The Minimum Wage is Bad at Everything

There are a handful of commonplace and widely accepted political policies that I fundamentally disagree with – ideas whose legitimacy I once took for granted but which I now question and reject the more I learn about them. Perhaps none is more far-reaching in its scope and implications, more cloaked in mumbo jumbo and fallacies, and yet more espoused by my peers and the population at large that the minimum wage. Conventional wisdom says that supporting minimum wage should be a no brainer for all but sociopaths and rich fat cats. Here, I’ll attempt to explain why I think the minimum wage fails to pass muster in virtually every respect.


Minimum wage laws began appearing in several states across the USA in the early parts of the 20th century before being enacted nationwide in 1933. The national minimum wage was challenged in the Supreme Court and overturned as unconstitutional, then revived in 1938 and later upheld by the Supreme Court on the grounds that the commerce clause of the 10th amendment grants the federal government authority to regulate wages. The minimum wage has increased over time and since 2009 has sat at $7.25/hour nationally or slightly higher in some states and cities. Recently, calls to increase the minimum wage to $15 or more have picked up steam and become law in a handful of cities and states. Most democrats and those on the left have pushed for higher minimum wages, led by figures like Bernie Sanders, Elizabeth Warren, and Robert Reich with concern for egalitarianism and poverty. Most republicans and those on right have pushed for the status quo or only modest increases, citing jobs and unemployment as a main concern. Calls to abolish the minimum wage entirely are rare.

Without further ado, I present to you the three main ways in which the minimum wage fails.

1) Not actually effective at fighting poverty and promoting egalitarianism

That’s right, the main reason why many on the left support a minimum wage is deeply flawed. Emperor Bernie Sanders has no clothes.

The minimum wage is just as much a restriction on workers as it is on employers. “Employers must pay workers at least $X/hour” is logically equivalent to stating “only people capable of earning at least $X/hour are allowed to work.”The true minimum wage, in fact, is always zero. Employment is not a guarantee, and millions in the USA remain out of work.

The minimum wage declares the least productive ranks of society unfit for employment. Those are the very parts of the population most at risk of poverty and most in need of help. Instead, the minimum wage ties their hands. Sure, certain people who are far from rich may come out ahead in the short run as they enjoy the same level of employment with higher wages. But this is hardly remarkable or unique. As an analogy, setting a minimum price of $10 for a sub might help Potbelly and Quiznos while putting Subway into bankruptcy. Does a fair or egalitarian society convert have-littles into have-nots so it can marginally benefit a few have-somes?

At the same time, the minimum wage eliminates opportunities for career growth. Nobody disputes the value of job experience when it comes to commanding higher pay and more job opportunities in the future. To illustrate this point, many candidates who push for a higher minimum wage simultaneously hire eager unpaid interns. Workers who earn a low wage accrue experience and knowledge just the same as ones who earn nothing – so why outlaw the former and allow (or even engage in) the latter? I don’t have a good answer, but I do know that it only serves to hinder upward economic mobility.

With this in mind, it might not come as much of a surprise that the early minimum wage movement was rooted partly in eugenics, racism, and nativism. Consider this quote by Frank Taussig in the bestselling 1911 textbook “Principles of Economics:”

We have not reached the stage where we can proceed to chloroform them once and for all; but at least they can be segregated, shut up in refuges and asylums, and prevented from propagating their kind.…

What are the possibilities of employing at the prescribed wages all the healthy able-bodied who apply? The persons affected by such legislation would be those in the lowest economic and social group. The wages at which they can find employment depend on the prices at which their product will sell in the market; or in the technical language of modern economics, on the marginal utility of their services. All those whose additional product would so depress prices that the minimum could no longer be paid by employers would have to go without employment. It might be practicable to prevent employers from paying any one less than the minimum; though the power of law must be very strong indeed, and very rigidly exercised, in order to prevent the making of bargains which are welcome to both bargainers.

2) Fewer jobs, yes, but also a less prosperous and productive society

It’s not just that the minimum wage can swell the ranks of the unemployed, it makes society poorer as a whole. The real wealth of any given society is entirely a product of the goods and services it produces (whether they are counted in GDP or not, perhaps a topic for another blog post some time). In the examples above, people who work less or not at all due to minimum wage restrictions represent real losses in wealth and production. People who get paid more to do the same job, however, don’t magically become more productive.

The repercussions are not always as visible or easily measured as the unemployment rate, but they make an impact through higher prices and fewer consumables to go around. And yet again, the meaningful consequences fall largely on those near or below the poverty level. A well off person’ wallet might barely notice the difference between a $10 or a $5 footlong sub, but it’s a different story for someone barely making ends meet.

3) My employment, my choice

This is an angle that’s rarely considered but personally I find it quite important. Many on the left understand and value the right to privacy and making choices for oneself, at least on certain issues. The signature issue where this applies, of course, is abortion. People in favor of abortion rights are not called “pro-abortion” but rather “pro-choice.” Perhaps people who favor abolishing the minimum wage should be called “pro-choice” as well.

If we want to call ourselves a free country, we should put some consideration towards giving people the right to make their own choices. For government to interfere in the private contracts or arrangements between consenting adults (employer and employee in this case), it should have a good reason to do so. Protecting third parties from harm, for instance, is a worthwhile concern. “I don’t think that’s enough money” is not. In this instance, I struggle to see where there’s any harm in allowing people to freely negotiate their terms of employment.

Ultimately, enforcement of the minimum wage falls on the use of force and imprisonment to punish and subdue violators. Call me old fashioned, but I think the use of such tools can only be justified in cases of clear harm and wrongdoing, and not as a way of imposing economic doctrine on ones neighbors.

Final Thoughts

Before I conclude, let me answer some possible reservations or retorts one might have about the arguments I laid out above.

