Free banking proponents often criticize central banking, rightly, for its poor track record maintaining the purchasing power of the monetary unit. That is, we suffer from inflation under central banking. Despite our criticisms, there remains a lot of confusion (equating the Consumer Price Index–or one of them at least–with inflation, eg.).
One of the biggest lessons that seems to have pierced a popular discussion is the minimum wage debate. Including, but not limited to, President Obama’s State of the Union address. In that address recently, the president spelled out his case citing a few states that have acted on their own as well as private businesses acting of their own accord before adding:
Today the federal minimum wage is worth about twenty percent less than it was when Ronald Reagan first stood here. And Tom Harkin and George Miller have a bill to fix that by lifting the minimum wage to $10.10. It’s easy to remember: 10.10. This will help families. It will give businesses customers with more money to spend. It does not involve any new bureaucratic program. So join the rest of the country. Say yes. Give America a raise.
PolitiFact.com rated the claim as “mostly true.”
Obama said, “the federal minimum wage is worth about twenty percent less than it was when Ronald Reagan” gave his first State of the Union address. Obama’s not far off, but it’s actually closer to 16 percent less.
And using Reagan to make a case to raise the minimum wage should be taken with a grain of salt since the former president never increased it during his two terms. And by Reagan’s last State of the Union, the minimum wage was $2 less than when he first took office, if you factor in inflation.
The statement is largely accurate but needs clarification or additional information, so we rate it Mostly True.
The Associated Press however put the proposal in perspective and was less kind.
Anecdotally however, I have noticed that there is a strong correlation between those who support a raise in the federal minimum wage and having a central bank with easy credit policies. I would love to be able to see some cross tabs in polls to back up my observation, but I’m pretty sure of it based on personal observation.
Ideally, one would think, that the intellectual disconnect would offer a teaching opportunity, but there seems to be little sign of that. I suspect that since so very few people are personally affected by the minimum wage that the debate is more about style than substance. And half of those affected positively are young (I don’t want to get into the debate now about those priced out of the workforce).
Since the minimum wage idea is more abstract than meaningful for most supporting the idea of raising it at the federal level (and, I think, of the Fed’s easy money policies), we may has lost that teaching opportunity. Or so I thought. At least locally in DC, one friend of ours Dave Doctor made the same inflation points at a hearing that actually does affect the lives of people here. As the Washington Post reported (and an audio clip here), the issue affects Metro riders too:
“There was Dave Doctor, 43, of Arlington, holding forth on the nation’s monetary system, then pivoting to the issue of subway dust.”
“If you’re upset about the increase, the place to go is not to these people, it’s to the federal government,” said Doctor, in defense of Metro. After rattling off a bunch of percentages regarding growth in the nation’s money supply, he said: “There are so many more dollars out there now. The Federal Reserve created this. . . . The fares actually are not going up. The value of our money has gone down.”
Doctor, who manages an apartment building, said: “To put it in perspective, let’s say they charged one bottle of water for a fare. Then they increased it to two bottles of water. But then you find out the bottle only has 25 percent as much water as it used to.” He went on in this vein until a buzzer sounded, signaling his three minutes were up.
Hopefully these and other examples will start to get those who default to defending the Fed to challenge their thinking.