Response to Billionaire Nick Hanauer: If the pitchforks are coming, they shouldn’t be for you

In response to Mr. Hanauer’s recent piece on wealth inequality, “The Pitchforks Are Coming…For Us Plutocrats,” I have to admit I did enjoy his historical references and his acknowledgment that a rapidly widening wealth gap can be a dangerous strain on the fabric of our society.  However, I had to point out a few glaring errors in his assessment.

First, he highlights the growing inequality gap, but doesn’t really delve deeply into why it’s getting worse and jumps right into the vaunted “we must do something” liberal siren song.  Did it ever occur to Mr. Hanauer that much of the rapid growth in the Gini coefficient has actually occurred under the current President?  Could it be that liberal policies and over-regulation contrived in the name of “helping” the middle class inadvertently create barriers to folks that can’t afford to have a tax attorney or compliance department on staff, and thus hinder their ability to succeed?  Too often, “doing something to help” is less about those that need it and more about the ego of those providing it.  The pitchforks should be for our self-serving politicians who, by either ignorance or willful malignance, have, through piles of misguided legislation, created a crony capitalist system that stacks the odds in favor of entrenched interests at the expense of small businesses.

This self-hating capitalist then proceeds to flagellate himself and his fellow successful people, as if becoming uber rich is some sort of sin.  I guess he’s just “checking his privilege.”  He cites Henry Ford, which is a great point.  However, he neglects to mention that Ford chose to pay his workers higher wages of his own volition; he was not compelled to do so by the government.  I have since sent Mr. Hanauer a copy of Milton Friedman’s Free to Choose, he should read it.

Mr. Hanauer then cites his idea of “middle-out” economics as an alternative to “the old misconception that an economy is a perfectly efficient mechanistic system.” Isn’t this the central tenet of Keynes, that a country’s economy is a well-oiled machine that can be actively “tweaked” for optimal performance?  It isn’t.  To quote George Will in one of his recent articles, our country “is the spontaneous order of 316 million people making billions of daily decisions, cooperatively contracting together, moving the country in gloriously unplanned directions.”  I also agree with Hanauer that a thriving middle class is the source of American prosperity, but he then subverts his own argument by suggesting government is the proper entity to engineer such prosperity.

Then comes the plunge right off the deep end as Mr. Hanauer starts touting the beneficence of the $15 minimum wage in Seattle.  Where do I begin?  The minimum wage is nothing more than a government imposed subsidy on the purchasing power of workers, and if you spend any time thinking deeply about economics, you’d know that when you subsidize anything, you invariably raise the price of it.  What that means is that since minimum wage workers now have more money to spend, the market will adjust to squeeze more of it out of them, and you’ll see rising prices, i.e., inflation.  It may seem like $15 minimum wage isn’t a risky policy, but that’s only as long as folks think its “cool” to plunk down $8 for a cup of coffee.

Further, if the McDonald’s fry cook produces only $5 of value per hour, but you are required to pay him triple that, the fruit of his labor must now increase in price accordingly for the employer to continue to make a profit.   Is that employer going to keep that employee, or maybe find a cheaper way to get the burgers off the griddle?  What would you do?  The question that Mr. Hanauer and all liberals always fail to answer is if these policies are such a good idea, then why do they have to be mandatory?  Bottom line, the miracle that has been the tech boom on the west coast didn’t really occur because of government intervention, it happened in spite of it.  So his assertion that his city “kick’s every other city’s ass” is only temporary, especially now that it’s applying a fix to something that he just denoted by virtue of inherent awesomeness wasn’t broken to begin with.

Mr. Hanauer vilifies Wal-Mart and McDonald’s, but neglects to mention the millions of jobs provided and the millions of folks lifted out of poverty by these businesses.  He asserts that people will absolutely not do the “right” thing, but that’s subjective.  What’s “right” or “fair” differs from person to person.  He actually makes a great proposal that I would take him up on, though.  If Wal-Mart paid its 1 million lowest-paid employees an extra $10,000 a year in exchange for the government cancelling all food stamps, Medicaid and rent assistance, I’m pretty sure every taxpayer would take that deal in a heartbeat.  Most would even throw $10 to Wal-Mart to help cover the cost.  Long term, that’s a win for the American balance sheets.

The biggest fallacy of Mr. Hanauer’s argument, though, reveals his amateurish understanding of economics.  He states that he socks his money away in savings, where it doesn’t do the country much good.  However, that is his choice, he shouldn’t be penalized for it (like most savers that see their savings sneakily devalued through low interest rates and inflation), and HELLO!!—SAVINGS ARE MERELY DEFERRED SPENDING!!

Mr. Hanauer does redeem himself slightly when he mentions that we need to reduce demand for government and that the solutions to most problems lie at the state and municipal levels.  But he loses his way once again when he suggests that capitalism should be well managed because left unchecked, it tends toward wealth concentration and societal collapse.  That’s crony capitalism, not truly free market capitalism.

He closes by questioning trickle-down, fact-based economics with some self-deprecation, asking rhetorically if he is such a superior person to belong at the center of the moral and economic universe.  The answer is no, of course, but he is proposing just such dominion of one person over another when he is asking that someone compel me, through government action, to pay more than I think I should for the labor of my employees.  I don’t know about you, but it seems this son of a pillow salesman is continuing his family’s profession—by peddling fluff.