Copyright John T. Reed 2013
Democrats say they are for jobs.
Talk is cheap. A visitor from Mars looking at it with fresh eyes would conclude that the Democrats were actually the party favoring, and favored by, robots.
Here is the first paragraph in a January 17, 2012 Wall Street Journal article titled “Man vs. Machine, a Jobless Recovery:”
In no other recovery since Word War II have companies been simultaneously faster to boost spending on machines and software, while slower to add people to run them.
Spending on gear and hiring usually are more synchronized. Since…2009, spending on equipment and software has surged 31% adjusted for inflation. Private-sector jobs have grown just 1.4% over the same span.
The U.S. [in 2012 was] second only to Japan in the use of industrial robots. Orders for new robots were up 41% through September  from a year earlier…[The cost of a Stihl chain saw made in Virginia is just 1.8% higher than a Stihl chain saw made in China because of] the power of automation.
I don’t know if that cost differential includes transportation cost from China to the U.S. If not, China is not competitive with the U.S. in the North American market at least.
The Internal Revenue Code has various provisions, e.g., IRC § 179, that encourage the purchase of robots and other labor-saving devices. Low interest rates—and ours are now at record low levels and have been for some time—also encourage purchase of robots and other labor-saving devices because borrowing the money to buy them costs less.
Robots do not receive pay; sue; strike; leave; unionize; demand higher wages; require human resources departments; trigger employer requirements to withhold taxes, pay unemployment, workers comp, life insurance, or disability insurance; trigger jurisdiction by OSHA; steal from their employer; require payment for health care other than cost effective repairs, receive pensions, have to be counseled for not doing a good job, have to be coached to do better, require parking spaces, take vacations, require break rooms, sleep, come to work with an AK-47 and blow away co-workers, don’t need to cross picket lines to get to work, require office space, go to the bathroom, forget what it has been told; require lights or indoor climate control to be around 70ºF; use the telephone; use the Internet for inappropriate purposes; loaf; get holidays off; require out-placement services.
That’s not to say that they are problem-free, or necessarily cheaper than humans overall. Humans do have some advantages over machines. But clearly there probably should be far more automation than there is given the litany of costly and time-consuming recent costs of human employees.
And as you look through the list and ask yourself which political party is responsible for the problem in question, it goes like this:
Pay—Democrats want to raise the minimum wage; they also championed time and a half and double time for certain work quantities and days.
Sue—The Democrat party is a wholly owned subsidiary of the ambulance-chaser lawyers association.
Strike—The Democrat Party is the party of unions and expanding union power.
Leave—neither part cares about tis
Unionize—See strike above.
Demand higher wages—see strike above
Require human resources departments—The Democrat Party keeps expanding the labor-related laws, rules, and regulations that now are so voluminous that they require additional bureaucracies within private companies.
Tax withholding—both parties
Unemployment insurance—Democrat policy
Workers comp—Democrat policy
I could go on but you get the idea. The Democrats see employees as their base, especially unionized employees. They have given them all the rights listed above in order to curry favor with them and get their votes, contributions, and free campaign workers.
And it’s not just robots. It is also any tool that increases productivity. The Luddites destroyed steam-powered looms because it took far fewer workers to produce the same amount of cloth as before the steam engine. When I was a kid in the 1950s, carpenters built houses with hammers and nails. Now, fewer carpenters build each house using nail guns.
Obama has literally complained out loud that innovations like voice mail and ATMs are inhibiting employment growth.
Economist Milton Friedman once observed massive numbers of workers in India using hand shovels to build a dam or highway or some such. He asked why they were not using bulldozers and other mechanized equipment. “Oh, you don’t understand, sir. This is a jobs program. By using shovels, we create more jobs.” “In that case,” Friedman said, “You should have them use spoons.”
By their logic, Democrats need to become the spoons party if they want to create lots of jobs for union morons, but they either have not figured that out yet or they are afraid to advocate it. So they are becoming the favorite party of those who create robots and other labor-saving devices.
But the Democrats have failed to understand that these are all “IF” laws and what that means. I wrote another article about that. The following is that article which I wrote in 2010:
Obama, Pelosi, Reid and all the other anti-business, anti-rich nut jobs will, if allowed, enact a ton of IF laws.
They all have this format:
If you do X, you must do it the way we say. or
If you do X, you must pay this tax.
For example, if you sell health insurance, you must not turn away persons with pre-existing conditions.
Or If you make more than $250,000, you must pay a 2.38% tax on “unearned income.”
Obama and his ilk, being ignoramuses about incentives and business, think businesses and rich people are inanimate objects from which money can be extracted. Obama does not believe money grows on trees. He believes it grows on rich people and businesses. All he needs to do to spend that money is remove it from the businesses and rich people.
They have it. We want it. We will take it. We are the mighty U.S. government. Businesses and rich people are powerless to stop us. Wanna bet?
Here’s the way it really works.
