February 19, 2014

CBO kinda making sense. Doesn't matter to Obama.

The Congressional Budget Office (CBO) has reported that Obamacare will cost jobs.  Now they are saying that raising the minimum wage will cost jobs.  When did the CBO start making sense?  On some level , they are reporting things in a less partisan, premeditated way than when they were offering crutches for Obamacare.  And the president's signature piece, is indeed in need of that crutch.  That's the real reason he's pushing for a minimum wage increase now.

Via Fox News:

A plan by President Obama and fellow Democrats to increase the minimum wage to $10.10 an hour would cost roughly 500,000 jobs but increase wages for roughly 16.5 million Americans, the nonpartisan Congressional Budget Office said Tuesday.

The report was immediately met with sharp Republican criticism for the (sic) wake hike plan.

“While helping some, mandating higher wages has real costs, including fewer people working,” said a spokesman for House Speaker John Boehner, R-Ohio. “With unemployment Americans' top concern, our focus should be creating -- not destroying -- jobs for those who need them most.”

The CBO analysts said their estimate of employment losses was approximate. They said the actual impact could range from a very slight employment reduction to a loss of one million workers.
Some quick math - raising the  minimum wage to $10.10 per hour from the nominal federal minimum wage of $7.25 per hour is a nominal increase of $2.85 per hour. If that indeed raised the minimum wage for 16.5 million people, it means an extra $47,025,000  in income per hour.  Forget that the logic behind the fullness of that impact is still suspect, what about the 500,000 jobs lost?  Let's say all of those lost jobs were also minimum wage jobs, at the nominal federal rate of $7.25 per hour.

That means $3,625,000 per hour is also being removed from the economy with a very real impact on those affected by it.  That leaves a net hourly benefit to the economy of $43,400,000 per hour.  But it also adds costs for unemployment insurance, assuming those who are let go all qualify for it. At $1166 per month, given a 22 work day month, and a 37.5 hour work week, that's another hourly impact of approximately $3.5 million per hour in government spending.

That means an hourly net increase in economic activity of roughly $40 million per hour.  Wow!  What an economic boon.  This should be a no-brainer, right?  Not so fast.

But what that doesn't factor in is the negative impacts of that reallocation of wealth.  What it means is that companies cannot spend that money on new equipment, which can lead to new jobs elsewhere.  Companies cannot spend that money on marketing efforts, perhaps allowing them to grow their businesses and as a result hire new workers.  Those are but two examples of companies have to adjust when new costs are imposed.  Essentially what is happening is that companies are forced to alter how they spend money.  That includes both directly and indirectly, jobs.  That is why I say that this is just a re-allocation of wealth.

A vastly disproportionate number of minimum wage earners are youth.  The same ones who are now discovering they can't afford Obamacare.  So what's the socialist solution to a socialist-created problem?  Transfer wealth of course. Give those affected who are not signing up for Obamacare, extra money in the form of a wage increase.  Problem solved.  They'll have more money and the costs of signing up for Obamacare become less intrusive to those not let go because of the jobs impact of raising the minimum wage.

Except we do see through it Mr. President.

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