the surprises however. On every other measure the most free states came out clearly ahead. Unemployment: Every year from 2005 right up to today the average unemployment rate amongst the five most free states was lower than the least free. Indeed, as the economy worsened the disparity grew: In May 2005 the most free states had an average unemployment rate of 4.36% while the least free states had 4.44% - a difference of .02%. Jump ahead to today and the most free states have an average unemployment rate of 7.22% while the least free states have an average rate of 8.52%, a difference of 1.3%.

On taxes the story is pretty much the same. Every single year from 2005-2009 the average tax rate was lower in the most free states than in the least free states, with an overall average of 8.6% vs. 10.8%.

What about cost of living? In ranking the states from 1-50 with one being the least expensive state to live in and 50 being the most expensive, there are no big surprises. The most free states averaged a score of 15 while the least free states hovered near the bottom with an average of 45.

So there you have it… citizens of the most free states have lower unemployment, lower taxes and a lower cost of living than their counterparts in the least free states. Residents of the least free states however come out slightly ahead based upon income and income growth.

It almost seems like it might be a wash with a slight tilt towards the free states… until you look a bit deeper. Why did income grow more in the least free states? Well, it turns out that that difference in growth is not that hard to find… it’s from their state governments’ deficit spending. During 2009 the five least free states ran an average deficit of $11 billion each while the five most free states averaged $494 million each. During 2010 the numbers were even greater, $17 billion vs. $828 million. In both cases the billions of dollars in deficit spending of the least free states was more than responsible for the disparity in income growth rates. So, not only do the citizens of the least free states pay higher taxes, suffer greater unemployment, experience a higher cost of living, it turns out the one measure where they were ahead of the game is a mirage created by a government shell game that leaves them with tens of billions of debt on their backs.

Dmitry Medvedev seems to have come to the realization that freedom and economic prosperity go hand in hand. If he ends up losing the 2012 presidential race to Vladimir Putin (who's not known for his capitalist or freedom sentiments) perhaps he can start a second career here in the United States teaching President Obama and the rest of the progressives how to bring an economy back to life…

What is America? A country, an idea or both?

I heard someone remark this week that Barack Obama did not share the values of the United States because he didn’t grow up here. While initially that sounded plausible, the more I thought about it, the more I disagreed with it. The truth of the matter is that growing up in the United States is no guarantee of sharing values with America. A few examples might be Jeremiah Wright, Bill Ayers, Michael Moore, the late Howard Zinn and many others.

The thing that President Obama and so many on the left do not understand is that the United States is indeed a unique animal. Not only is it a country, but it’s also an idea. People around the world don’t just dream of coming to America, they dream of becoming Americans. Many have and continue to risk their lives to do so. It’s one thing to risk your life escaping the Soviet Union, Communist China or even Communist Cuba. Those people were or are running from something, trying to go anywhere else. It’s another thing altogether to risk one’s life to come to a place… And that place is more often than not, America.

America is somewhat unique in the history of mankind – or at least in the last 2,000 years. People may dream of moving to Paris for the romance and the food, but they don’t dream of becoming a Frenchman. Many Hong Kong Chinese moved to Canada before the Communists took over, but they weren’t expecting to become Canadian. Someone might move to Singapore for its economic opportunities, but they don’t expect to become Singaporean. Throughout history one has examples of people choosing to move to a different locale to take advantage of economic opportunities or various freedoms. The British Empire offered certain advantages but few Indians or South Africans or Egyptians expected to move to Britain and become British. While they may have been British subjects, they were not actually British. One almost has to go back to the Roman Empire to find something similar to the idea of America. There, outsiders not only dreamed of living in Rome, they also dreamed of becoming Roman… and could do so. The idea of becoming a Roman citizen actually meant something beyond just living in the Empire or being subject to its laws.

Barack Obama misunderstands what it means to be an American. When he says that America is just one amongst equals on the world stage, he misses the point. Most Americans feel like America is indeed a better country than the rest of the world. That doesn’t mean that Americans believe they are genetically superior to anyone else or that we are by definition smarter than anyone else. It doesn’t even mean that the United States is infallible – a point President Obama is more than happy to point out. Rather, it is a recognition of the unique combination of freedom and opportunity that makes the country great. The United States may be filled with mortal men, but the expectation for 200 plus years is that those mortal men can achieve the impossible… that anything is possible. That sense of can do spirit, of American Exceptionalism has a long history going back to the pilgrims who carved out a place to call home and the rag tagged army that defeated the most powerful empire in the world. There is so much more with explorers, inventors and innovators. From McCormick feeding the world to Edison lighting it to Rockefeller revolutionizing energy and medicine. There’s also flight, winning two world wars, putting a man on the moon and the micro processor. There are even more mundane things like vulcanized rubber, the elevator, air conditioning and the Slinky.

Where Barack Obama and much of the left make their mistake is that they think the United States is synonymous with Uncle Sam… the federal government. They think America began to be great when the progressive agenda began to fall into place. They think of America as a place where the government makes people equal, where the government provides or guarantees everyone healthcare, welfare, education and income. America is great because the government protects the little guy against the modern robber barons. In essence, America is great because Uncle Sam is there to look out for everyone. In their zero sum game universe the government is there to adjust the down markers and move the goal posts so that everyone gets their “fair share”.

Barack Obama and the left are simply wrong. There’s an old saying about someone being born on third and imagining they hit a triple. They have the luxury of imagining the government is what makes America great precisely because for so long the government largely heeded the Constitution’s bounds and America prospered. It is only because the private sector was so successful, it is only because so many entrepreneurs risked everything, it is only because so many millions of Americans worked hard and created so much national wealth and prosperity could the progressives find an opportunity to think up things for the government to do. From Teddy Roosevelt attacking the robber barons to FDR paying farmers to kill pigs and let fields go fallow to Barack Obama pouring a trillion dollars in stimulus money down a rat hole, it is only the success and wealth created by the American people that made such folly possible.

One does not need to have grown up in America in order to appreciate what America is. (Read Paul Johnson’s History of the American People and you’ll see it on perfect display.) Anyone can look at a map and find the United States nestled between two oceans. It’s another thing altogether to know what the country is about, what its people are about, what the source of its greatness is and what makes it unique. Barack Obama and the Democrats can probably find the country on a map. Unfortunately it’s the other things, the more important things that they can’t see. That’s too bad for them, and as long as they making the rules, too bad for all of us.