Will reducing the corporate tax rate actually lead to increased wages?

Democrats and others are claiming that the proposed Republican tax package’s reduction in the corporate tax rate is a sham and a ruse to benefit the one percent. It would actually only lead to enriching corporations and have zero effect on wages. A brief review of what real economists say will be refreshing.

Start here with David Henderson’s short post on the subject.

Let me quote the most germane part of Professor Henderson’s post:

So let me explain in simpler words by noting that the key assumption in the above is the assumption of a perfectly elastic long-run supply of capital. Why would it be perfectly elastic? Because capital is quite mobile across countries, so when one country’s government cuts its tax rate on capital, that draws in capital from around the world.

Why does this matter? The greater the stock of capital, the higher is the ratio of capital to labor, and, therefore, the higher is the marginal product of labor, and, finally, the higher is the real wage.

Thus increasing the marginal product of labor, i.e. the value of labor, entails rising wages.

If you follow the link to Professor Mankiw’s blog post you will see that he shows there is a multiplier bonus effect: every dollar of tax cut to capital (on a static basis) raises wages by $1.50.

Bingo. QED. Try explaining this to denialist Democrats with a vested interest in naïve counterfeit economics.    


Addendum: it might be helpful to say that there is a tight relationship between the marginal product of labor and wages (total compensation.) Greg Mankiw shows that as the former goes up, so does the latter. See  here  especially point #4 for a fuller, yet still simple explanation.



Gun control? The debate and the true message

Mollie Hemingway, my favorite television commentator, on Fox News’s Special Report spoke with unusual simplicity and wisdom:

We’re pretending we’re having a debate about gun control, but we’re really having a debate about the nature of evil and whether a big enough government can contain it.

You can see her comments here at about 1:54 into the clip. Kudos to a  post by Andrew Klavan for highlighting her apercu. He follows up with truly touching reflections about evil in our fallen world. Well worth the little bit of time it would take to read and digest it.

A few thoughts come to mind regarding those who believe that for every evil there is a government solution, or at least a good government response. This leads to faith in a millenarian telos achievable by collective action, i.e. all powerful government. We saw the fruits of this in the horrors of the totalitarian states of the 20th century. To hold this faith amounts to belief that evil exists only by our collective inaction, thus denying the permanence of evil in the world. As individuals we can do little except support bigger government. If the remedy is collective and fails, we as individuals, pointing the finger at others,  can absolve ourselves and justify not acknowledging that the evil around us also exists in us.   


Blind and Deaf versus Blind, Deaf, and Dumb

Paul McGann, who is blind and deaf, successfully sued a movie theatre chain under the Americans with Disabilities Act (ADA.) The 3rd U.S. Circuit Court of Appeals upheld his claim, initiated by the group Disability Rights Pennsylvania and supported by the U.S. Dept of Justice, that the theatre should be required to provide him with “tactile interpreters” so he would be able to appreciate movies by feeling the hands of American Sign Language interpreters provided by the theatre.

More details about this absurdity here.

I do not wish to write churlishly about the truly disabled, including Mr McGann, who deserve  our every sympathy. But in Mr McGann’s case our courts are legally blind to common sense, deaf to pleas to stop abusive law suits, and just plain dumb. Feeling the hands of tactile interpreters will not permit Mr McGann to appreciate movies. Nothing will, pace the ADA law: he is deaf and blind. It is a fraud to think this decision will do anything positive for Mr McGann. But it does satisfy one interpretation of the letter of the law. And it does something for the disability lobby, which labors to expand the definition of disability to increase the rolls as well as the scope and cost of the ‘remedies’ demanded. Just like the Medicaid expansion which includes childless working-age adults who have no disabilities, crowding out funding for the truly disabled who have children.

Many if not most Federal mandates over time have led to great abuse and needless expense, as seen in the lawsuits against the EPA by environmental groups and most notoriously by the trial bar’s abuses of the ADA and fraudulent suits alleging racial or sexual discrimination. Legislation creating legal ‘rights’ are inherently suspicious. These fictitious ‘rights’ favor some groups over others and create havoc in the legal system, not to speak of our economy. One sixth of the adults in Puerto Rico are on Federal disability. Overreaching, expensive , and inflexible legal rights for the disabled seem like empty symbolic gestures designed magically to deny the reality of their crippling conditions and are very poor substitutes for medical and technical advances, not to speak of human compassion. Such legislation betrays a naïve belief that for every perceived problem there is a government solution, and these solutions can be trusted to be wise, effective, and beneficent and would never ever have negative unanticipated consequences or lead to the entrenchment of powerful special-interest groups. After all who would believe that ‘common-sense’ gun-control legislation could ever lead to confiscation?   

