Progressive bogeyman and billionaire owner of Koch Industries Charles Koch is provoking the ire of liberals and progressives yet again. Koch, who dares to spend his billions on political advocacy in defiance of the liberal position that billionaires whose last names aren’t Soros shouldn’t spend money on political advocacy, aired an ad through his foundation claiming $34,000 a year would place one in the 1%. It would, because $34,000 in income is the top 1% of world incomes.
Predictably, progressives immediately denounced the ad, Charles Koch, and any criticism of their old mainstays: government regulation and a minimum wage. From the Huffington Post:
Of course, earning $34,000 in the U.S. won’t get you very far in most parts of the country. The Economic Policy Institute estimates that a family of three needs an income of at least $44,617 a year to cover basic living expenses in the cheapest parts of the country. In Wichita, Kansas, where the commercial is currently being aired, according to Think Progress, a family of three would need to make $53,721 to get by. That’s far more than $30,000 a year that two parents earning minimum wage would make.
Let’s examine the assertion that a family of three needs an income of at least $44,617 a year to cover basic living expenses in the cheapest parts of the country. The Economic Policy Institute, which was cited by the Huffington Post in their article, says that in the cheapest area of the country, Marshall County, Mississippi, a two-parent, two-child family needs at least $48,144 to get by.
According to the U.S. Census Bureau, the median household income in Marshall County is just $33,279 in 2011 dollars. That’s almost a full $14,000 less than the EPI insists a family of four would need, and over $10,000 less than a family of three would need to just get by in the EPI’s view. The Census Bureau provides us the persons per household in Marshall County, and it’s 2.76.
78.4% of Marshall County’s impoverished people, who make $10-$14,000 a year less than the EPI says they would need to get by, own their homes. That’s almost 8% higher than the statewide average of 70.6%. What gives?
The EPI estimates that the child care expenses for a two parent, two child household in Marshall County run some $501 a month. How does the EPI arrive at this number?
Child care expenses are based on costs of center-based child care for four-year-olds and school-age children, in urban and rural areas, as reported by the Child Care Aware of America annual report on the cost of child care by state (CCAA 2012).
Of course, it seems highly unlikely that families in Marshall County will spend $501 a month, or $6012 a year, on center-based child care for four-year-olds and school-age children, given that they only earn $33,279 a year. Perhaps a parent stays home, or a grandparent or relative watches their children in lieu of the center-based child care considered an essential expenditure by the folks over at EPI.
This seems to be working, because not only is home ownership in Marshall County almost 8 percentage points higher than the statewide average, home values are $83,700, or $15,500 less than the statewide average of $93,700.
But what about the EPI’s reputation amongst progressives as a go-to organization for handy statistical analysis to bolster their assertions that minimum wages and more government regulation will increase the lot of the poorest individuals and families? Well, outside of the progressive community, and media organizations like the Huffington Post that mindlessly cite the EPI’s numbers as gospel truth, nobody takes the EPI seriously.
Why? Because so many of their assumptions have been shown to be utterly wrongheaded. Daniel J. Ikenson of the Cato Institute (full disclosure: Cato is funded by the Koch Brothers as part of their nefarious effort to pollute public discourse with libertarian perspectives) took down the EPI for asserting that trade deficits with China adversely affect U.S. employment.
Ikenson looked at the data within the Economic Report of the President and found that trade deficits with China actually support U.S. employment rather than detracting from it:
EPI’s methodology is not taken seriously by most economists because, for one, it approximates job gains from export value and job losses from import value, as though there were a straight line correlation between the figures. There’s not. And it pretends that imports do not create or support U.S. jobs, which is clearly wrong. After all, U.S. producers — purchasing raw materials, components and capital equipment — accounted for more than half of the value of all U.S. imports last year ($1.05 trillion). In other words, the majority of U.S. imports support U.S. economic activity, which is the basis of U.S. employment. Yet EPI’s methodology counts those imports as jobs-reducing.
He further went on to cite the U.S. International Trade Commission’s report entitled “The Economic Effects of Significant U.S. Import Restraints” to further bolster his conclusions:
Table ES.4 of that study indicates that there is more U.S. valued added (U.S. labor, material, and overhead) in U.S. imports than there is Chinese valued added in U.S. imports. Specifically, 8.3 percent of the value of U.S. imports (about $160 billion last year) is U.S. value, while 7.7 percent of the value of U.S. imports is Chinese value added. EPI’s methodology does not account for the U.S. jobs associated with the U.S. value added in U.S. imports.
EPI’s jobs loss figures also fail to reflect the fact that the U.S. capital account surplus – the flip side of the current account deficit – is a considerable source of U.S. employment. Foreign investment in U.S. plants, property, hotels, equities, debt, and other assets provide employment for millions of Americans in much the same way that U.S. exports do.
The Center for Union Facts also confronted the EPI over their assertion that public employees were underpaid. That’s right, the Economic Policy Institute argued that public employees were underpaid. Dr. Jeffrey H. Keefe of Rutgers University employed suspect methodology to argue that public employees as a whole were under-compensated by as as much as seven percent relative to their private sector counterparts.
The Center for Union Facts took on the EPI’s analysis noting the following:
In fact, according to their own analysis, public employees
at both the state and local levels enjoy a compensation premium of close to five percent compared to an employee of similar education and experience in the private sector.
Public sector workers enjoy substantially greater job security than their private sector counterparts; their layoff and discharge rate
as a percent of total employment is over three times lower than the private sector as a whole.
Additionally, there are measurement issues that need correcting: public employees like teachers that work full-time but only a part of the year have 36 weeks of total compensation pro-rated over a 52-week period. That means the per-month compensation of this
significant portion of the public sector is substantially understated in the Keefe study.
