In this Let People Prosper episode, I discuss the latest state-level jobs report for July 2018 issued by the U.S. Bureau of Labor Statistics while highlighting how economic freedom and the recent federal changes to the State and Local Tax Deduction (SALT) matter to our prosperity.
As noted in my previous blog post (see presentation), Texas continues to be America's jobs creation engine as the Lone Star State has created 23% of all new civilian jobs added nationwide and created the most nonfarm jobs of 377,100 in the last 12 months.
In general, states with more economic freedom and lower taxes have performed better in terms of economic growth and job creation over time than states with less economic freedom and higher taxes. Hundreds of papers have found this connection when considering the Economic Freedom of North America report by the Fraser Institute.
Watch the episode to find out more. Have a blessed day and let people prosper.
(Tip: Get checked by a dermatologist periodically, especially if you have fair skin like I do. That's the reason for the band-aid on my left cheek--praying for no issues!)
This presentation provides information about Texas’ economy, labor market, and fiscal situation and key public policies that would strengthen the Texas model to foster more individual liberty and economic prosperity.
In this episode, I discuss today's decision by the San Antonio City Council with a 9-2 vote to pass a city ordinance mandating private businesses provide paid sick leave of 64 hours for those with more than 15 employees and of 48 hours for those with 15 or fewer employees.
As I noted in a previous blog post, this sort of forced activity by government is bad for employers (raises costs), bad for employees (reduces negotiating power), bad for consumers (increases prices), and bad for the Texas economy (less economic activity).
Instead, San Antonio and Austin, which passed this ordinance earlier this year, should find ways to provide a pro-growth economic framework to let people prosper instead of making people poor while likely violating state law (Texas Minimum Wage Act).
In today's Let People Prosper episode, I first give an overview on the U.S. markets: General overview was that stocks were down primarily from increased trade tensions with Turkey, dollar appreciated, oil fell to $65 per barrel, and the 10-yr Treasury note rate declined to 2.86%.
Americans' wages are up around 3 percent over the last twelve months. But the cost of living, measured by the consumer price index (CPI), is up by almost that rate. In other words, you can purchase the same basket of goods you did last year but probably not much more. A recent Wall Street Journal article says that "Rising U.S. Consumer Prices Are Eroding Wage Gains."
However, is this really true? Which prices are going up and why?
Let's discuss! #LetPeopleProsper
AUSTIN – Today, Texas Public Policy Foundation announces that Senior Economist Vance Ginn, Ph.D., has been named a Champion of Freedom by Grassroots America-We the People, one of the state’s leading conservative grassroots organizations.
“We are thrilled to announce Vance Ginn as a 2018 Grassroots America Champion of Freedom,” said JoAnn Fleming, executive director of GA-WTP. “To read, hear, and observe Vance assert the fundamentals of economic freedom one can never question that he believes these principles down to his very core. Vance’s gift is his ability to translate abstract economic principles into concrete, understandable applications for maximum liberty, while doing so with infectious enthusiasm and good cheer. Vance is a happy warrior, arming citizen activists with usable information as they battle government bureaucracy and prosperity-stealing over-regulation and taxation. Dr. Vance Ginn is a tremendous asset to the growing Texas conservative grassroots movement.”
“Vance’s important work continues to advance the goals of the Texas Public Policy Foundation – promoting liberty at every level, from local governance to state and federal issues,” said TPPF Executive Director Kevin Roberts, Ph.D. “This honor from Grassroots America-We The People is an unexpected but richly deserved award. We thank Grassroots America for its own work of holding government officials accountable and ensuring that government itself remain efficient, open and limited.”
Ginn will be honored with the award at GA-WTP’s annual Champions of Freedom Banquet, to be held on Sept. 8 in Tyler, Texas. Other honorees for 2018 include Teresa Beckmeyer of Lone Star Voice, Jim and Elizabeth Graham of Texas Right to Life, Aaron Harris of Direct Action Texas, Rachel Malone of Texas Firearms Freedom, Dr. Laura Pressley of True Texas Elections and Pastor Dave Welch of the Texas Pastors Council.