Troglo (L. H. Kevil)

Jimmy Kimmel on Graham-Cassidy: a quickie

During Jimmie Kimmel’s tearful diatribes about his infant son’s heart surgery he implied that he had a pre-existing condition, one which poor people could not afford thanks to evil Republicans. But it is not a pre-existing condition; if the parents have health insurance the child’s needs will be met. Even without health insurance the child will receive the similar medical care for free, thanks to Federal law. If responsible parents cannot afford health insurance, it is likely because ObamaCare has wrecked the individual market. If the parents are irresponsible…the less said the better. Pray for their children.

It is interesting to note that the scourge of Berkeley snowflakes, Ben Shapiro, has an infant daughter with the same heart condition as Kimmel’s son. She was treated at the same hospital and by the same physician as Kimmel’s son. It is a charity hospital refusing care to no one. Shapiro claims the same right to claim policy expertise from personal experience as Kimmel. You can read about it here; excuse the typos. Shapiro’s comment that ObamaCare does not satisfy the Kimmel test is a dagger through Kimmel’s bleeding heart socialism.

Popular culture has made significant inroads into the political. Decades ago we had Senator Murphy and President Reagan, actors from California. Now Jesse Ventura as Governor of Minnesota and a current U.S. Senator from the same state, more of a joke in the Senate than on TV. Would Donald Trump be President without the recognition from his television series? Some of us, while not longing for the good old days of lawyer dominated politics and smoke-filled rooms, would like to see fewer actors and comedians and more exceptional people from ‘ordinary’ (i.e. real) jobs: businessmen, physicians, and the like. Only media bias can explain the great coverage given to Kimmel’s philippics. And only heaven can help us if this trend of democracy as popular culture continues.

The crux of the immediate issue, as I have written before, is the great amount of money the Feds pour into states that expanded Medicaid to include able-bodied adults with no children or disability. The reimbursement rate for these people is diabolically higher than for those on traditional Medicaid, low-income people with children or disabilities or both. The numbers on the expanded rolls are such as to crowd out those waiting for traditional Medicaid. These greedy states with way above average reimbursement rates are very reluctant to give up their privileged place sucking on the fore teats of Mother Sam. All this is of course unconscionable and typical of how Big Government works.

Kimmel disciples should pay attention to this sage advice from Th. Sowell:

Comparing any society to ideals virtually guarantees that that society will be condemned as a failure, if only because it costs nothing to imagine something better than what exists…while everything created in the real world has a cost. Moreover our only choice in the real world is between different societies compared to each other – not compared to ideals such as “social justice.”

Troglo    Troglo

Are 45 million dead just a statistic?

A famous, perhaps spurious quotation attributed to the monster Josef Stalin has it that “one death is a tragedy, a million a statistic.” Heartless, but revealing. The recent story of Charlie Gard has garnered more attention than the painful deaths of thousands in Syria or Africa. A recent article by Professor Ilya Somin helps to put all this into contemporary perspective: the Great Leap Forward (1958-62) of Mao’s Communist China, the biggest mass murder in history, led to the deaths of “up to 45 million people.”

Professor R. J. Rummel, in his celebrated book, Death by Government, documented the millions of civilians murdered by their own governments. His tabulations of the deaths by totalitarian governments are beyond sobering. The Soviet total comes in at 61 million, the Nazis are 21million. Rummel’s data show Red China at 76 million – undercounted by at least 7 million if we consider the revision upward of his count for the Great Leap Forward. Other estimates will put the Chinese total well beyond 83 million.

