Sunday, April 26, 2015

A test

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Sunday, April 26, 2015

Learning from Limbaugh

“At length I recollected the thoughtless saying of a great princess, who, on being informed that the country people had no bread, replied, ‘Let them eat cake.’’” &#8210 Jean Jacques Rousseau, Confessions

In 2008 Rush Limbaugh was paid $38 million. In 2014 Rush Limbaugh earned $66 million. For terrestrial navigation he drives, among other things, a Mayback 57S that costs $450,000 fully loaded. For celestial travel he flies in a Gulfstream G550 that cost $54 million.

April 2015 was noteworthy for reasons having nothing to do with the income tax. On April 19, 2015, Dan Price, the CEO of a company called Gravity Payments, a credit card processing company located in Seattle, Washington, announced that he was cutting his own salary and raising the minimum annual salaries for everyone in his company to $50,000 immediately and over the next three years, years, to $70,000. In doing so he was cutting his own annual salary from $1 million to $70,000. In making the announcement at a quarterly firm meeting he was, understandably greeted by a standing ovation from employees. He explained that he was doing it partly in response to a study conducted by Princeton that concluded that emotional well being rises when income reaches about $75,000 a year. Mr. Price said “I want to be a part of the solution to inequality in this country, and so if corporate America also wants to be a part of that solution, that would make me really happy.”

One week later there was a story in the New York Time with the enthusiastic headline: “Democrats are Rallying Around $12 Wage Floor.” The headline gives the impression of a gathering of politicians eager to do something similar to what Mr. Price did. That was a bit misleading. What Democrats wanted to do would happen only incrementally and the goals were more modest than those of Mr. Price. The Democrats hoped to see the minimum wage go from $7.25 an hour or $14,500 a year to $12 an hour or $24,000 a year by 2020. Of course no one thinks that will happen. It is simply aspirational. There is no reason for a minimum wage worker to expect anything to change with respect to his or her earnings if an increase depends on Congress.

One day before that story appeared, the Washington Post had a story about Charles Gladden, a homeless man who works in the basement of the Dirksen Senate Office Building. According to the Post “For eight years, he has greeted senators, staffers and lobbyists in the hallways and the cafeteria, at exclusive banquets and special functions.” He earns about $18,270 a years serving the elected nobility, assuming he works 52 weeks a year. Of course he doesn’t. The senate takes lots of paid vacations and when they are on paid vacation he, too, is on vacation-unpaid. Part of the time he lives at the McPherson Square Metro Station which is about 2000 feet from the White House. He moves around quite a bit since he is homeless and hasn’t had a permanent residence for more than 20 years.

Charles Gladden won’t start a conversation. The minimum wage won’t start a conversation. Dan Price started a conversation. Rush Limbaugh and others joined the conversation. Rush knows a lot about how compensation affects workers and he shared his knowledge with his listeners. And it didn’t take him more than an hour or two. He described what Dan was doing. Dan is taking 80% of the $2.2 million in company profits and using them for the salary increases. Rush sees through Dan Price. In his radio show Rush explained the fallacy in what Dan Price is doing. “What he [Dan Price] doesn’t understand is, happiness does not equal productive. Happiness equals comfort. ‘Seventy grand, well, I can stop working hard’ is what it means. . . . This is pure, unadulterated socialism, which has never worked. That’s why I hope this company is a case study in MBA programs on how socialism does not work, because it’s gonna fail. . . . When you take care of people they tend to take care of you. For a while, that will be true. . ..For a while they’re all gonna appreciate it, but it isn’t gonna take long before the appreciation dries up and the expectation settles in, and it doesn’t take long at all for the appreciation to vanish.”

Rush knows about appreciation. In 2008 his syndicator Clear Channel Inc’s Premiere Radio Network Clear Channel Radio entered into a five-year contract with Rush for $38 million a year plus a $100 million sign up bonus. He appreciated that. The following year Clear Channel fired almost 3,000 of its employees, about 12% of its work force. It did not fire him. He appreciated that. It is not known whether any part of Rush’s $38 million could have been used to keep some of the workers employed. Rush was almost certainly grateful for the $38 million salary and $100 million sign up bonus he got. But as he explained when addressing Dan Price’s actions, people don’t remain appreciative. As Rush said, “appreciation dries up.” That explains why in 2014 it was reported that his earnings now come to $66 million a year making him the 59th highest paid person in the United States. He obviously needed more money than what he got from his meager salary negotiated in 2008. When his contract comes up for renewal in 2016 he will probably ask for a raise. Increases in Rush’s income is what keeps Rush’s appreciation from drying up and permits him to focus on explaining to his fans why Dan Price is making such a terrible mistake by paying his workers enough to live on. And what’s more, his salary will never be a case study in how socialism does not work.