Previous honorees include Sen. Ted Cruz, Congressman Louie Gohmert, members of the Texas House Freedom Caucus and Pastor Rafael Cruz.
Grassroots America – We the People, Inc. is the largest constitutional conservative citizen organization in East Texas and one of the largest in Texas.
In this Let People Prosper (LPP) episode, I tell my story and why institutions matter so much to me and my worldview.
I've realized that I haven't told you about me yet after 27 episodes, so I decided to change that in episode 28. I've been blessed by the grace of God throughout my life to overcome the many trials and tribulations that have come along the way. But through it all, I'm so thankful for my family and friends.
I was born November 12, 1981 to wonderful parents in South Houston, Texas who didn't have much money but had much love to let me prosper as a child. My experiences in private, public, and home schools gave me a different perspective on how institutions matter. My time as a drummer in the band Sindrome in Houston while living the life of a rockstar challenged my future goals. But a major car accident along with prayer helped to change my direction forever to a life of purpose to help others. My tool to do so is economics, which is why as a first generation college graduate I chose to earn my doctorate in economics at Texas Tech University so I can do all I can to learn more about our world to let people prosper.
You can view more of this story with pictures at a previous blog post here. Thank you for watching these episodes and reading my blogs. I am truly honored.
If there's ever anything you'd like for me to discuss, please write me a comment or send me an email. There's much more for us to do to learn more about human action and which institutions can best let people prosper.
Limit Government to Support Prosperity Conversation with Chief Economist Jonathan Williams: LPP EP 27
In this episode, I talk with Jonathan Williams, Chief Economist of the American Legislative Exchange Council (see full bio here), about the positive economic effects of the recent Tax Cuts & Jobs Act along with how the Texas Model works well but should be improved.
Don't miss his latest Rich States, Poor States publication that gives an economic outlook for each state and then ranks them. Here is the recent commentary I co-authored with Jonathon on not believing the hype about a carbon tax.
Check out more of his work and more of the fantastic information at ALEC at the website www.alec.org.
In this episode, I have a conversation with Dr. Brandon Logan, who is the Director of the Center for Families & Children at the Texas Public Policy Foundation, about his fantastic work in helping kids and families prosper more throughout their lives.
The most essential institution is the family, and with government crowding out many of a family's basic functions, civil society suffers. By letting people prosper through limited government, whereby parents have the freedom to raise their child as they see fit without abuse, families can have the best opportunities to flourish.
Here's more on Dr. Logan: Before joining the Foundation, Brandon represented hundreds of children as attorney and guardian in child welfare courts throughout Texas. He is certified as a Child Welfare Law Specialist by the National Association of Counsel for Children. Brandon has also represented parents, grandparents, and foster families in custody and adoption cases across the state.
Brandon earned his undergraduate degree from Texas A&M University. He holds a law degree and doctorate in human development and family studies from Texas Tech University, where he also taught courses in child welfare policy and family dynamics. His academic work includes child maltreatment, abuse trauma and treatment, and family and father engagement.
Brandon and his wife, Mindy, were raised in the same small West Texas town and are blessed with five young children – four boys and a baby girl.
In this episode, I discuss the current state of the markets, give a quick recap of the jobs report, and primarily discuss the recent announcement by the Teacher Retirement System of Texas to lower the assumed rate of return and what the implications are for teachers and taxpayers.
I gave the following presentation at a policy forum on property tax reform at the Arlington Chamber of Commerce.
Here's an overview of the forum from the Greater Arlington Chamber of Commerce:
Property tax relief and slowing the growth of property taxes proved to be a topic capable of bringing approximately 120 business leaders and elected officials together at the Greater Arlington Chamber of Commerce on Friday, August 3. Four experts on property taxes presented their perspective on the issues and then responded to questions from Tarrant County Property Tax Assessor/Collector Ron Wright. The event was the first ever sponsored by the Coalition of East Tarrant Chambers.