  • “Employers need workers and will just pay the higher wages.” Intuition and data both disagree – and as far as data goes it’s hard to measure the number of jobs that have simply never existed due to the minimum wage. If you’ve ever wanted something but decided not to buy it because it was too expensive, you know how this goes. As the price of labor increases, employers will find ways to reduce the amount of labor they consume. As a prospective business owner one day myself, I can imagine roles that are a steal at $9/hour but not worth it at $15/hour. In the long term it’s simply unsustainable to pay employees more than they create in value.
  • “Putting more money in the hands of the working class is good for the economy because they spend it.” Even if we accept the premise that money in the hands of the working class is good for the economy, it’s not clear that the minimum wage actually accomplishes that and it may even be counterproductive. If the goal is to get more money to the working class, there are simpler and more direct ways to achieve that such as tax cuts or even a basic income guarantee.
  • “Countries in Europe have high minimum wages and are doing fine.” These sorts of correlational observations without accounting for the multitude of other factors in play are notoriously unreliable. Even then, this is not as true as one might assume. Many of Europe’s most prosperous countries actually have no minimum wage, such as Switzerland, Denmark, and even Sweden.
  • “Well, maybe the minimum wage is flawed but it’s still better than nothing as far as poverty is concerned.” Again, it’s not clear that the minimum wage helps the poor at all and it may even be counterproductive. And again, there are more direct and much more effective ways of combating poverty.

The minimum wage is a shining example of how no amount of good intentions or wishful thinking can make a bad policy into a good one and how conventional wisdom can be dead wrong. It exacerbates dire poverty, it makes us collectively poorer, and it needlessly infringes on our liberty and self-agency. I hope you’ll agree, and maybe bring up some of these points the next time a minimum wage increase is served up as a solution to poverty and inequality.

1Technically speaking, this is only truly equivalent if people are required to demonstrate their capability of earning $X/hour by finding a job that pays at least that, but you get my point.

An Open Letter on a Bewildering TSA Experience

I am a staunch opponent and skeptic of the TSA. I believe there’s no convincing evidence that the agency is effective at either saving lives or stopping terrorist attacks, and that in fact there’s mounting evidence that the TSA is ineffective at its primary goal of preventing weapons from getting through security checkpoints. The costs of the TSA both in terms of dollars as well as the routine inconvenience and privacy violations that passengers experience are enormous and undeniable whereas the benefits are negligible. In fact the TSA may even be counterproductive to its main mission, as its possible if not likely that airports and private security companies would be better equipped to keep passengers safe and adapt to constantly evolving threats than a massive, encumbered nationwide bureaucracy like the TSA. Not to mention that TSA-related costs and inconveniences may dissuade people from flying so that they drive instead, which results in indisputable risks and deaths given that driving is far more dangerous than flying.

Yet I’m not writing today to complain about the TSA in general, but rather about a particularly bewildering experience at a TSA checkpoint in Las Vegas McCarran airport on 6/16/2015 that is an excellent example of the ineptitude and nonsensical policies of the TSA. I opted out of the body scanner to receive a patdown as I usually do when travelling – a personal protest against what I perceive as needless invasion of people’s privacy posed by the body scanners. When I was escorted to the patdown area, I was also notified that my carry-on bag would need to be inspected. I knew immediately what in my bag triggered the inspection, two small cans of apple and orange juice that I’d intended to drink before getting to the airport. These were indeed the problem items and I asked if I could drink them on the spot rather than throw them out since I was quite thirsty. I was told that no, I couldn’t, unless I wanted to go back outside, drink them there, and then come back in and repeat the security process. I was also told that if I did opt to drink them I would have to go through the patdown procedure twice, right there and then also upon reentering security.

The famous quote from Patrick Henry, after all, is “Give me liberty or give me death” and not “Give me liberty but not if it means slightly inconveniencing myself.”

I was torn. Going back outside, standing in line, presenting ID, taking off my footwear, emptying my pockets, taking out my laptop, waiting for an agent to pat me down, and then actually being patted down all over again posed a major inconvenience and waste of time. Then again, my flight was already delayed and I sincerely wanted to drink that juice – plus I’m not usually one to to easily give in to pointlessly oppressive government policies. The famous quote from Patrick Henry, after all, is “Give me liberty or give me death” and not “Give me liberty but not if it means slightly inconveniencing myself.” I asked if I could mull the decision over while I was being patted down, but was told that no, I must decide right then and there. Very well, I opted to go through the ordeal and save my juice. By now, in my mind the juice was not merely concentrated fruit extract mixed with filtered water, but a metaphor for the rights and liberties that Americans before me willingly gave their lives for.

I received an unusually thorough patdown despite my very light clothing, with five instances of direct contact to my genitals. Of course, I don’t mind strangers brushing up against my genitals all that much (or at least less than I mind needlessly conceding my liberties) otherwise I wouldn’t bother with the patdown procedure in the first place. I always try to be cordial with TSA agents I interact with and the agent patting me down returned my friendliness. I could tell from his tone that he recognized the absurdity of the policies surrounding my decision to drink my juice, and I asked him what would be the best way for me to try to change these policies. He laughed and told me that it’s never going to change, and that I could write my congressman or comment on the TSA website but that it wouldn’t do a thing. He said it would be a meaningless drop in a bucket, although if you’re reading this you know that didn’t discourage me from trying anyway.

[The TSA agent] laughed and told me that it’s never going to change, and that I could write my congressman or comment on the TSA website but that it wouldn’t do a thing.

I then packed my bag and was escorted through the passenger area of the airport back out to the main terminal where I repeated the security procedure all over again, although not before I enjoyed my beverages and, more importantly, the freedom to drink them. The same agent patted me down again, and again he made direct contact with my genitals on five occasions. I was then free to go, so I recycled the now empty cans in my backpack and made it to my gate on time. I hold no ill will to the agent who patted me down and put me through this ordeal, as he was just doing his job and despite more contact with my genitals than I’d received in my first 16 years of life he was actually quite accommodating, friendly, and earnest.