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Thursday, April 23, 2015

Drugs, Guns or Life In Prison

Hanging was the worst use a man could be put to.
— Sir Henry Wotton, The Disparity Between Buckinham and Essex

Herewith a study of the activities of two state legislatures that have dealt with identical problems in quite different ways. The two legislatures are in the states of Utah and Nebraska and the reader may decide which of the two is the more enlightened. The problem both states hope to address is that posed by the unavailability of drugs with which to rid society of the unwanted, after the necessary legal steps have been taken to demonstrate that we are members of a civilized society and that the object of the actions taken is not and should, therefore, be dealt with.

The problem was demonstrated by Clayton Lockett, formerly of Oklahoma. The execution of Mr. Lockett was unpleasant for both the onlookers and Mr. Lockett. This was because the drugs the executioners had been using to execute the condemned were unavailable on the occasion of Mr. Lockett’s execution. The Oklahoma executioners were an imaginative group and used their creative powers to come up with their own death dealing drug concoction. When it was given to Mr. Lockett, however, instead of dying peacefully as expected, he writhed in what appeared to be great pain and only died after 45 minutes. Furthermore, the cause of death was a heart attack rather than the drugs. In addition to inflicting pain on Mr. Lockett, the drawn out execution pained onlookers who found his 45 minutes of writhing unpleasant to watch and, in all likelihood, disruptive of their schedules since the entire event had only been expected to last a few minutes. But this column is not about Oklahoma but about how Utah and Nebraska have taken completely different steps to address the problem created by the unavailability of death dealing drugs.

Utah’s senate has reintroduced the execution method it favored until it began using lethal drugs to rid itself of the unwanted-the firing squad. A bill signed by Utah Governor, Gary Herbert, on March 23, 2015, provides: “The method of execution for the defendant is the firing squad if the sentencing court determines the state is unable to lawfully obtain the substance or substances necessary to conduct an execution by lethal intravenous injection 30 or more days prior to the date specified.” Utah last used the firing squad on June 18, 2010 to rid itself of Ronnie Lee. It will, if history is a guide, surely have the opportunity to avail itself of this method of dealing death in the future. Another, and quite different approach to address the drug shortage, comes from Nebraska.

Like Utah, Nebraska has been concerned with the difficulty of obtaining the necessary drugs to carry out executions. It is concerned even though Nebraska has executed only three people since 1976 and all died while seated in the electric chair. In 2011 the Nebraska Supreme Court said the use of the electric chair as a means of execution constituted cruel and unusual punishment and could no longer be used in executions.

Although Nebraska has not had reason to execute anyone since the Court issued its ruling, the legislature is far sighted and decided to confront the issue of the unavailability of death dealing drugs head-on. It could have followed Utah’s steps and adopted the firing squad. It might have even taken an historical approach to the procedure and introduced hanging as a means of dispatching those who were found by a jury of their peers to be worthy of the punishment. Instead, the Nebraska legislature took a very different approach. It passed a bill substituting life in prison for the death penalty.

Although life in prison seems like a more civilized approach to the issue than that taken by Utah, not everyone is pleased. Nebraska Governor, Pete Ricketts has said he will veto the bill. He says killing people provides an important tool for “public safety and our prosecutors.” He went on to say: “Death row inmates have earned the penalty they received. They do not deserve the luxury of living on the taxpayer dime for a lifetime.” He is, of course, overlooking the costs of the endless appeals that follow the imposition of the death penalty. He also ignores the repeated executions around the country of those who are posthumously declared innocent of the crime for which they were executed. If the governor vetoes the repeal of the death penalty there may be enough votes to override his veto. If so, Nebraska would join the 18 other states in which the death penalty has been eliminated.

It seems odd that a state as closely identified with its homegrown religion as Utah would be so quick to insure it is not found wanting when it comes time to rid itself of the unwanted. It could just as easily have opted for the approach taken by Nebraska and the other 18 states. Utah legislators might say that Nebraska took the easy way out. Others might say it took the humane way out. Readers may decide for themselves.

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