Vance Ginn, Chief Economist with the Texas Public Policy Foundation in Austin, presented TPPF's view of how to completely eliminate school maintenance and operations property tax. Dr. Aaron Reich, President of the Arlington ISD Board of Trustees, talked about the complications of the Texas system for funding property taxes and how it seems to short change districts like Arlington. He made the point the state uses taxes collected as "school" taxes for other state expenses like health care and transportation. County Judge Glen Whitley represented the perspective of cities and counties and made the point that without a state income tax, which he does not favor, Texas has a two-legged stool which is hard to sit on. He took great exception to the idea of eliminating property taxes and replacing them with more sales tax could be made to work. State Representative Matt Krause brought the perspective of the legislature to the discussion. He shared about the state's overall shortage of funds and how growing Medicaid expenses are crowding other important items in the budget.
Follow this link to read a summary of the presentations.
Click here to view the video of the entire Forum.
In this episode, I discuss today's U.S. jobs report published by the Bureau of Labor Statistics for the month of July. Overall, there were many good signs, such as the increases in the 25-54 years old employment-population ratio, but weaknesses remain. By cutting government spending and ending trade uncertainty, the Trump recovery can continue with rather robust job creation.
A recent Wall Street Journal article highlighted how the $4 trillion in total unfunded public pension debts of cities and states nationwide equals Germany’s economy. The WSJ figure below highlights how this massive sea of red ink means that there could be a tremendous burden on taxpayers as contributions rise or on public sector employees’ as funded ratios decline without major reforms.
In other words, public sector employees and taxpayers may soon be in a world of hurt because of decades of poorly managed and constructed defined-benefit pension plans.
The Teacher Retirement System of Texas, or TRS, recently lowered its assumed rate of return for its pension fund from 8 percent to 7.25 percent. The TRS figure below shows that the lower rate is more consistent with the average annual returns in the past 20 years of around 7 percent, but it remains well above the 5.8 percent average return in the last decade.
While some Texas teachers and unions worry about potential benefit cuts, teachers shouldn’t fret about changes to current benefits from the lowered assumed rate of return but rather note that the increased transparency helps better reflect longer-term solvency issues.
The lowered return indicates unfunded liabilities amount to a staggering $45 billion, pushing the funded ratio below 80 percent, which that some consider actuarially sound. However, if the funded ratio is below 100 percent, then some teachers are at risk of not receiving their retirement because of insufficient funds to pay them.
The goal of public pensions should always be a 100 percent funded ratio so teachers and taxpayers aren’t shortchanged.
To better fund teachers’ pensions, TRS has stated they will request more contributions from the Texas Legislature this upcoming session. These added contributions could come from current teachers or taxpayers through increased state or school district spending, but that’s up to legislators.
While Texas has historically had terrific credit ratings, it risks a downgrade if the Legislature doesn’t solve what could be a looming pension crisis. Total state unfunded pension liabilities now amount to more than $60 billion after the recent TRS decision. These unfunded liabilities, if not covered, will require more resources from teachers and taxpayers.
Lowering the rate of return to a more accurate assumption is a step in the right direction, but more reform is necessary.
To assure a 100 percent funded ratio, the Legislature should consider transitioning pension plans to cash balance plans. Or, to avoid getting back into the current situation from mismanagement of the portfolio over time, legislators should consider hybrid contribution plans or defined contribution, 401K-style, plans.
Traditional opponents of defined contribution plans say they cost more to the state, are less stable for retirees, and generate less returns over time. However, most of these are unfounded and those that are legitimate have solutions. A well-designed defined contribution plan can be even more beneficial to teachers so that they are in control of their retirement while practically eliminating the risk to taxpayers.
The looming debt crisis could hurt teachers and taxpayers if the can is continually kicked down the road. Before the can makes it off the cliff, legislators should act and reform the system.
State of the U.S. Economy Including Strong Growth & Rising Compensation and Costly Tariffs & Budget Deficits: LPP EP 24
In this episode, I discuss the state of the U.S. economy, including the markets, rising compensation for Americans, Federal Reserve leaves target federal funds rate unchanged in the range of 1.75-2%, and costly federal budget deficits of nearly $1 trillion that will be a drag on economic growth unless government spending is reined in along with the cost of tax hikes from tariffs.
There is a clear path to more economic growth, job creation, and resulting prosperity: capitalism without government barriers to opportunity.