Somin’s revised count puts Mao’s crime in stratospheric context, although it does not include the following horrors of the Red Guard period. The total count of the slaughter of innocents by twentieth century governments now goes well over 150 million. These deaths were not accidental; but consciously broken eggs in the confection of the omelette of the workers’ paradise. Rummel notes that the governments involved were totalitarian, authoritarian right-wing or Communist, but most expansionist. The crimes of authoritarian governments are at least two orders of magnitude greater than those of the democracies. Nazi crimes are always newsworthy, but where do we hear of the far greater crimes of the People’s Republic of China? Japan is chided for insufficient apologies for the crimes of the now defunct Empire of Japan. But where is the outrage over Chinese communist crimes? Who criticizes the current whitewashing of Stalin? The Blame America crowd points to the civilian deaths from the Hiroshima and Nagasaki bombings of 1945, necessary to end a war we did not start, but where is the outrage over the Communist mass murders? The very same Communist government responsible for these mass murders is still very much in power. Many Chinese today have parents, grandparents, and other relatives slaughtered by Mao’s minions. They cannot speak out for fear of persecution, but who will speak up for them and the dead? Are they to become forgotten statistical wraiths? Don’t the guilty deserve an opportunity for absolution? Germany long ago forswore the unspeakable crimes of the Nazi government and brought to justice those guilty. The PRC merely says Mao made some mistakes. The PRC is a vicious tyranny; mass murder may no longer be practiced, but there is still cruel repression of dissidents, including Christians and practitioners of Falun Gong. It ruthlessly quashed the nationwide protests of 1989 centered in Tiananmen Square. The viciousness of the culture under the PRC dictatorship can be encapsulated in the blowtorches used to prepare dogs for slaughter during the Yulin dog festival. We used to celebrate Captive Nations Week, to call attention to the cruel Soviet hegemony in Eastern Europe. How can we justify not doing the same for those suffering under Communism in China and Korea? How can we justify not naming the enemy correctly: it is communism. Where are the calls for the International Criminal Court to bring to justice the criminals responsible for Mao’s mass murders?

Could it be that there is implicit acceptance of the Marxist claim that revolutionary violence is not violence, that there should be no enemies to the left?

Sidebar: is this situation not similar to the call for Trump to single out white nationalists for rebuke, but to keep silent about black nationalists? And how does ‘nationalism’ become something evil, except by comparison with left-wing internationalism?

This is not just dead history; there are contemporary implications. The problem with North Korea was started by Soviet expansion into Korea in the last days of World War II. The civil war in China after the withdrawal of the Japanese occupiers was won by the Communists, with help from the U.S. American communists and fellow travelers lobbied for aid to Chiang Kai-shek to be cut off. He was portrayed as a fascist murderer, while Mao was a gentle lover of democracy. Truman eventually did cut off aid to Chiang and the nationalists, leading to the Communist victory in 1949 and the debate over Who Lost China? Then in 1950 the North Korean puppet government invaded the South, at Stalin’s urging. The PRC soon entered the war, with great loss of American life. The PRC is still our enemy, despite the trade between it and our country. (I note that a branch of the Chinese military illegally channeled contributions to the 1996 Clinton campaign through the DNC. Remember Johnny Chung and others in the Chinagate conspiracy? There was no independent investigator looking into this collusion.) The PRC is planning to become the world’s foremost superpower. The PRC’s expansionist claims in the South China Sea and its theft of American and European trade and technical secrets betray this ambition. Its Made in China 2025 project gives their ambition a date. Let’s not forget that twenty-first-century warfare will be as different from the twentieth as the twentieth was different from the nineteenth. Cyberwarfare is just one aspect of the new threats. A good pop view of cyberwarfare will be found here.

Commercial relations are well and good, but let’s call an evil spade evil and not trust beyond what can be verified. Let’s not sell the rope that will be used to hang us.   


Troglo  (L. H. Kevil)

A call for repeal of Missouri’s prevailing wage law

Why is repeal called for? Prevailing wage laws increase costs borne by the state, municipalities, and school districts and transferred to tax-payers by:

  • artificial, high minimum wages
  • burdensome and expensive regulations
  • limiting competition

This is not complicated. It is basic supply and demand economics.