Now let me break down the most baffling aspects of the policies I encountered to illustrate why they must be changed.

  • What valid reason is there to deny passengers the option of drinking liquids that they take through security with them instead of discarding them? I was allowed to handle my cans of juice, but for some reason I couldn’t drink their contents? If there is some threat posed by me drinking the liquid, then why is it OK for me to drink that very same liquid and be allowed into the secured area?
  • If the juice is indeed considered too much of a potential threat to let me drink it on the spot, then how is it safe enough to give the cans back to me and escort me back to the security line where I’d be within close distance of 50-100 passengers? How is it safe to discard them in regular trash cans in a crowded area?
  • Why must I be patted down twice if I opt to drink my beverages? I was escorted back out to the security checkpoint anyhow, what is the point of patting me down before that?
  • Although this was relatively minor, if I must be patted down regardless of whether I discard my drinks or choose to drink them, why can’t I make that decision after the patdown? I strongly question whether this is even an actual TSA policy, or whether the lady who had my bag was just flaunting her power over me.

I don’t think there are any good answers to any of my questions (if there are I’d like to hear them) and for that reason I believe these policies must be changed. Better yet, the TSA’s entire procedures should be completely overhauled to minimize pointless inconveniences and intrusions. Best of all, the TSA should be disbanded entirely and replaced by private parties – parties that have major vested interests in keeping both airports and airplanes safe while simultaneously keeping their procedures efficient and convenient for passengers.

A generation of Americans are growing up being conditioned to unjustified government intrusion and seizure

The TSA in its current form is an organization so bogged down by pointless rules and policies that its very employees recognize and laugh at its plain absurdity while simultaneously being unable to do anything about it. These very same policies are also so ineffective that recent tests show that 95% of weapons make it through its checkpoints – suggesting that we remain no safer or perhaps even less safe from the threat of terrorism related to air travel thanks to the TSA’s efforts. But what’s even more apparent is that a generation of Americans are growing up being conditioned to unjustified government intrusion and seizure at every airport, while being told by government agents that their thoughts and concerns regarding these intrusions and seizures are worthless.

As my representative in congress, I hope that you prove this TSA agent wrong by showing me that my thoughts and concerns are indeed worth something. My concerns about the TSA are shared by many of my friends and relatives, although most don’t write their representatives about it as I’m doing now. Please make efforts to reform or disband the TSA or – at the very minimum – rewrite the rules concerning drinkable liquids brought through security so that they use a modicum of common sense. Thank you.

How Overzealous Reactions To Indiana’s RFRA Law Weaken The Case For Gay Marriage

If you’ve paid attention to social media and headlines news recently, you’ve almost certainly seen debate and criticism over a recently signed Indiana bill intended to protect exercise of religion from government interference which may, among other things, make it easier for business owners to refuse service to homosexual customers. It’s this aspect in particular that has drawn the ire of gay rights activists and sympathizers. Major corporations like Salesforce are chastising the bill and making efforts to take their business elsewhere. Even the Governor of Connecticut is boycotting official government travel to Indiana to make a statement.

To be clear, I am strongly in favor of gays having every civil and legal right that heterosexuals do, including marriage and adoption issues, and I find the idea of refusing service to customers based on their sexual orientation to be contemptible. I have quite a few thoughts over the spectacle concerning Indiana’s new bill that has developed over the past days, but for this post I’ll focus on just one that I find particularly compelling – that extreme reactions from the pro-gay rights camp are actually weakening one of the strongest arguments in favor of gay marriage.

A Flashback to June 26, 2013

This was a momentous day for gay (and human) rights. The Supreme Court ruled 5-4 that the Defense of Marriage Act was unconstitutional, thereby allowing the federal government to recognize same-sex marriages.

The decision rekindled debate over the issue of whether the government should permit same sex marriages, with many insisting on religious grounds that a marriage must only be a union between one man and one woman. However, I’ve long believed that the case in favor of allowing gays to marry and enjoy the same rights as heterosexual couples is much stronger than the religious objections of some of their fellow citizens.

Perhaps the strongest argument to make this case is the broad notion that a government should afford all its citizens the same rights and opportunities regardless of their identity. This identity may include race, religion, ethnicity, and gender among other factors and I see no reason to exclude sexual orientation from that list. This is simply equality under the law, and it’s worth fighting for no matter which group’s rights are at stake.

But if I had to choose the next strongest argument in favor of allowing gays the right to marry, it would be that it doesn’t affect me, or religious crusaders against gay marriage, or really anyone who’s not party to that marriage. If two people of the same gender decide to form a union and decide to call that union a marriage, it does not harm or impact me in any way and frankly it’s none of my business. Nobody’s interests are harmed or jeopardized by gay marriages, and therefore there’s no legitimate public interest at stake to justify forbidding them. “I’m uncomfortable with the idea of it” is not a good reason to ban something.

On the day of this ruling, I remember reading an article from Cracked that more or less made the same point I did in my last paragraph. It’s titled “A 30-Second Guide to How the Gay Marriage Ruling Affects You” and the short answer is “This decision does not affect you in any way.” In other words, people who object to gay marriage on religious grounds were not impacted in any way and were free to continue their lives without getting involved in gay marriages. Everyone wins! Right? Well, not quite…

Declining To Cater Gay Wedding Pizza Parties

Recently, as part of the frenzy over Indiana’s religious freedom bill, a TV reporter in Indiana walked in to a pizza restaurant and asked if the owner would cater a gay wedding. The owner said no, because they are a Christian establishment. The reaction to this comment was merciless and resulted in the restaurant shutting down. Criticisms were lobbed, threats were made, and Yelp reviews were one-starred. Even the district’s state senator stated that this “thinking has no place in this town.” How dare someone discriminate against gays like that?

Keep in mind, as this article points out, that there’s no indication that this store owner has ever refused service to gays, catered a wedding, or involved himself in gay rights issues in any way. In fact, he promised he would never refuse service to gays who walk in his door. Maybe if the follow-up question had been “you know that if you don’t cater a gay wedding pizza party, they’ll just order Pizza Hut and you’ll lose business, right?” then the store owner would’ve changed his mind after some thought.