In other words, the federal government should uphold contracts through a justice system, provide a national defense, and deal with international commerce, but really not much more than that.
Let people prosper by letting them satisfy their desires within institutions of civil society that are the backbone of America's strength. Unfortunately, too many of those institutions are hindered because of excessive government intervention at every level.
Let's learn more about what we can do together.
President Trump’s Council of Economic Advisors recently released a reportshowing that there is a large portion of non-disabled, working-age adults (16 to 64 years old) who are receiving government non-cash welfare payments funded by taxpayers but aren’t working. For example, of those on Medicaid, 53 percent of non-disabled, working-age adults don’t have a job.
These perverse incentives created by relaxed work requirements for able-bodied workers who receive welfare payments not only hurts their financial prospects today and over time, but is an extractive institution hurting civil society.
Institutions are the framework that makes up society. They are the rules of the game. Institutions can include formal laws and rules, but also more informal social norms, families, and churches. Institutions can be considered inclusive, like capitalism, or extractive, like socialism, as noted by Acemoglu and Robinson.
Economist Douglass North remarked in his 1993 Nobel Prize in Economics lecture that “if the institutional framework rewards productive activities then organizations—firms—will come into existence to engage in productive activities.” On the opposite side, if institutions reward unproductive behavior, the result will be more unproductive behavior and increased poverty.
Unfortunately, the institutional framework in the U.S. has many extractive programs in our welfare system that have incentivized unproductive behavior and made many people poor in the process.
As another example of a costly welfare program, the Supplemental Nutrition Assistance Program (SNAP) provides assistance to more than 10 million non-working, non-disabled working-age adults. Of all the childless adult recipients on SNAP, 63 percent do not work, which is higher than the rate of recipients with infants (57 percent)—often the most difficult age to raise a child.
Clearly, the incentives to work while getting welfare are little to none, even when you are able to work and don’t have a child. Welfare should be based on need, and with the unemployment rate at record lows and more job openings than people unemployed, there are few excuses to not work.
Work ethic, personal responsibility, and independence are all informal institutions. They are the rules of our game. These institutions are inclusive, because they allow individuals to be self-sufficient, and become productive members of civil society.
When these incentives and social norms are eroded, our institutions become extractive, redistributing resources from productive workers to welfare recipients. This process is done by government bureaucrats subjectively determining who gets what and when. Moreover, these institutions create a situation that crowds out inclusive social institutions, such as families and private charities and churches, which have been the backbone of civil society for centuries.
Our current welfare system, specifically the Temporary Assistance for Needy Families (TANF), has been reformed before, making it more inclusive. This includes putting the recipients on a path to individual responsibility and prosperity by increasing work requirements to receive welfare, thereby increasing recipients’ productivity that helps them actually get off government welfare.
Chicago economist Casey Mulligan has explained that the income cliff when someone earns more income and is dropped from government welfare programs acts like an implicit marginal income tax that reduces their incentive to work. It’s time to stop this sort of welfare for non-disabled working age adults. This would not only improve the relatively low but improving employment-to-population ratio for the prime age working group(25 to 54 years old) but also help to reduce welfare and the taxes paid by workers to fund these programs.
The Trump administration’s recent report highlighting these issues and calling for an increase in work requirements of welfare programs for able-bodied people is a step in the right direction to let people prosper.
Seven out of ten Americans consider foreign trade an economic opportunity, according to Gallup. You wouldn’t expect this given the protectionist rhetoric about “unfair” trade practices and “bad” trade deficits in the news regarding the North American Free Trade Agreement (NAFTA) and tariffs.
To avoid impoverishing Americans, trade uncertainty should quickly end by reducing trade barriers in NAFTA to maintain its net benefits and end tariffs to reap the benefits of the Trump tax cuts.
Let’s be clear: NAFTA isn’t a perfect agreement and other countries have poor trade practices.
For example, NAFTA would ideally be one sentence: “No trade barriers between the U.S., Mexico, and Canada.” Instead it’s more than 1,700 pages of exceptions and regulations that subjectively determine winners and losers. So, a renegotiated deal towards fewer trade barriers would help people benefit from trade.
