McDonald's, Unions And The Minimum Wage

See Unions Cast Ronald McDonald as Simon Legree: The SEIU is leading protests to 'supersize my wage,' but a minimum-wage hike would mean fewer jobs By STEPHEN MOORE of the WSJ, 8-17/18-13.

"Most of the evidence shows that super-minimum wage laws force businesses to reduce hiring and are counterproductive in reducing poverty."

"An exhaustive study this year by the National Bureau of Economic Research found that "minimum wages pose a tradeoff of higher wages for some against job losses for others," with unemployment rising most for teenagers. "

"...the activists rarely mention the federal Earned Income Tax Credit that supplements the full-time, minimum-wage salaries by up to $6,800 a year."

"President Obama put most of his chips on green jobs, promising five million of them for the middle class. Only a small fraction of those jobs have materialized. And ObamaCare's mandated health benefits have already begun to push more employees into part-time jobs."

"There's at least one place where you're unlikely to find the SEIU besieging fast-food restaurants with protesters: North Dakota. The state has thousands of unfilled jobs thanks to the oil boom, and fast-food workers really do earn as much as $15 an hour and even get $500 signing bonuses. There's nothing better for workers at every level of employment than a flourishing economy."

The American Airlines and US Airways Might Merger Actually Increase Competition

See Arbitrary Antitrust: Government lawyers try again to predict the future of airlines. From the WSJ, 8-16-13.

"Out of the more than 900 domestic routes that American and US Airways fly, there are merely 12 nonstop overlaps, nearly all of them between their hubs. In the U.S., American flies to 48 cities not served by US Airways, and US Airways flies to 64 that American doesn't. Their networks are largely complementary, so combining the two would help them compete in more markets.

Market share data are an old antitrust favorite, yet that also isn't persuasive. A combined American and US Airways would have about 25% of the market for domestic seats, just ahead of Delta and Southwest.

As for international travel, the two airlines seeking to merge have struggled to compete for global corporate business against the extensive international networks of Delta and United-Continental.

US Airways now has 55% of takeoff and landing slots at Reagan, and the merged company would have 69%. But American and US Airways would still only enjoy about 25% market share if the Washington market is appropriately defined to include not only Reagan, but also Dulles and BWI, which is between Washington and Baltimore.

All of this suggests that Justice's real motivation is that airlines are finally profitable again, which must mean something nefarious is going on. Assistant Attorney General for antitrust William Baer declared this week that "neither airline needs this merger to succeed." Since when is that a standard for antitrust law, and how would he know?

The airline deregulation of the 1970s has been a great success for consumers, with fares still lower after inflation than under the price controls set by the Civil Aeronautics Board.

In 2001, Justice blocked the planned merger of U.S. Airways and United because the antitrust seers claimed the deal would reduce service, raise prices and limit competition. By the end of 2002, both airlines were in Chapter 11, which was hardly a boon to competition.

... industry competition is increasing as fewer but stronger competitors compete in more markets. The Journal's Scott McCartney found that over a recent 12-year period airline ticket prices rose more slowly than general inflation, even while fuel prices were rising.

If one of the giants charges monopoly prices on a route, a stronger player is more likely to compete than a weaker one."

Freddie Mac tightened its lending standards and became profitable

See Freddie Mac 2nd-Quarter Profit up 65% By Nick Timiraos and Saabira Chaudhuri of the WSJ.

"Freddie Mac has returned to profitability in large part because it has sharply tightened its lending standards, meaning that riskier loans from the housing bubble are being replaced with much safer mortgages."

Some Middle-Class Facts

See Behind the Middle-Class Funk The recession hurt, but some troubles have been simmering for 40 years. By WILLIAM A. GALSTON, from today's WSJ. If you look at all the excerpts below, it seems to me that the middle-class is doing okay. Excerpts:

"Many economists define the middle class as those adults whose annual household income is between two-thirds and twice the national median—today, that means roughly $40,000 to $120,000."

"In 1971, it accounted for fully 61% of adults, compared with 14% for the upper class and 25% for the lower class."

"Four decades later, the middle class share had declined by 10 percentage points to just 51%, while the upper class share increased by six points and the lower class by four."

"During those 40 years, Pew calculates, the median income of middle-class households (adjusted for inflation) grew by 34%. The median grew for the others as well—by 43% for upper-income households and 29% for those with incomes below the middle class. This isn't surprising, because the median income for all U.S. households rose by 32% during that period, from $44,845 in 1970 to $59,127 in 2010. Indeed, 86% of middle-class Americans, and 84% of all Americans, enjoy higher incomes than their parents did."

"Pew uses a definition of income that excludes employer-provided health insurance, non-cash transfers such as food stamps and the redistributive effect of taxes. If these additional sources are included, the rate of increase in median household income between 1979 and 2007 is significantly higher. The increase looks substantially smaller if, as some economists suggest, we use the rate of medical-cost inflation rather than the consumer price index to determine the real value of employer-provided health insurance.

Another complication: Forty years ago, average household size was 3.2 persons. Today, it is only 2.5, a drop of 20%. Most analysts (including Pew's) adjust for this change, because a smaller number of persons per household means that income per person rises faster than the overall household income numbers would suggest. But some researchers disagree, on the ground that smaller households reflect, in part, lower birth rates, which are in turn influenced by gloomier economic realities and expectations."