Here’s a store that has never denied service to gays and promises it never will, yet it’s been excoriated for merely suggesting that it would decline to cater a completely hypothetical gay wedding. Here’s what I think: so what?

There’s a sharp difference to me between an establishment that forbids customers based on their sexual orientation and a business owner declining to participate in a ceremony that run counter to his religious beliefs. I’m Jewish and, although I’ve never wanted a religious ceremony, I wouldn’t lose any sleep if a wedding services provider declined to participate in my ceremony for religious reasons – I’d just call someone else. If a photographer only wants to shoot Baptist weddings in a Baptist church, be my guest. Freedom works both ways.

Not Any Of Your Business

So lets tie this back to the Cracked article I linked to earlier, how does gay marriage affect you? Apparently, hypothetically declining to serve one might get you raging internet mobs calling for blood and – perhaps more concerning – even more people calling for laws that legally require you to participate in gay weddings if solicited. That doesn’t quite have the same ring to it as “it won’t impact you in any way.” As I see it, the point of that article goes right out the window in a society where declining involvement in a gay wedding is forbidden and, with it, one of the strongest arguments in favor of equal marriage rights for gays.

Don’t get me wrong, I personally don’t see any good reason to decline to serve a gay wedding and I’d rather live in a society where everyone accepted gays the same way I and an increasingly large number of Americans do. But neither government intervention nor internet vitriol aimed at opposite-minded people will attain tolerance and acceptance for gays.

One’s personal life, sex life, and religious beliefs are one’s own business. Let’s not make it the government’s business, and let’s not make it the business of every pizza parlor in the country either.

The US Debt is Enormous and You Shouldn’t Care

Did you know that the US National Debt is almost $17 trillion and growing at a rate of hundreds of billions of dollars a year? Or wait, maybe the debt is at $70 trillion. Or is it $86.8 trillion?

Regardless, what’s important is that our country owes a zillion bajillion dollars and that growing number will lead to the federal government going bankrupt like the City of Detroit, the Chinese marching in with their US debt holdings and taking over, or worse! Even in the short term, you have people like Donald Trump stating that “When you have [debt] in the $21-$22 trillion [range], you are talking about a [credit] downgrade no matter how you cut it.” A credit downgrade! That means the US would have to pay even higher rates on the money it borrows, meaning the debt would increase even faster! And Donald Trump is really rich, so you know he’s smart and wouldn’t be making ludicrous claims with no basis in reality.

Mother of God...

Mother of God…

Are you terrified yet? Ready to demand that the government balance the budget or, better yet, pay off our debt entirely? Relax. I was once like you, worried that the US Government was overspending and undertaxing our way to financial collapse and putting an undue burden on future generations. I cringed at the thought of the US government paying nearly $3 trillion in interest – almost $10k per American – while I responsibly paid all my credit cards and debt payments in full each month. I got a warm, fuzzy feeling from politicians and journalists who talked of balancing the federal budget (that would probably include almost every politician these days). But I, like many others, bought into a critical misunderstanding of how taxation, spending, and public debt work with fiat currency like the US Dollar.

In reality, there is no coherent possibility for the US government to go bankrupt, experience a credit downgrade, or be coerced by foreign debt-holders due to excessive debt. These are all logically absurd outcomes that don’t even merit acknowledgment. In fact, just the notion of any government being in debt of the currency it issues is rather absurd as well.

Chuck E. Cheese’s and the Never-Ending Supply of Fiat Currency

Anyone familiar with the term “fiat currency” is aware that the US government has an infinite supply of dollars at all times. Every dollar in circulation today was created, and distributed, by the US government at one point or another. Note that I used the term “distributed” instead of “spent,” but those words are equivalent in this context since the distribution of dollars from the US government to other parties is the very definition of government spending. Once a dollar is in circulation, it can be used to pay taxes or exchanged for goods and services in the free market.

The US government’s capacity to produce dollars is quite similar to Chuck E. Cheese’s capacity to produce its tickets. It can create them and distribute tickets however it likes, and it also collects them at their arcade stores. But, the process of awarding tickets through its machines doesn’t depend on how many tickets are collected at their stores. Quite simply, Chuck E. Cheese’s can never run out of tickets or ever have a compelling need to acquire them.

All that's missing is "This note is legal tender for all debts, public and private."

All that’s missing is “This note is legal tender for all debts, public and private.”

Now, imagine a world where Chuck E. Cheese’s is duly elected to represent the people, and a new constitution is drafted giving them powers of taxation and declaring the ticket as the national currency. Let’s assume that, on day one of this new order, the government has not yet distributed any tickets. Although they still have infinity of them, as they always do, the people have none and are using a barter system (or maybe SOJs and Bitcoins) for trade.

It’s not really a government without any government spending, so President Cheese himself declares that they are hiring policemen, teachers, road builders, and miscellaneous paper pushers to be paid in tickets. To his dismay, he gets exactly zero applications. Nobody is trading tickets, nobody has a need for them, and in fact tickets don’t even burn well enough to heat one’s house. Likewise, nobody is willing to take a job that pays in tickets.

But President Cheese is a resourceful mouse and he figures out a solution. “All citizens will be required to pay a tax of 10 thousand tickets at the end of the year, and violators will be thrown in jail for tax evasion!” he decrees. Now that may not be the fairest way to allocate tax burdens to the population, but it does the job. People, now clamoring for tickets to avoid jail time, sign up to become government employees in droves. Those that don’t join the public sector instead trade their goods and services to government employees in exchange for tickets. Soon, everything from aardvark meat to zucchini bread can be bought and sold for tickets.