Also, intellectual property rights and currency manipulation issues in other countries, particularly China, could be problems needing attention. However, tariffs are unlikely to solve those problems, especially when private U.S. firms do business in China knowing they’ll be forced to fork over ideas but do it anyway because of the profitability available from very affordable labor. Instead, the Trump administration should rejoin the Trans-Pacific Partnership talks that include many of China’s trading partners and use its negotiation prowess to benefits Americans.
Ultimately, these trade uncertainties plaguing entrepreneurs’ decisions defy the positive view that most Americans have of foreign trade and reduce many Americans opportunity to prosper.
What’s often lost in this discussion is that countries don’t trade with each other, people do when they mutually benefit. It’s a reason that considering trade deficits a bad deal is nonsense. What’s true is that raising trade barriers will hurt people mutually benefiting along with many others from higher prices and fewer job opportunities.
For instance, Texas has much to gain or lose from NAFTA renegotiations because of about $230 billion in imports and exports with its closest foreign neighbors and largest trade partners. NAFTA has helped Texas lead the nation in exports for 16 straight years and supported at least 300,000 jobs over five years. Not only would Texans suffer from a poor deal with our North American neighbors, but Americans would also hurt as Texas has created 24 percent of all civilian jobs added nationwide since the Great Recession.
While it’s easier to blame others instead of flawed domestic policies, past mercantilist attempts to dictate foreign trade have failed. Understanding that people, not countries, trade to satisfy their desires is why trade balances don’t matter much. Really, the cumulative value of imports and exports tells how much people benefit from trade across borders.
For instance, Americans import $2.9 trillion in goods and export $2.4 trillion for a trade deficit of about $500 billion in 2017. However, the real value of total trade is the cumulative $5.3 trillion because individuals across borders wouldn’t have traded had they not benefited. An estimate of this economic activity shows that NAFTA supports 14 million American jobs.
Passage of the Trump tax cuts last year helped to foster a more competitive domestic policy environment so individuals and businesses can flourish. Specifically, Americans have been winning within months after passage of the $1.5 trillion tax cut over a decade using a static analysis. But, given that the tax relief was, on average, $150 billion per year, the Trump tariffs could make a major cut into that relief.
The figure below notes that current tariffs are a small part of overall U.S. imports, however, if tariffs on autos and auto parts take effect then almost 20 percent of imports would be taxed.
With around a 10 percent tax on current imported goods, the $8.5 billion cost to Americans isn’t much. But add in the potential for a 25 percent tax on $360 billion in imported autos and auto parts, and the tax increase balloons to almost $100 billion per year. That could shave two-thirds annually from the Trump tax cuts thereby substantially reducing its expected benefits.
When you consider the costs of trade uncertainty from the lack of a NAFTA deal and the expectation of more tariffs to come, just think how much faster economic growth and job creation could be. Time is of the essence for more freedom by assuring NAFTA negotiations are towards freer trade and tariffs will soon end so people prosper.
In this episode, I explain why we need educational freedom to let people prosper. It's unfortunate that so many students are stuck at a particular school based on a zip code. Here is a list of the 1,343 failing schools across Texas.
Sure, some people already have school choice, but some is not enough. It should be everyone. Sure, the government should probably not be involved in education, but because it is we should demand that every taxpayer dollar be spent as families see fit instead of the government.
We should let each student learn in their unique way through student-centered funding achieved with education savings accounts (ESAs). These accounts allow families to use the dollars for a number of educational services, which can include tuition, tutors, books, etc.
Human capital is one of the main drivers of economic prosperity, let's not fail our students any longer by a public school monopoly (read this) and let's not fail our quality teachers with low pay any longer by a public school monopsony (read this).
Watch the episode to learn more.
“One of the great mistakes is to judge policies and programs by their intentions rather than their results,” said Milton Friedman. This is certainly true when considering government-mandated paid sick leave.
Connecticut learned that unintended consequences matter after it passed a mandatory paid sick leave law in 2011. And now Austin, which passed its own such ordinance in February, will learn the same thing. Adding to people’s hurt are efforts in Dallas and San Antonio, which are both considering replicating Austin, but the effort in Dallas was stopped in its tracks from too few verifiable signatures.
