The Dem-majority House just passed a hike in the federal minimum wage to $15/hr. This is not at all surprising given the Dems' antipathy toward the free market and the fact that the economy is in the stage of the business cycle it is in. Given the history of these things, this does not bode well for the economy in the coming years. If Dems want a recession in '20 - surely their best shot of winning back the White House - they would do well to have a minimum wage hike signed into law.
Here is the history of the federal minimum wage (the dark blue is the nominal rate, the light blue the inflation-adjusted one):
[Note: the highest the inflation-adjusted federal minimum wage has ever been is just shy of $12 in today's dollars. And the Dems want to jack it up to $15? I don't think they're nearly as intellectually superior as they think they are. While they're at it, why stop at $15 ffs?]
Now, everyone who's been paying attention knows that before ca. 1973 the U.S. and world economy were structurally different enough that the pre-1973 economy could withstand the more "progressive" policies such as marginal tax rates north of 70%. Globalization since the 1970s has put increased pressure on the U.S. labor market, making more sense at the margins for businesses and finance capital to offshore or outsource. (The result has been close to a miracle for the rest of the world (mostly China...), in terms of living standards. See all the relevant numbers at ourworldindata.org.)
And since the 1970s, increases in the minimum wage have usually (with one exception) been associated with recessions. As any economist worth anything will tell you, an increase in wages (ceteris paribus, of course) in recessionary conditions can only make the recession more protracted. Sizable inflation-adjusted increases in the federal minimum wage happened in 1974, 1990-1991, 1996-97, and 2007-09. Except for 1996-97, these increases happened at the peak of the business cycle - when the politicians have the most leeway for doing so - and recessions followed.
Now, this is not to imply that the minimum wage increases were the sole cause of the recessions (it didn't cause a recession in 1996-7, after all; and the main cause of the Great Recession starting in '08 was a financial crisis), but they almost certainly made it harder for the economy to recover from recession. If you doubt this, ask whether the politicians would raise minimum wages during a recession or early in the expansion phase when unemployment is still high. Is this the sort of thing we want to take a chance on, business-cycle-effects-wise?
(Not that anyone cares about, oh, freedom of contract in this context. We're talking vulnerable exploitable workers and greedy predatory businesses, after all. A superior moral compass dictates a govt role here, right? [AOC, exemplar of altruist morality as Rand defines it, declares as an incontestable axiom that the right to things like a $15/hr wage takes precedence over the privilege of earning a profit(, Comrade).] Meanwhile, the most vulnerable workers are indeed the most vulnerable in a recession when the greedy businesses are trying to stay afloat and deal with all the challenges and/or bullshit involved in running a business.)
Now, what is a good sign that we are currently at or near a peak point of the business cycle? The treasury yield curve and/or spread between short and long term rates has historically been a very accurate predictor of recessions (the shaded areas):
An inverted yield curve is a situation where short term rates are higher than long term rates, and recessions have reliably followed such situations. The yield curve at present is U-shaped (which I don't recall seeing before).
So is it any wonder that Democrats are licking their chops at raising the minimum wage in the current state of things? Or maybe their intentions aren't wicked and they're just ignorant of the history and economic logic of these things. It's hard to tell these days.
But one thing's for damn sure: The Dems who cry "racism!" so much that they've lost all credibility even were a legitimate example to arise, are promoting - in action - a policy with racially disparate effects, i.e., the very sort of thing they say is racist. It goes hand in hand with an entire menu of destructive policies the Dems have inflicted upon the black community in the name of helping it. No, the minimum wage doesn't make the targeted worker more productive or increase the worker's earning power. It only makes it more difficult, at the margins, for the worker to be employable.
President Trump is already decrying the Federal Reserve's short-term interest rate policies, and he has data to back him up. If the minimum wage hike somehow makes it to his desk (meaning the Republican-majority Senate would have to pass it), he has as much reason to veto it as he has to oppose an inverted yield curve. But with this president, it's hard to know who he might pander to at a given time on a given issue. His tariff policies can't be helping his reelection chances (just ask any economist how protectionism affects economic growth) even if they might yield a more favorable trade situation long-term.
(On a related note: commonly cited GDP growth numbers don't adjust for population growth. Since population is growing about 1% per year, a 2% GDP growth rate means about 1% per-capita growth. This means that a 3% GDP growth rate means a doubling of the per-capita growth rate over the 2% commonly-cited growth rate. This means that the economy under Trump so far is growing at roughly twice the rate it was under his predecessor, although he's expanding the deficit to fuel this growth; this fiscal year - at a peak phase of the business cycle no less, when this isn't supposed to occur - the federal deficit is expected to reach 5% of GDP, more or less an unsustainable figure where nominal GDP is growing at any less than than 5%. These would be points the Democrats might capitalize on effectively if they weren't so intellectually bankrupt and credibility-squandering.)
[Addendum: I take it that in addition to such wonderful ideas as open borders combined with a generous welfare state - is it that, and not an Aristotelian ethos (say), that is their conception of the end of history, and if so, how pathetic is that? - the Dems, were they in charge of what AOC termed "all three chambers [sic] of government - the House, the Senate, and the White House," would indeed push through a $15/hr minimum wage as signs of economic slowdown loom? (Keep in mind, using the GDP math I just mentioned, that any GDP growth rate below about 1% means a contraction in per-capita terms, meaning pretty likely an increase in the unemployment rate, the #1 main-street indicator of recession.) Would a president in the new Democrat mold be that fucking stupid when all is said and done? Or is the $15/hr idea more of a virtue-signaling thing? Do we really want to find out? Given the laws of supply and demand, how would that $15/hr interact with that whole open borders plus generous welfare state idea? What happens to the marginal productivity of labor if tons of laborers flood over the border? If it turns out that they can't find work at the otherwise attractive $15/hr, do they go on the dole? Then what? Will the Dems find yet another way to cry racism and demand immediate agreement, and double down with more of the same policies? Again, do we want to find out, given the nature of today's Democrat Party?]