For the sake of this example, suppose that 10 billion tickets are paid to government employees in the first year, while 9 billion tickets are collected in taxes. With 10 billion tickets going into economy, and 9 billion coming out, that leaves 1 billion tickets in circulation. It also means that the government spent a billion more tickets than it collected, although strangely there is still no government debt. At the end of the day, the government leveraged its power of taxation to take some of the workforce and put it towards providing roads, police, and teachers. The government can continue operating with this budget as long as it wants. The only direct impact of the deficit is that a billion tickets are put into circulation each year. Sounds all well and good, right?

Does the Deficit Matter at All?

Remember that government spending injects money into an economy, while government taxing takes it away. If you have too much of the former, but not a lot of the latter, the supply of money grows at a very fast pace. When it grows faster than the output of the economy, the currency in question experiences inflationary pressure. Inflation is not always a bad thing – it is effectively equivalent to a tax on those who hold money – but large or unpredictable amounts of it usually are undesirable.

Yet, sometimes inflationary pressure and putting money into an economy can actually result in a more productive and prosperous society. This is generally true during recessions, including the recent 2008 crash that we’re still recovering from. In a recession, businesses lose revenue and therefore lose money available to spend on wages. Cutting the price of products or services is easy – consumers love a good price reduction – but wages are another story. Wages are sticky, meaning that people don’t like accepting pay cuts, so instead businesses employ fewer people to reduce their wages paid. That leaves us with unemployment, and unemployment represents wasted production in an economy.

Reduced taxes would give businesses more money to spend on wages and individuals more money to buy what they want, decreasing unemployment and helping put an end to the recession. Alternatively, increased government spending could make use of the labor being wasted to unemployment and end the social ills that come with it, also leading to a faster recovery from recession. Either of these, of course, would result in a larger deficit.

Considering all this, cutting taxes and/or increasing spending until a recession is over and unemployment goes down to low levels seems to be a pretty obviously good idea. Yet our government doesn’t do it nearly as much as it should. Why not? Because, as I indicated in the beginning of this article, too many people are paralyzed over fear of national debt.

Instead of issuing new currency to cover deficits, the US government issues treasury bonds. Issuing these bonds is not necessary for government spending, it is merely a relic in constitutional procedure from when the US dollar was on the gold standard. The only practical difference between issuing currency and issuing treasury bonds is that bonds pay interest, effectively encouraging saving and putting upwards pressure on interest rates in the free market. This occasionally results in weird situations when the Federal Reserve decides it wants to lower interest rates, like the government buying treasury bonds from itself. It also means the government has an obligation to redeem those bonds for dollars when they mature, and this is what’s known as the national debt. The term “debt” is something of a misnomer and is not the same debt that people, businesses, and local governments are used to. To “pay off its debts,” the government must simply convert outstanding treasury bonds back to dollars.

The Phony Debt Crisis

Rather than handling fiscal policy in a way that maximizes the well-being and productivity of society, policymakers in Washington bullheadedly pursue disastrous policies in the name of debt reduction with little basis in reason or reality. The size of government is a legitimate question for society to debate, yet rather than compromise between cutting taxes and increasing spending during a recession, we often do the opposite. In the face of a rampant unemployment, Republicans ask for spending cuts while Democrats ask for tax increases.

Actually, our country CAN literally sustain deficit spending forever, as can any country with a sovereign currency.

And now, with the debt rapidly approaching a completely arbitrary debt ceiling, some congressmen are threatening to allow the US to default on its debt payments, despite the massive negative impacts that could have on the economy. That’s like the ocean defaulting on payment of water. Or Chuck E. Cheese’s defaulting on payment of its tickets.

And before you blame it all on the Republicans, keep in mind that it wasn’t long ago that our current President voted against a debt ceiling increase himself:

Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

I therefore intend to oppose the effort to increase America’s debt limit.

None of this is accurate, except perhaps the part about a failure of leadership. Our children need not be burdened by today’s deficits because the government doesn’t need anything from them to pay off its debts. What matters for our children is that they have the technology, education, and infrastructure to provide for their generations. Even if this quote were true, the right away to do something about it wouldn’t be to default on debt payments.

Why can’t our policymakers simply set government spending at a level that allows it to provide the services that society desires from it, and then set taxes at a level that minimizes unemployment without letting inflation get out of hand? Why must our leaders posture, fear-monger, and repeat blatant falsehoods? Is that really too much to ask?

This kind of nonsense policy and rhetoric will continue as long as Americans continue to miscomprehend the nature of our debt and the effects that deficit spending has on an economy. Politicians will capitalize on fear and misunderstanding of our national debt to help their election chances, but don’t allow yourself to be fooled. I only hope that this article takes us a step in the right direction.

Why You Should be Against Sex Work Prohibition

Today is Friday the 13th, a day sex workers’ rights activists have chosen to raise awareness for their cause. I sympathize with their cause, and although the laws and stigmas against sex workers don’t affect me personally, their struggle for individual liberties and against harmful and overbearing laws is one that everyone should care about. Consider this post me doing my small part.

As you probably know, almost every country in the world has laws against prostitution and other sex work, and the Land of the Free™ is no exception. In many states, getting convicted of paying or receiving money for sex is a felony and can land first offenders in jail for up to a year. In Louisiana, “Crime Against Nature” laws require some convicted prostitutes to register as sex offenders – grouping them with rapists and child molesters. Clearly, our country treats the voluntary exchange of sex for money as quite a serious offense.

But why? I’ll attempt to deconstruct the two arguments I see used most to justify criminalization of sex work.

Sex Work is “Immoral” or “Indecent” – But That’s Just, Like, Your Opinion, Man

Some form of this accusation gets used against many private, voluntary activities and it is completely without merit in every instance.

There happens to be a handful of major religions that view sex work as inappropriate, and many of their most zealous followers push for prohibition for that reason. Of course, those religions may also view extramarital sex, contraceptives, or masturbation as inappropriate. In fact, strict interpretation of the scripture of those religions may even forbid cursing, eating lobster, or cotton/polyester blends. Is any of this justification for prohibition of certain activities? If enough people found fabric material blends objectionable, would that be grounds for police to set up stings to sell people black-market fabric and arrest those that buy it?