When the Center goes on to examine the statistics compiled by the Bureau of Labor Statistics comparing public versus private sector employee compensation, the idea that public employees are under-compensated relative to their private sector counterparts becomes even more laughable:
Total employer compensation costs for private industry workers averaged $27.73 per hour worked in March 2010. Total employer compensation costs for State and Local government workers averaged $39.81 per hour worked in March 2010.
The Center went on to examine two errors in Keefe’s methodology that skewed his final results. First, Dr. Keefe makes an improper assumption about organizational size, and he improperly excludes a key employee group. Dr. Keefe’s first assumption relates to his belief that any public employee not working for the government would work for a large corporation, because many government employees work for government organizations with 1,000 or more employees.
The problem with this assumption is simple: only 43 percent of workers in the private sector are employed by large corporations. When the Center accounted for this in their re-computation of Keefe’s data, they found that 55% of public sector workers would work for a smaller firm if they relocated to the private sector. Instead of Keefe’s four percent compensation penalty for state and local workers, the Center found a premium of three percent for all public employees when this distribution of public sector employees was taken into account.
The second assumption relates to Keefe’s exclusion of part-time workers on the grounds that they earn less than full-time workers, are more weakly attached to the labor force, and often lack benefit coverage. This results in the exclusion of part-year full-time workers like teachers, and when those public employees are included in the analysis, Keefe’s four percent compensation penalty for public employees becomes a five percent premium.
The EPI has a history of shoddy methodology, errors in statistical analysis, and incorrect conclusions, but progressive organizations and liberal media outlet still cite to the EPI’s studies as a rebuttal to Charles Koch’s relatively uncontroversial statement that if you make $34,000 a year, you’re in the wealthiest 1% of people in the world. That’s because Koch’s statement is factually correct; it’s also because in order to challenge the statement, one has to change the parameters of the argument by switching the debate to whether or not $34,000 a year is enough money to get by. Even in that argument, the EPI and the Huffington Post fail utterly.
For the progressive media, when Charles Koch stayed in the shadows and simply gave his money to others, he was secretive and evil. Now that Charles Koch has stepped out of the shadows and into the light to make his own arguments in newspaper interviews, he’s even worse. What Koch actually says in interviews is something anyone could agree with:
“We want to do a better job of raising up the disadvantaged and the poorest in this country, rather than saying ‘Oh, we’re just fine now.’ We’re not saying that at all. What we’re saying is, we need to analyze all these additional policies, these subsidies, this cronyism, this avalanche of regulations, all these things that are creating a culture of dependency. And like permitting, to start a business, in many cities, to drive a taxicab, to become a hairdresser. Anything that people with limited capital can do to raise themselves up, they keep throwing obstacles in their way. And so we’ve got to clear those out. Or the minimum wage. Or anything that reduces the mobility of labor.”
Koch’s points are simply true, and speaking truth about progressive policies and their utterly ineffective results is a threat to liberalism and increased government power. Simply put, if a minimum wage hike won’t raise people out of poverty, or increase employment, there’s no reason to increase the minimum wage. Joseph J. Sabia and Richard Burkhauser examined minimum wage hikes in 28 states between 2003 and 2007, and found the following:
Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.
The 1994 study by David Card and Alan Krueger which supposedly debunked a connection between raising the minimum wage and rising unemployment was eviscerated in a subsequent study by economist David Neumark, Mark Schweitzer, and William Wascher, who took Card and Krueger’s work and analyzed their data to come to the opposite conclusion: the New Jersey increase in the minimum wage led to a spike in unemployment. Far from debunking the notion that a minimum wage increase led to increased unemployment, Card and Krueger’s data confirmed the notion. Their methodology was simply wrong.
85% of the studies that followed re-affirmed Neumark and Wascher’s findings, and serve to bolster Charles Koch’s outlook on the minimum wage’s deleterious effects on upward mobility for poor people. What is so telling about the story of Card and Krueger is this: after being utterly wrong in their study, Krueger went on to be nominated as the chair of the President’s Council of Economic Advisers.
The liberal media and its intellectually bankrupt supporters in academia can’t attack Charles Koch’s statements on the merits, because the overwhelming amount of available evidence suggest Koch is correct. What liberals do instead is telling: they attack Koch for having the temerity to use his money to tell the truth, and for daring to tell a truth that conflicts with their ideological positions.
As President Obama presides over an economic “recovery” that has doubled the amount of homeless public school students since 2007, and has put 1 out of every 6 Americans on the dole while also increasing the national debt by more than the first 41 (now 42) presidents combined, it’s worth noting that Charles Koch is the one being vilified in the liberal media.
The dishonesty is staggering: while increased government assistance does increase individual reliance on government, it does nothing to benefit individual employment levels, or GDP, or the condition of ordinary Americans. The only people who find that it does are liberal economists and statisticians employing sloppy methodology that is more oft than not debunked by subsequent research. Nevertheless, the Huffington Post and other mainstream media outlets continue to purvey those studies as proof of their false narratives and defamatory statements about Charles Koch and others who attempt to refute the narrative in question.
For the average American on the ground, the economic recovery isn’t a recovery at all, but the Huffington Post would have them believe that more government is a panacea for what ails them. Charles Koch would have them believe that less government is the cure, and the actual evidence backs Koch up. However, the mainstream media simply employs manufactured evidence from the likes of the Economic Policy Institute despite their deplorable track record. When the facts don’t fit the narrative, the narrative is wrong, and the policies it advocates are destructive to individual freedom from destitution and enslavement. It isn’t just wrong to lie about Charles Koch; it’s beyond cruel to do so in a way that perpetuates falsehoods about how to lift people out of poverty.