The lesson here is that mandatory paid sick leave lowers standards of living. This results from raising the cost of doing business, and that higher cost leads to fewer jobs and fewer raises, along with higher prices for consumers.
Here in Texas, Austin’s paid sick leave ordinance, and any others that follow, likely violates state law as outlined in the Texas Minimum Wage Act and it infringes upon the rights of businesses in Texas.
In order to assure this doesn’t happen, the Texas Public Policy Foundation represents the Texas Association of Business, the National Federation of Independent Business, and the American Staffing Association in filing a lawsuit against the city in April to stop this ordinance.
The ordinance would require businesses with more than 15 employees to offer 64 hours of paid sick leave per year or employers with 15 or fewer employees to offer 42 hours of it per year.
While there’s nothing inherently wrong with paid sick leave, there’s something wrong with the government intervening in the relationship between an employee and employer—and potentially violating state law in doing so.
What’s more, research in this area shows that mandatory paid sick leave ordinances don’t help employers or employees.
Take that Connecticut law. It applies to employers with more than 50 employees, excluding manufacturing firms and nationally chartered nonprofit organizations, which nearly 90 percent of employers already offered paid sick leave—before it was mandatory. While this reduced the negative effects of the Connecticut law, a survey of employers less than two years after the law went into effect found that, as expected, employers had already reduced worker wages or hours and raised consumer prices.
The Austin ordinance, which applies to all businesses, is far more draconian, meaning the effects would likely be much more costly. Government-mandated paid sick leave is bad, but Austin’s ordinance is far worse. The cities of Dallas and San Antonio simply shouldn’t be taking cues from Austin.
The opportunity costs associated with this policy must be taken into account.
If an Austin employer has five workers, would the added cost associated with paid sick leave discourage that employer from hiring an additional worker to increase output? It will certainly be a factor the employer takes into consideration when making decisions.
And because—like a minimum wage hike—paid sick leave is a cost that’s not associated with higher worker productivity or profitability, the employer will have no choice but to find ways to cover those costs. We know that usually ends up being lower wages, fewer jobs available, and higher prices.
And in that way, Austin’s paid sick leave policy will harm the local economy, because it works as an indirect tax on both employers and consumers.
The Bureau of Labor Statistics estimates that employers’ costs of benefits, such as paid leave and health insurance, are 30.5 percent of an employee’s compensation, with paid leave alone being only 7 percent. However, with states like Connecticut and cities like Austin mandating such leave, these costs could skyrocket, leaving even fewer dollars available for raises and jobs.
According to a Freedom Foundation report, more than one-third of businesses surveyed reported having difficulty with mandated paid sick leave. Also, most employers across the country voluntarily offer paid sick leave with the rate ranging from 50 to 89 percent even before a mandatory paid sick leave ordinance.
There’s no justifiable reason for the government to jump in when employers and employees have it worked out. Government mandated paid sick leave hurts economic freedom, and economic freedom is the foundation for greater economic prosperity.
In this episode, I give an overview of today's report by the U.S. Bureau of Economic Analysis that shows the U.S. economy expanded at a 4.1 percent annualized rate in Q2 2018, which is the fastest pace in four years.
Relief of taxes and regulations has been a big part of that, but making those tax cuts permanent, reducing government spending, and relieving trade uncertainty would help sustain faster economic growth.
In this episode (YouTube channel Vance Ginn Economics), I explain how institutions matter from an economic, social, and political perspective. This episode is longer than usual (30 minutes) to go through these institutions and explain how the Texas Model supports prosperity while highlighting how it could be improved by limiting spending and eliminating property taxes--starting with school property taxes.
Given how federal institutions have failed for so long, though they are improving now, there is a need to look at the states.
A good comparison is the largest four states in terms of economic output and population of California, Texas, New York, and Florida. These states have very different institutions, whereby Texas and Florida have primarily inclusive (liberty-related) institutions and California and New York have primarily extractive (redistributionary) institutions. The economic results from these are clear over the last decade-plus with Texas and Florida leading the way in most economic indicators, even when considering income inequality and poverty.