The most basic axiom of economics is known to us all:  IF YOU REDUCE THE SUPPLY – PRICES WILL RISE.  It’s that simple. Prevailing wage laws reduce the supply of competitive bids, significantly increase the total costs of projects, and indirectly increase the burden on taxpayers. Add in required record keeping (so the state can compute the “true” prevailing wage for each craft in each locality) and the net result is fewer bids from non-union companies and substantial unnecessary costs to projects subject to prevailing wage. All this is well documented in the academic community as are the fraudulent claims of harm if prevailing wage legislation is repealed.


Please note that Wednesday there will be a hearing in Jefferson City by the Senate Interim Committee on Labor Reform, Senator Dave Schatz, Chairman. It will take place in the Senate Lounge at 1 pm. You can testify whether you will be present or not. Simply fill out this form:


Scan and email it to Senator Schatz, at dave.schatz@senate.mo.gov


Before getting into economic analysis below, I think it might be worth mentioning how unfair prevailing wage laws are. At least minimum wage laws, however harmful, apply to all workers. Prevailing wage laws apply only to construction workers. Both laws create unemployment, but prevailing wage laws tax all to benefit only a chosen, privileged few. How can this abuse of government power be called fair?

You won’t hear supporters of Missouri’s prevailing wage law mentioning unnecessary red tape or the unjust “transfer of wealth” effects of prevailing wage.  Instead they disguise the real effect of prevailing wage by suggesting that less experienced workers, higher injury rates, lower wages, less health coverage and the effects of “harmful competition” will result if the prevailing wage law is repealed. They will also speak glowingly about higher increased earnings and taxes and the economic benefit that accrues from the “spending cycle” which results, they claim, from the higher prevailing wage rates.

Proponents of prevailing wage will also claim that there is a downward spiraling “multiplier” effect to all wage earners when prevailing wage laws are repealed. This claim is sometimes backed by studies, commissioned by the supporters of prevailing wage, that disregard and ignore the economic value of the savings that accrue from the repeal of prevailing wage.  They ignore the fact that these savings, either in form of reduced taxes to citizens or reduced cost to the state, it will reenter the economic cycle for other uses: e.g., other labor projects, other purchases, other services, etc..

For example: One recent study claimed that repeal of prevailing wage in West Virginia would reduce construction income (wages) by $31 to $47 million and result in a total loss of $51 to $77 million in wages, after application of the “multiplier effect” (spending cycle).  This study also claims the reduction of income and sales tax revenue to West Virginia of $4.5 to $6.8 million. Such studies ignore the effect of the economic benefit (for wages and other expenditures) of alternative utilization of the savings on construction wages as well as the multiplier effect of such alternative uses.   In addition, the income and sales tax revenue that would be derived from these alternative wages and expenditures is ignored.

Intuitively we know that if all labor costs were to be increased by law, prosperity would be harmed, not increased. Aggregate prosperity is improved only by increasing productivity – not by increasing wages.   Increased wages, without an increase in productivity, only transfers wealth and reduces prosperity.  If the opposite were true you would need only to pass a law increasing the minimum hourly rate to $500 per hour and we would all get rich.

Proponents of prevailing wage also claim that all deficiencies or problems of prevailing wage laws can be cured by improving the “paperwork,” the reporting of wages used by the Missouri Department of Labor and Industrial Relations to calculate prevailing wage in each reporting area of the state. Utter nonsense.  First, as any contractor knows, unnecessary labor cost to “pick up a pencil” can increase the cost of construction just as much as an unneeded carpenter picking up a hammer.  It’s the equivalent of government forced “featherbedding”. No one is motivated to add unneeded cost to his overhead and will do so only when forced to by law.

I would like to address two other claims made by prevailing wage proponents in Missouri:

  1. That prevailing wage laws produce “fair and competitive” bidding:  This is a twist on the preposterous claim, often used by proponents of prevailing wage, which maintains that the construction industry is uniquely subject to “harmful competition” that slashes wages and reduces standards. Thus when wages are set by law that such harmful competition is limited. A claim of emotional argument, not objective analysis. Think about it and logic alone will tell you that if the wage portion of a contract is fixed and a low bid is secured, contractors will just as likely look to reduce costs in other areas. Thus grade B materials are used instead of grade A.

It is construction management, performance bonding, monitoring and oversight of construction specifications that ensure that quality and other construction standards are met – not the wage rate.