Of course not. People whose religion or personal values disagree with prostitution are free to refrain from it, or even speak out against it. But they have no grounds to push for laws that criminalize it in a free country. The same goes for any other private, voluntary activity.

Sex Work Exploits Women – So We Should Throw Those Women in Jail

This is a slightly trickier issue. It typically goes something like this: “Sex work is exploitation of women by men, and many women are forced into sex work by poverty, human trafficking, or sex slavery.”

Viewing all sex work as exploitation touches on the previous issue of morality. As I see it, it is the woman in question who gets to decide if she is being exploited, not police or lawmakers. Almost by definition, a person who is completely voluntarily engaging in an activity is not being exploited. If a healthy adult woman wants to do sex work for her own reasons and motivations, where is the exploitation? Is she not able to consent to the ways in which she uses her body? Many people would never dream of doing sex work, but projecting one’s own values on others and then forcing them to abide by those values is not a legitimate way of helping people.

Where women often go to stop being exploited

Where women are often held involuntarily to save them from being exploited

But what about women who really are forced into sex work against their will by others? Although the number of these incidents is often greatly exaggerated, this is a real possibility. Quite simply, this should absolutely remain illegal – although with no criminal charges for the women – and is not unlike other forms of slavery. When work is coerced, it is no longer work.

Furthermore, I suspect that decriminalizing voluntary sex work would only serve to reduce or eliminate sex slavery and human trafficking for purposes of sex work. When a black market exists for a certain good or service, unscrupulous criminals emerge to meet demand. Lawful alternatives can crowd out those criminals.

Ironically, some of the most ardent supporters of this claim are self-proclaimed “feminists.” I use scare quotes here because I find it hard to call anyone who would support increasing women’s restrictions and jail populations a feminist.

Only Bad Things Come From Prohibition

So now you know some of the common arguments for sex work prohibition and why they’re completely bogus. What about the consequences from the policies we have today?

There are many similarities between prohibition on sex work and prohibition on drugs. However, many of the most addictive and destructive drugs pose great threats both to society and to users. Certain drugs can stop people from functioning normally and cause long term health problems or even death. Reducing society’s use of certain drugs is a worthy goal with tangible benefits.

“I believe that sex is one of the most beautiful, natural, wholesome things that money can buy.”
Steve Martin

I can’t say the same for sex work. Sex and the desire for sex is a normal part of being human. Safe sex is relatively consequence free, and is actually widely considered to confer health benefits. Most men crave sex, and society hardly thinks twice if men only interested in sex woo women with charm, fancy cars, or expensive jewelry. So where is the harm in allowing voluntary sex work to occur?

If one man pays a woman for sex, and another man promises a woman he’ll call her the next day if she sleeps with him but then never does, who has committed the greater misdeed? The first man engaged in an honest transaction that benefited both parties, while the second man deceived the woman he slept with and probably caused her some emotional suffering after the fact. Yet, society has decided to throw the first man – and the woman he slept with – in jail, while the second man is deemed a “player.”

Regardless, and much like the drug war, prohibition is woefully ineffective at eliminating that which it criminalizes. Rather, it fills our jails with non-violent offenders and pushes voluntary activities into the darkness. Meeting a stranger for sex in a private location could be considered dangerous, but it’s far more dangerous than it needs to be when whores are reluctant to go to the police for help out of fear that they’d be thrown into jail themselves. In fact, you don’t need to look hard to find multiple stories of police officers themselves threatening whores with arrest to extort sexual favors from them.

By now I hope you’re thinking “Well, gee, anti-prostitution laws seem really stupid and actually harm the people they purport to help.” It took me a while to come to this conclusion myself, and I spent most of my life hardly giving sex work prohibition a second thought. Anti-prostitution laws have existed and caused harm for centuries, and they won’t start coming off the books until public awareness about this issue increases. Please share this with people you know, and help sex workers get the attention and the rights they deserve.

A Letter Against Dragnet Domestic Surveillance

Recently, I’ve been making an effort to persuade or pressure my representatives into curtailing the domestic surveillance and counter-terrorism programs that arose after 9/11. To put it briefly, I think these programs are an unwarranted, unconstitutional, and unprecedented invasion of privacy that pose more dangers to American than they eliminate.

Two days ago, I received a response from Senator Tim Kaine from Virginia. His letter attempted to deflect my concerns, but wound up having the opposite effect. It was apparent to me that he is not interested in stemming the tide of growing domestic surveillance and eroding liberties and privacy, much less changing the status quo.

I’ve reproduced the letter from Mr. Kaine in full below:

Dear Mr. Mcnally:

Thank you for contacting me about recent reports concerning the National Security Administration’s intelligence programs. I appreciate hearing your concerns.

On June 6, 2013 details of two National Security Administration (NSA) programs were published in the media as a result of leaked confidential documents. These articles indicated that since 2007, under provisions within the Foreign Intelligence Surveillance Act and the PATRIOT Act, the NSA has legally monitored private communications in an effort to increase national security.

Many have expressed legitimate concerns about the privacy implications of this policy. I believe there needs to be an open discussion about the limits of surveillance, the need for transparency, and the protection of Americans’ privacy, while maintaining national security.

The primary mission of the U.S. intelligence community is to detect and prevent the very real threat of terrorism on our homeland. According to General Keith Alexander, Director of the NSA, and Robert Mueller, Director of the Federal Bureau of Investigation, the intelligence community has successfully used these programs to identify and thwart dozens of terrorist plots at home and abroad. Additionally, leaders from the House and Senate Intelligence Committees have defended these programs stating that they are transparent, lawful, and have been instrumental in defending our homeland.