I highlight how the Texas Model has led the way in terms of prosperity, but there is more that needs to be done, specifically limiting state and local government spending. Specifically, there is no education spending problem in Texas, as noted by data from the Texas Education Agency, and the state share of education spending hasn't declined. So, the state spending more, as education lobbyists request, will not lower property taxes.
I then go through the option of eliminating school maintenance & operations property taxes over 11 years by limiting spending and using state surplus dollars to permanently buy school property taxes down until they are eliminated. As often asked at these events, I also briefly discuss the option of swapping school property taxes with a sales tax that has a broader base so the rate doesn't increase much if at all then cut taxes with surpluses dollars thereafter.
I discuss other ways to improve the Texas Model as well, such as passing a stronger state spending limit and eliminating the business margins tax. These steps will allow Texas to be even more prosperous by getting government out of the way with an institutional framework that support entrepreneurial activity and human flourishing today and far into the future.
Thank you for watching! Please share as you see fit. Have a prosperous day!
In this episode of the Let People Prosper series, I discuss the economic freedom associated with the Texas Model, which is based on relatively less government spending and taxation along with sensible regulations.
I examine data for more than a decade along with the latest state-level jobs report to highlight how the Texas Model has supported abundant prosperity. Of course, Texas has room for improvement, such as limiting government spending and eliminating property taxes, but there's much Texas gets correct.
Please watch and share this episode.
Service industry workers — wait staff, bartenders and the like — are experts in free-market economics. They enjoy immediate and tangible reward for their hard work in the form of tips, and the best servers can make hundreds of dollars per shift through hard work, positivity and attentiveness.
When they aren’t feeling it, the effects are equally tangible — in the form of less pay at the end of a shift. There are other variables, of course, but tipped service workers enjoy something that’s increasingly rare in our salary and set-wage world: They have a real degree of control over how much they earn daily.
So it’s no surprise that many oppose the District’s minimum wage hike for tipped workers. When Initiative 77 was presented to D.C. voters in June, it was sold as a progressive reform for an industry with struggling workers. The measure, approved 55 percent to 45 percent , will raise the minimum wage for tipped staff from the current $3.33 per hour to $4.50 in July and eventually to D.C.’s standard $15 per hour by 2025.
Yet the workers themselves opposed it. They formed “Save Our Tips” groups on social media, and they lobbied hard against it. Why? Because they knew its effect wouldn’t be to set a lower limit on how much they could earn; instead, it would set an upper limit.
It’s simple economics. Restaurant owners will probably compensate for mandated higher server wages by raising food prices. The predictable effect is fewer customers. And the remaining customers will be less inclined to tip. Proponents of Initiative 77 said customers would be free to tip, but the legislation itself makes no mention of that. Tipping culture could die, leaving the ambitious wait staff or bartenders scraping by on what government — not their customers — says they’re worth.
And it’s not just the workers at risk. The bustling D.C. food scene will drastically change.
Food writer Todd Kliman (formerly of the Washingtonian ) knows what will happen if the D.C. Council doesn’t repeal the measure.
“Get ready for it, DC,” he tweeted. “Those cocktails that’re overpriced [right now] at $14? Soon enough they’ll be going for $18. And you’ll be lucky to find apps below $16 at anywhere decent. Entrees? $36-$40, easy. Initiative 77 is gonna make [restaurants] even more a place for those with $$$.”
And the small, family-owned restaurants and neighborhood bars will be hit the hardest. Their margins are typically small, and with rising rents, additional costs will force more of them to close or relocate outside the District.
But really, this is a battle over minimum wages.
Supporters of Initiative 77, “Fight for $15 ” and similar measures call for a “living wage,” but the truth is that despite their good intentions, minimum-wage hikes hurt the very people they’re attempting to help.
There’s a rare near-consensus among economists that price controls lead to poor outcomes in the marketplace. The classic example is the price controls on gasoline the federal government put in place in the 1970s. The outcome: long lines and significant shortages.
This is also true of restaurants. When government demands that employers pay more for labor, then employers can afford less of it.
On a not-unrelated note, the first hamburger-making robot has gone online in a San Francisco restaurant. Such technology shows that when government steps in and forces up wages, employers have ways to work around them.