  1. Lack of prevailing wage laws promotes “unskilled workers”: Proponents of prevailing wage laws maintain that in their absence the training of construction workers is inadequate.  The inference is that the industry depends on unions for an adequate supply of trained workers. There is no evidence that there is more of a market failure in the training of construction workers than in the training of workers for any other occupation group. There are community colleges, private technical institutes and other training resources besides labor unions. In addition there is on-the-job training for less skilled “helpers”, who abound in free market construction contracts. With prevailing wage contracts contractors are motivated to hire union workers rather than less skilled helpers due to the cost disparity between the prevailing pay rate that they are forced to pay and the productive value of helpers.

These and other claims advanced by the supporters of prevailing wage laws are a complete disguise of their real PURPOSE: TO LIMIT COMPETITION BY THE FORCE OF LAW.  This purpose applies to both sellers of labor and sellers of construction contracts. The sellers of labor (unions and other labor organizations) want to limit the competition from others who might offer their labor at a lesser price; and sellers of construction contracts want to limit bidders to only those who pay comparable wages as they do, whether by force of union contacts or the force of prevailing wage laws.

Why is the real purpose (limited competition) disguised behind all these claims? As anyone with the most basic understanding of the way markets function knows: when competition is limited prices rise. It’s basic “supply and demand stuff.”  Added costs due to increased wages are paid by Missouri taxpayers. This results in fewer and lower quality government buildings and infrastructure or other “goods and services” than would otherwise be possible with free-market bids.

Of course proponents of prevailing wage can’t sell a prevailing wage scheme on the singular purpose of raising labor costs so they must attempt to justify the law with false and misleading claims.


There are many economic studies by scholars with no dog in the fight that debunk the claims by proponents of Prevailing Wage. You need only rely on your own economic knowledge base to determine that buyers love competition and sellers hate competition.

Reduced competition is what the sellers of prevailing wage are seeking. Don’t buy their flawed arguments that disguise the hidden purpose of Missouri’s prevailing wage law.    

Bruce Hillis

Mexico, MO 65265

573.380.1132 brucehillis@charter.net

August 13 , 2017


Ban the Box: another liberal idea backfires

I first posted on the foolishness of Ban the Box legislation several years ago. The idea behind this is that if employers are prohibited from asking about an applicant’s criminal history in a check box on job applications, all manner of good things will result.  A recent scholarly study the Powerline blog reported here has evidence that if  the people hiring cannot determine criminal history from an application, they will instead use race as a proxy. The result is: fewer black applicants are being called back and hired than when there were such evil boxes. Is this really a surprise? Do “good intentions” not all too often guarantee a bad result? Instead of crowning their skulls with halos,  the proponents should have used the gray matter inside, as indicated by this quip in the Powerline article:

Charles Murray commented on Twitter: “Any policy analyst who would not instantly predict this unintended outcome should find a new career track.”

Below is my original post on the Ban the Box issue in Columbia, Missouri.

December 2, 2014 the Columbia City Council unanimously voted to prohibit city and private employers from asking about or investigating applicants’ criminal histories until after a conditional job offer has been made. See a newspaper article here. The box on a job application form asking if the applicant has ever been convicted of a crime is now banned.

This step, the first for any Missouri city, is intended to:

  • Level the playing field for offenders
  • Reduce violent crime
  • Reduce recidivism by having more offenders employed
  • Compensate for the “flaws” in our criminal justice system
  • Reduce the cost of enforcement and increase tax revenue
  • Benefit society as a whole

So what’s not to like?

In our opinion just about everything. This is a horrible example of feel-good government activism and abusive overreach, a precedent for even more far-reaching legislation. Regulating essential aspects of business practice is not a legitimate function of local government. It is not government’s business to level playing fields, particularly those tilted by criminal activity. In our opinion it is not a bad thing for criminals released from prison not to have an easy time finding a job. Bad decisions should have consequences. What will happen if this experiment in social justice should be seen not to work? Will we then see affirmative action quotas? Reduction in violent crime by waving magic wands of unproven legislation is wishful thinking. Crime can be reduced – but never eliminated – by incarceration and hiring more police officers. These are costs of essential government services, not frills to be reduced. As for the ‘flaws’ in our justice system, this is liberal twaddle. For some it is too easy to blame the ‘system’ and not the criminal.  Troglo