Madeline Cano conflated income inequality with poverty in her recent letter letter to the editor in the Des Moines Register. (Hunger is symptom of income inequality. 10/15/2015) Poverty is the problem, not income inequality. Rich people earning even more does not make poor people earn less. Cano did not actually advocate taking money from the wealthy and redistributing it to the poor. She simply repeated the erroneous meme that income inequality is the problem.
Cano correctly identified that, “…Iowans are not earning sufficient incomes to support themselves and their families.” Increasing the incomes of Iowans in a sustainable way to reduce hunger in Iowa should be a priority. The best way to do that is through education, work experience, and opportunity, not through an increase in the minimum wage.
Raising the minimum wage definitely hurts most those who have no job and those who have the fewest skills. It makes it more difficult for them to get a job and, at the same time, has a tendency to make things more expensive.
To the extent that we want taxpayers to subsidize low income earners, it is better done through the current Earned Income Tax Credit, which targets benefits to those with real need, and excludes those with higher incomes or who are claimed as a dependent by others.
Republicans propose to reduce food stamp spending by $20 billion to $40 billion over the next 10 years. As reported in the Des Moines Register, we currently (2012) spend about $75 billion per year, up from $ 15 billion in 2001. The number of people receiving food stamps has gone from 17 million in 2001 to 46 million in 2012. So, the number of people receiving food stamps has gone up 170% and the dollar amount has gone up 400%! The $40 billion in proposed cuts over the next 10 years equals an average of $4 billion per year. That is only a 5% cut from the current record high numbers.
Under the Republican proposal, many of those who will have their benefits cut have incomes that are too high to meet the normal food stamp guidelines. Their states allows them to automatically qualify because they qualify for one or more other safety net programs. Others who will have their benefits cut include able bodied individuals who fail to either work or attend job training for at least 20 hours per week.
Given the improving economy, declining unemployment, and our tremendous budget deficit, these cuts appear very reasonable. How can we ever solve our budget deficit problems if we can’t make cuts like these?
Contrary to the letter to the editor in the Des Moines Register by Doris Render on 11/23/2012, “Taxpayers subsidizing low-wage businesses”, all private businesses, including those that pay low wages, add wealth to our community. People take jobs at Walmart because their next best option is a job that pays less, or possibly no job at all. There is no reason to believe that if our government stopped providing welfare benefits to poor people, that employers would start paying higher wages and benefits. Government welfare helps poor people, it does not subsidize business.
If businesses like Walmart were forced by government to pay higher wages and benefits, then prices will go up correspondingly. Those higher prices will hurt low income families the most. Sure, those who keep their jobs will benefit from a higher minimum wage. But those who are most vulnerable, those with the least skills, will lose their jobs as automation and foreign competition become more economical because of the higher wages.
History has proven that government attempts to control wages and prices are doomed to failure. Even today, our slow economic recovery is due in no small part to our government’s attempts to prop up housing prices and force all employers to pay for health insurance. Good intentions are no excuse for bad policy. The unintended consequences of government actions must always be considered when government uses force, (i.e. laws and regulations), to manage our economy.
Link to Register article: http://www.desmoinesregister.com/article/20121123/OPINION04/311230033/Letter-to-the-editor-Taxpayers-are-subsidizing-low-wage-businesses?Opinion&nclick_check=1
On 9/14/12 The Des Moines Register reported that The Federal Reserve (The Fed) announced it will spend $40 billion a month to buy mortgage bonds for as long as it deems necessary to make buying a home more affordable (“Fed unveils plan…”). The Fed is not doing this to make homes more affordable. They are doing it to inflate the prices of houses. If everything else is equal, lower interest rates will result in lower house payments. But everything else is not equal. Lower interest rates also encourage sellers to ask for higher prices and allow buyers to pay more for homes. Lower interest rates and higher housing prices also encourage home builders to build more homes. That means more jobs and lower unemployment.
The problem is that The Fed policy of keeping interest rates artificially low has serious negative consequences. The Fed buying $40 billion of bonds each month will not only keep interest rates low, it will also pump $40 billion of new dollars into our economy each month. That will certainly lead to increased inflation. (Inflation in housing prices is what the Fed wants.) So, The Fed;s answer to a deflated housing bubble is to try to re-inflate the bubble. Low interest rates, especially when combined with inflation, also hurts savers who try to earn interest from savings accounts, CDs, and bonds. With interest rates so low, some savers just try to get by with less, while other savers move money into the stock market looking for higher returns. So, both housing prices and the stock market are being propped up by the artificially low interest rates.
The Fed’s mandate from Congress is to, “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Their mandate should be changed to only promote stable prices. That mandate alone is difficult to achieve. The Fed’s current goal for stable prices is 2% inflation. 2% inflation will double prices every 35 years! How does the Fed know that prices should not actually go down as we continue to become more efficient and productive? The best answer would be a return to a gold standard so that our money supply can’t be manipulated by politicians or economists who imagine they can successfully control our economy.