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Trying to legislate value out of thin air

Orrin J. H. Johnson
Orrin J. H. Johnson
Opinion
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Front of the Nevada Legislature building

I have a solution to poverty in Nevada. With one stroke of his pen, Governor Sisolak could make every Nevadan wealthy beyond all of our dreams. All we have to do is mandate a minimum annual salary for all workers to be a million dollars.

Think employers can’t afford that?  What are you, one of those people who only cares about corporations instead of real people?  Not to worry, though – with every working Nevadan now a literal millionaire, the money will flow back to business all across the state. Sure, prices might have to go up by thousands of dollars, but now everyone can afford it – everyone wins!

OK, OK, so maybe there isn’t that much actual money in the state of Nevada. That’s all right – we can just get the feds to print more, and in higher denominations!  Other highly progressive countries have done just that. And honestly – most money is nothing more than electronic data anyway – what’s the harm in adding a few zeros to everyone’s bank account?

This example is silly, of course, but there is no real difference between my “Everyone a millionaire!” plan and any other proposal to create economic value by legislative fiat. Artificially raising wages doesn’t create real value; it just raises prices for everyone and forces employers to seek hiring alternatives, which hurts the economically strained the most in the end.

But the minimum wage isn’t the only place where politicians want to mandate prosperity without understanding the difference between money and real wealth. The report released this week by the Guinn Center about Nevada’s “rising wage gap” is full of recommendations that, if passed, would create the illusion of economic stability and waste millions of dollars on government programs and bureaucracy, while doing nothing to help Nevadans in the long term.

Whenever people talk about “income disparity” as a monstrous problem, beware. It is a call to envy and resentment and division, and nothing more. Unless the richer person than you literally stole it from your wallet or embezzled it from your bank account, it’s just not your business. When you consider that the easiest way to “solve” this problem is for everyone to be poor together, all of a sudden a few other folks getting super-rich doesn’t seem to be a terrible price to pay for the rest of our opportunities for upward mobility. The rich being rich are not the cause of other people’s financial struggles, and anyone telling you otherwise is lying to you in order to get or stay in political power.

The Guinn Center’s report describes the average median household income as less than what it was prior to the Great Recession, and then recommends a host of government entitlement programs to “fix” it. The problem is that there doesn’t seem to be any accounting in that figure for our explosive population growth over that same time period. I’d like to see wage growth data that only looks at people who have been in Nevada for the past decade.

It’s not that new arrivals to our state don’t matter. It’s that their coming here is a sign of prosperity in and of itself, even as it depresses poorly defined statistics. Consider – people, and lots of ‘em, are choosing to move to Nevada. People move for all sorts of reasons, but the sheer mass of people moving here says pretty clearly that they believe their lot will improve if they come. The fact that they’re staying and raising families here suggests they’re right. But people who pull stakes and move to a new state wouldn’t be moving in the first place if they were rolling around in excess cash in their previous home, which would explain the seemingly negative statistic.

The Guinn report doesn’t stop with minimum wage in its suggestion to lawmakers that they make something out of nothing. For example, it points out that there is a lack of post-secondary education opportunity and suggests further subsidizing college tuition. But college tuition is already absurdly over-inflated, which university administrations can do when they know the government subsidies will always be there and when students can’t discharge student loan debt in bankruptcy. What we need in Nevada are more colleges that can compete for students (and their tuition fees) and to ensure that (especially if tax dollars are subsidizing them) colleges and trade schools are providing substantive educations with degrees the actually return their investments to their graduates.

It’s not unlike piling more people onto government health insurance programs when the problem is a lack of doctors willing to take those patients (and the lack of doctors generally). Or paying people to do nothing as a “remedy” for automation driven in no small part by government mandated wage increases. (This “Universal Basic Income” idea has failed in in the most liberal of places where it’s been tried, for all the reasons you would expect.)

The same is true with the suggested “affordable housing credits.”  Rent is like tuition – free government money to landlords simply induces them to raise rents, because they can. The only solution to not enough housing is to build more residences – something only the private sector can accomplish with any efficiency. And sure enough, Reno, which has seen a lot of new residential construction and rising median household income over the last few years, is finally starting to see housing prices drop.

(It’s not for nothing that in a lot of the statistics the Guinn report cites, things take a turn for the better in 2015, the year Republicans controlled the government.)

The report also wants the Legislature to mandate that all employers provide lavish benefits to their employees. But this is like raising the minimum wage. Job benefits are part of the total compensation package, a reflection of the value an employer feels the employee adds to his business. The economy is booming, and especially for service employees likely to make minimum wage or close to it, there are a LOT of options out there if they don’t think they’re being treated right.

I think the Guinn Center does a lot of good work compiling statistics and looking for economic trouble spots. But their recommendations here deal only with symptoms, not with underlying economic foundations. Indeed, a lot of good work has been done (and good restraint being exercised) in Carson City over the last few years. Trying to wave magic wands and make everyone millionaires by fiat will do nothing to strengthen those foundations and will leave everyone worse off down the road.

Fortunately, the far left’s wailing and gnashing of teeth over the failure of our Democrat-dominated government to be more, well, far left is a good sign for all of us. At the end of the day, common sense and economic realities don’t care about party affiliation, and I’m glad a majority of our lawmakers from both parties (while they’re doing much I disagree with) seem to be looking at the bigger picture. They’ll do well to take the Guinn Center’s economic report with large grains of salt, while staying on sane economic ground.

Orrin Johnson has been writing and commenting on Nevada and national politics since 2007. He started with an independent blog, First Principles, and was a regular columnist for the Reno Gazette-Journal from 2015-2016. By day, he is a criminal defense attorney in Reno. Follow him on Twitter @orrinjohnson, or contact him at [email protected].

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