To put it simply, no matter what the minimum wage is in law, the actual minimum wage is always zero. An unemployed person who lost his job or can’t find one because of high labor costs earns nothing.
Servers and tipped staff understand this simple economic concept, and that’s why they’re so vehemently against Initiative 77. The D.C. Council has already taken steps to repeal the measure, and Congress is stepping in.
That’s good — it’s good for the economy, it’s good for the industry, and it’s good for the workers who will again have control over their own prosperity.
In today’s episode, I discuss the financial markets and the big news about the release of the state-level jobs report, which Texas continues to be America’s jobs creation engine. I’ll have more on the jobs report soon with graphs but I wanted to give you a quick overview.
Here’s my statement in a TPPF press release: https://mailchi.mp/texaspolicy/texas-....
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In today's episode, I discuss the benefits of trade, both domestically and abroad. In particular, I note that trade with the Chinese, though imperfect, benefits Americans. Instead of resorting to tariffs, which are taxes on imports, we should seek to renegotiate the Trans-Pacific Partnership to deal with potential issues such as intellectual property and other concerns. The tit-for-tat tariffs in the fast brewing trade war with the U.S. and China is unlikely to lead to many policy changes by the Chinese government and will likely help only a few American producers at the expense of many American consumers (and producers).
We should first understand how the balance of trade payments matters. Americans import $505 B from the Chinese. Chinese import $130 B from Americans. This results in a $375 B current account deficit that's matched by a $375 B capital account surplus for America. In other words, we purchase a lot of goods from them relative to how much they purchase from us (current account deficit) but they send that money back to the U.S. in the form of financial investments (capital account surplus). Check out my recent paper on Texas and NAFTA and how people prosper from trade here.
As Americans import $505 B from Chinese, current tariffs (taxes!) on imports of $34 B of goods, soon $16 B, & potential $200 B total $250 B in tariffs, which would be half of all imports from Chinese. At a 10% tax rate, that would mean a tax hike of $25 billion on Americans, limiting the average annual $150 billion tax cut passed last year. This would slow growth compared to what it otherwise could be, meaning fewer jobs for those potentially hurt by trade with China and counter to the tariff game.
Here's how tariffs/taxes on imports from Chinese could influence Americans. Rather than hurt Americans, Trump administration should re-enter Trans-Pacific Partnership discussions to pressure Chinese on intellectual property rights and reduce trade barriers.
In this episode, I discuss the need to eliminate property taxes starting with limiting government spending so state dollars can permanently buy down school maintenance & operations (M&O) property taxes until they are eliminated. I also discuss how the state spending more on education by itself won’t lower property taxes because that’s not how the funding system works.
Here is the paper on eliminating school property taxes (half of property tax burden). Here is a paper on education funding in Texas.
In today's episode, I take the normal look at the financial markets, with stock falling primarily from brewing trade war with China.
But the big news today was the Texas Comptroller Glenn Hegar revising the Certification Revenue Estimate substantially up for the current 2018-19 budget period, such that instead of a $94 million surplus at the end of FY 2019 there is now an expected $2.67 billion surplus. This is one of the many benefits of the Texas Legislature passing conservative budgets to keep taxes lower than otherwise during the last 2 sessions resulting in faster economic growth and even more tax revenue. While many people will want to spend this additional taxpayer money, and there will likely be a need for a supplemental bill to fund expenditures above appropriations from last session for the $1.8 billion delayed funding to the State Highway Fund and some amount for Medicaid, the focus should be on sustaining a conservative budget and prioritizing extra dollars for tax relief. Options could be to buy down the school M&O property tax over time until it is eliminated or even cutting the business margins tax until elimination.
More money in the hands of Texans in the productive private sector is how people become more prosperous while government simply functions to preserve liberty.
Vance Ginn, Ph.D.
Free market economist with leanings towards Chicago and Austrian schools of economics. Hard rock drummer. Classical liberal. First gen college graduate at Texas Tech. Hometown H-town. Work at TPPF to find ways to let people prosper. Live the dad life in Round Rock, TX. Views=mine.