"Between 1979 and 2007, on average, annual hours worked by middle-income households rose from 3,007 to 3,335—fully 10%, a larger increase than for any other income group. Some of the additional work reflects expanding opportunities for women. But much of it came in response to economic pressure and represents time that men as well as women reluctantly diverted from their children—hardly an unambiguous improvement in family well-being."

Entrepreneurs built our roads, rails and canals far better than government did

See Obama's False History of Public Investment By LARRY SCHWEIKART JR. AND BURTON W. FOLSOM JR. From today's WSJ. Mr. Schweikart, a history professor at the University of Dayton, is the co-author, with Dave Dougherty, of "A Patriot's History of the Modern World" (Sentinel, 2012). Mr. Folsom, a history professor at Hillsdale College, is the co-author, with his wife, Anita, of "FDR Goes to War" (Threshold, 2011). Excerpts:

"Create the infrastructure, in other words, and the jobs will come.

History says it doesn't work like that. Henry Ford and dozens of other auto makers put a car in almost every garage decades before the National Interstate and Defense Highways Act in 1956. The success of the car created a demand for roads."

"... the makers of autos, tires and headlights began building roads privately long before any state or the federal government got involved. The Lincoln Highway, the first transcontinental highway for cars, pieced together from new and existing roads in 1913, was conceived and partly built by entrepreneurs..."

"Before the 1860s, almost all railroads were privately financed and built."

"When the federal government decided to do infrastructure in the 1860s, and build the transcontinental railroads (or "intercontinental railroad," as Mr. Obama called it in 2011), the laying of track followed the huge and successful private investments in railroads.

In fact, when the government built the transcontinentals, they were politically corrupt and often—especially in the case of the Union Pacific and the Northern Pacific—went broke. One cause of the failure: Track was laid ahead of settlements. Mr. Obama wants to do something similar with high-speed rail. The Great Northern Railroad, privately built by Canadian immigrant James J. Hill, was the only transcontinental to be consistently profitable. It was also the only transcontinental to receive no federal aid."

"...Pan American World Airways, began flying passengers overseas by the mid-1930s. During that period, nearly all airports were privately funded..."

"Public airports did not appear in large numbers until military airfields were converted after World War II."

"Most state-supported canals lost money, and Pennsylvania in 1857 and Ohio in 1861 finally sold their canal systems to private owners."

"In all of these examples, building infrastructure was never the engine of growth, but rather a lagging indicator of growth that had already occurred in the private sector."

Biofuels Mandate Has Unintended Consequences

See Biofuel Makers Seek to Ease Mandates to Avert Congress by Mark Drajem of Bloomberg, July 25, 2013. Excerpts:

"With production of fuels made from sources such as wood waste, algae or used cooking oils at a fraction of what was envisioned in a 2007 law, the Environmental Protection Agency needs to adjust requirements for use of biofuels in coming years,..."

Refiners

"...must use a certain amount of renewable fuels each year, or buy credits called Renewable Identification Numbers, known as RINs..."

"...separate requirements for cellulosic fuels, diesel made from biomass such as soybean oil, as well as a general renewable category that is largely filled by ethanol made from corn.

With the use of gasoline falling, refiners say that EPA’s current mandate means they can’t sell enough ethanol without exceeding the 10 percent blended level deemed safe for all vehicles."

Former Clinton Administration Official Says U. S. Broadband Is Good Party Due To Competition

See The Myth of America's Inferior Broadband: Access to faster networks in the U.S. is greater than in Europe, where regulations have discouraged investment by EV EHRLICH today's WSJ. Ehrlich is a former undersecretary of commerce under the Clinton administration. Excerpts:

"...  U.S. broadband is a major success."

"...international speed rankings, has the U.S. currently at No. 9, up from No. 22 in 2009—faster than in France, Germany and Britain."

"...the U.S. has the second-lowest entry-level broadband prices (behind Israel) in the Organization for Economic Cooperation and Development..."

"...U.S. broadband companies have invested $250 billion in Internet upgrades since the recession began in 2008."

"...Europe, where in most countries Internet service providers lease aging wires from incumbent, often state-sanctioned telephone companies."

"...because the ISPs do not own the underlying infrastructure, they have no incentive to invest in it."

"In the Telecommunications Act of 1996, Congress recognized that existing local phone companies had a serious advantage over potential competitors since they were the only providers with wires going into homes. So Congress mandated that those companies provide their competitors access to their systems at low, government-mandated prices..."

"This seemed great—except that neither the DSL providers nor the incumbent phone companies had any incentive to invest and innovate. As a result, the U.S. started falling behind.

The exception was the cable industry, which wasn't covered by the common-carriage mandate. Cable companies such as Comcast and Time Warner began investing heavily in high-speed networks."

 

"In 2004, the Federal Communications Commission and the courts ended the mandatory leasing regime,..."

 

"It was only then that fiber entered the broadband picture."

 

"The results of these two competing models are now apparent. In the U.S., 85% of households have access to wired broadband networks capable of speeds of 100 megabits per second. By contrast, just half of Europeans get service that meets or exceeds 30 Mbps.

Why the disparity? Because the U.S. is one of two nations on the planet—the other is South Korea—that has three different and fully deployed broadband technologies:"

 

"...some U.S. critics want to bring back European-style regulations, including the policy of common carriage.

 

They would do well to listen to regulators in Europe, who have overseen this kind of regulation and say it doesn't work."