It is also important to note that these intelligence programs are limited in scope to viewing phone records and other metadata under strict court-enforced protocols. They do not allow authorities to listen to private conversations or access private e-mails, and court orders are required before any additional information to be obtained. President Obama has urged the intelligence community to review, declassify, and release information regarding these programs to the public to ensure that the programs aren’t jeopardized and more importantly, that Americans are made aware of the intelligence programs currently in place.

Please be assured I will work to ensure that efforts to improve our national security protect constitutional rights in a balanced way.

Thank you once again for contacting me on this important matter.

Tim Kaine

I was quite disillusioned after reading this, particularly since I’d voted for Kaine’s Senate run just last November. So, the next day I crafted another letter in response which I’d like to share on this blog. It doesn’t go into detail as to why I disapprove of the NSA’s programs, but rather focuses on the fallacies in the arguments that Kaine (and others) use to justify them. I’ve copied the letter below, with emphasis added for this post.

This is in response to your letter on July 29, 2013 regarding my concerns over the NSA’s intelligence programs.

I was extremely disappointed with your justification of the NSA’s practices. In that letter, you made several statements to which I take exception.

  • You called for an “open discussion” about surveillance, privacy, and transparency. This is a line repeated several times by the Obama administration. While I agree that an open discussion is necessary, I see this line as more of an attempt to deflect attention away from much needed reform (as it was when the Obama administration urged Congress to vote against an amendment that would defund suspicionless, dragnet data collection on Americans). For one thing, to have a legitimate open discussion about these issues, Americans need to know the facts about what their government is and isn’t doing. Is the government monitoring which people we e-mail? Which websites we visit? Unfortunately, this information remains confidential for the foreseeable future while the government aggressively prosecutes and demonizes those who dare leak it to the public.

  • You call the threat of terrorism in our homeland “very real.” I disagree, at least relative to countless other threats that kill or injure Americans in far greater numbers. In fact, according to numbers from the Heritage Foundation, more Americans have been killed in our misguided wars/occupations in Afghanistan and Iraq (~6700) than in all acts of terror against Americans worldwide from 1969 to 2009 (~5600). This number accounts for 9/11, which is responsible for over half of those deaths. This is but one example of how inordinate efforts to curtail terrorism can wind up doing more harm than the terrorism itself.

  • You note that members of the House and Senate have described the NSA’s programs as “transparent.” This claim is brazenly dishonest and deceitful. Were it not for a leak by a government contractor, the NSA’s practice of collecting every American’s phone records would continue to operate in complete secrecy – even secret from Congress. Meanwhile, other parts of the program – including those we’re not even sure exist – continue to operate using secret warrants, secret FISA courts, and secret legal reasoning and justification. How is any of this even remotely transparent?

Proponents of aggressive surveillance and counter-terrorism practices often claim they are necessary to protect our freedoms and democracy. I believe that is nonsense. I believe that such practices are greater threats to freedom and democracy themselves than the threats they’re designed to eliminate. Privacy and civil liberties have been eroded drastically during the so-called “war on terror.” As for democracy, how can democracy and public discourse about counter-terrorism occur when the federal government is concealing or even lying about its surveillance programs and the innocent deaths our actions are responsible for?

Over the last 12 years, I have many times felt embarrassed to be an American. Embarrassed to have a government that recklessly kills innocents, tortures prisoners, invades the privacy of its citizens, and misleads the public – all in the name of fighting terrorism. Embarrassed to have elected officials who pay lip service to the founding principles of liberty, freedom, and due process while simultaneously trampling all over them. However, I was very proud last week to watch a group of Congressmen from various states and backgrounds speaking spiritedly on the House floor against the suspicionless surveillance of every American.

The amendment these Congressmen supported, which would end the NSA’s dragnet surveillance of Americans, failed narrowly. However, I suspect that this type of reform is just beginning. I strongly urge you to join this reform and work towards restoring the United States’ place as a worldwide leader in freedom, liberty, and human rights.

I was expecting to end this blog post here. However, the morning after I wrote that letter, new information was released outlining an NSA program that monitors nearly everything Americans do on the internet, including e-mail and visiting websites. This information, of course, wasn’t released by the Obama administration or anyone within the NSA, but rather through leaks.

How quaint, then, that Tim Kaine’s letter insisted that the NSA does not “access private e-mails.” Or that Mike Rogers said that the NSA doesn’t collect e-mails and Michelle Bachmann claimed there is more information in the phone book than in the NSA database, both statements being made on the House floor moments before they voted to continue these programs.

I am outraged, and many other Americans are as well. I urge you to contact your representatives and demand that they join the fight against dragnet domestic surveillance. If they refuse, do your country a favor and vote them out of office in the coming election year.

It’s all Monopoly Money Now

I used to play Diablo II, an action role-playing game that could be played online with other players. In the game, the players’ characters would slay monsters which occasionally dropped weapons, armor, and other items that could be used to make characters more powerful. The items they’d get from slaying monsters would be generated randomly by the game, and every now and then they’d get lucky and find exceptionally rare and powerful equipment. However, the valuable items found were not always useful to the character that found them, and an in-game barter system quickly arose.

Let’s say I found a rare crossbow, but my character had no need for a crossbow and instead could use a better helmet. I would look for another player who wanted a crossbow and was offering a helmet so we could make a mutually beneficial trade. However, this was not always a simple task. What if the player offering the helmet didn’t want a crossbow? What if the player who wants a crossbow doesn’t have a helmet to offer? What if someone does want a crossbow and offers a helmet, but my crossbow is much rarer and more powerful than his helmet, or vice versa? These issues complicate trading.

Currency and its characteristics

Currency can facilitate these types of trades. However, the Diablo II universe did not trade in dollars, euros, pounds, or pesos. There was an in-game currency called gold, but it was exceedingly common and there were restrictions on how much of it a character could carry or store which made it useless for trading rare items.

A useful form of currency should have the following characteristics:

  • Fungibility: One unit of the currency must be equivalent to any other units.
  • Portability: It must be easy to move and carry around significant amounts.
  • Divisibility: It must be able to be split into smaller quantities for precision when performing transactions.
  • Scarcity: It must be difficult to find or produce in large quantities.
  • Durability: It must not spoil or decay over time.
  • Acceptability: It must be recognizable, desirable, and demanded by a large portion of the population.

Over time, one item started being used as a de facto currency in the Diablo II world. The Stone of Jordan (SOJ) was a rare type of ring that was useful across all the different character classes and most character levels. It was small and therefore possible to carry and store large amounts of them at once. All SOJs were more or less equivalent to each other, and they never decayed. As such, it had all of the above characteristics except divisibility, and soon all rare items and valuable transactions were denominated in SOJs. A player could sell his rare crossbow for SOJs, and then use them to buy a rare helmet. Trade flourished and the players benefited.

Stone of Jordan

Suppose that one day a player in Diablo II announced that he had made his own rings. These rings were small and durable like SOJs, but they conferred no bonuses to the character that wore them and were therefore worthless on their own. Furthermore, the player that made these rings would have the ability to make more of them whenever he wanted at his own discretion. Imagine you were a Diablo II player and this player offered to trade you his rings in exchange for your rare equipment or SOJs. You would laugh him off and tell him to take his useless trinkets elsewhere, right?

SOJs in the Real World

Now, let’s go back to the real world. Currency has been a boon to trade and the prosperity of humanity. Gold and silver are the SOJs on planet Earth; they are fungible, portable, divisible, scarce, durable, and widely recognizable and desirable. They’ve been valuable across generations and across eras. However, they are not as convenient to use for currency as paper money. It’s much easier to give someone exactly $3.50 than it is to give someone the equivalent amount in gold or silver (which would involve a lot of dividing and weighing I imagine).

There is a workaround for this, however. Banks can accept deposits of gold and silver and issue bank notes that are redeemable for the gold and silver on deposit. These notes can come in varying denominations – grams, milligrams, etc… – which makes the underlying commodity even more portable and divisible. Notes from banks that are sufficiently reputable and reliable can be considered as good as the gold or silver they represent. There are shortcomings of such a system, namely the risk of fraud and bank failure, but that is a different topic altogether.

Gold, silver, and notes that represent them have been used as currencies in human history because they were the best forms of currency known to man at the time. Suppose that you lived in a society where these were the most widely used and accepted forms of currencies. And suppose that, as in my Diablo II example, a person started making his own currency and this time called it “monopoly bucks.” These offered the same convenience that bank notes did but had no intrinsic value of their own and were not redeemable for anything that did. This person could also make more monopoly bucks whenever he felt like it. If he came up to you and offered you his monopoly bucks in exchange for your gold, silver, or other objects of value, wouldn’t you laugh him off just as you would the Diablo II player peddling his trinkets?

Fiat money – “This is valuable because I said so”

If, however, a national government were the entity making the monopoly bucks instead of some arbitrary person or private party, what you wind up with is basically the fiat money system that is used all over the world today. What are fiat bills if not arbitrary, inherently useless artifacts that can be created in unlimited quantities by an issuing authority? They are not truly scarce – producing them is a matter of turning on the printing press. Perhaps more importantly, they don’t provide any functional advantages over other forms of paper currency.

500 billion dinar bill

That’s a lot of zeroes…

What makes US Dollars any different from the monopoly bucks in my previous hypothetical? Americans are, to a certain degree, compelled to use dollars by the government. Legal tender laws make it so that only debts in dollars are enforceable by the courts. Taxes are imposed in dollars, and Americans must pay capital gains tax on their nominal gains when they convert other currencies to dollars, even if those gains do nothing more than keep up with inflation.

Dollars can satisfy the demands of the US Government and, to that extent, they have a use that other fiat currencies don’t. Even in places outside of the US government’s jurisdiction, dollars are recognized as valuable because it’s understood that they are useful for people in the USA. However, the value of the dollar isn’t due to it being any more desirable or better suited for use as a currency than other types of paper money. Its value is artificial and propped up by the policies of the US government.

Bitcoin – The Cadillac of monopoly money

Bitcoin is a decentralized, virtual currency with a predictable and limited supply. Bitcoins are inherently worthless and they are not backed by anything of value, like fiat money. However, they have essentially all of the desirable characteristics of currency.

Bitcoins are extremely portable; carrying large amounts is no more difficult than carrying small amounts and bitcoins can be sent across the globe in seconds with virtually no transaction fee. They can easily be divided down to eight decimal places. They are scarce, with a fixed long term supply of roughly 21 million bitcoins and no possibility for any party to increase the bitcoin supply or to create counterfeits. Bitcoins never decay, and large amounts can be stored securely without needing to trust a bank.

When I tell people about bitcoin (which is often), I usually am faced with skepticism. Some of the first questions I generally get are:

“What are bitcoins backed by?”

“Who decides what they’re worth?”

“Who invented bitcoin and who makes new ones?”

The answers are simple: Nothing. Nobody decides but the free market. An anonymous software developer designed and released it, all the code is open-source and the process for making new bitcoins is entirely predictable and open to anyone with a computer.

Bitcoins combine the scarcity of gold and silver with divisibility and portability even greater than that of paper money; and that’s without needing to trust banks to honor their notes. Although bitcoins are inherently worthless, their scarcity and superlative usefulness as a currency makes them valuable to society and to whomever holds them. That is something that can’t really be said about fiat money.

Many still dismiss bitcoin as online funny money, yet those same people are generally blissfully unaware and accepting of the inherent worthlessness of the government fiat money that pervades their lives.

I don’t expect the US Government to start printing $500,000,000,000 bills any time soon, although that is an inevitability if we continue with our current monetary system. Nor do I expect it to revise its legal tender laws or accept alternate currencies to satisfy tax payments. But, if that were to happen, I wonder how long it would be before people realize their dollars are only truly good at hotels on Boardwalk and Park Place…