Business people and rich people (other than heirs, lottery ticket winners, etc.) did not get to be successful or rich by being stupid. Plus, they have an extremely different perspective on IF laws than dummies like Obama. Obama thinks those laws say things like “health insurers will accept pre-existing conditions” or “people who make more than $250,000 a year will now send me more of their income.” Not at all. Businesspeople and the rich read such laws this way:
I have two choices:
• I can stay in health insurance and accept pre-existing conditions or I can do something else or
• I can continue to make $250,000 before tax as defined by the Internal Revenue Code and pay higher taxes or I can change my taxable income either simply making less than $250,000 or by changing the details of the income so it moves to a less taxed category of the Internal Revenue Code.
For a detailed example of the latter, read my book Aggressive Tax Avoidance for Real Estate Investors, now in its 19th edition.
Maryland famously decided to tax the rich more heavily in 2008. It raised the tax bracket to 6.25%. Baltimore and Bethesda also impose income taxes. The combination of state and local tax rate can go as high as 9.45%. Governor Martin O’Malley said the rich (made more than $1,000,000 a year) were “willing and able to pay their fair share.” The Baltimore Sun said the rich would “grin and bear it.” In 2009, one-third of the millionaires disappeared from Maryland tax rolls. In 2008 about 3,000 million-dollar income tax returns were filed; in 2009, 2,000. Maryland politicians figured they would get $106 million more from the tax. In fact, they got $100 million less—a total $206 million loss to the state run by those politician geniuses.
This phenomenon is best known as the Laffer Curve effect. Arthur Laffer is quick to point out that the first known person to write about the revenue-depressing effect of overly high tax RATES was Adam Smith in 1776.
Think of it this way. If the tax rate is 20%, the government collects a certain amount. If it’s 21%, they collect more. But what if you raise it to 100%? Obviously, they would collect zero because no one would go to work. The government would also collect zero if they lowered the tax rate to 0%. If you graph tax revenue by max tax rate from 0% to 100%, you find that it maxes out at about 20%.
When you go above that point, the revenue goes down because people change their behavior to avoid the tax. They retire, change businesses, change states, invest in tax shelters, cheat, leave the country, etc.
NJ politicians started beating up on car insurers not too many years ago—like Obama and health insurance companies. They passed more and more laws against the car insurance companies. NJ became the toughest state in the nation to be a car insurance company. IF you sell car insurance in NJ, you have to do X, Y, Z, A, B, C,… I do not know the details, but I seem to recall reading that car insurers, whose marketing plan was to be nationwide, decided 49 states was enough and stopped selling car insurance at all in NJ. Eventually, all or almost all of them left the state and the state had to be its own car insurer. That was a disaster. So they had to entice real car insurers to come back and did. I may be a little off on my facts. I would appreciate hearing from those who know better.
Raising tax rates makes earning money less attractive and makes avoiding taxes by spending more on tax advice, relocating outside the jurisdiction raising the tax rates, and even cheating more attractive.
When you tax something, you get less of it. When you subsidize something, you get more of it.
Obama and his fellow geniuses tax successful business and individuals and subsidize people who are unemployed, who do not pay their mortgages, who are in unions, who are sick, and so on. Consequently, they will get less tax revenue and have to shell out more to loafers. Higher tax rates change the economics of businesses, often to the point where they are no longer profitable. Take Amtrak. Once upon a time, railroads that provided passenger service were privately owned. But government encouraged unionization of railroads, the high tech rich companies of the day. And the government held down the ticket prices to please the voters.
Ultimately, all, I repeat, all of the privately owned railroads got out of the passenger business. There is only one passenger railroad in the U.S. now: Amtrak. It is unionized, government owned, ratty, never on time, and never operates at a profit even though its supporters promised that it would when it started in 1971.
Want to see the future of health care? Take a trip on Amtrak. Actually, running a railroad is pretty straightforward. Health care will be far more screwed up by government control than the railroads. Every time Obama passes one of these beat-up-on-the-rich or business laws, the rich and business stop doing the thing in question or do it differently so they are exempt. There is no free lunch, not even for politicians who failed to learn about economics or business when they were growing up.
The laws that encourage robotization of American workplaces are “IF” laws. They say if you have human employees, you must pay all these things, do all these things, keep all these records, be sued, etc. but if you use robots, you get out of all that hassle and expense. Then they are surprised when companies automate.
When I was kid, all business phones were answered by a human. Indeed, well-run companies made sure the calls were answered within three rings. Many even imported British receptionists to sound classier.
Today? Ha! The receptionist has almost been totally eliminated. You get voice mail, answering machines, “push one to…” and all that.
The phone company used to have operators and information people. Almost all automated now.
The trash truck used to have a couple of guys who would jump off and throw the trash into the dump truck. Now the truck has one driver and a mechanical arm that picks up the standard can and shakes it into the mobile compactor.
Ever heard of Cesar Chavez. He’s the big Latino hero in America. What did he do? To hear his supporters tell it, he was the savior of the grape pickers getting them much better wages and working conditions.
Do you know any American grape pickers? Ever seen anyone picking grapes?
Me neither. Grape picking was hard to automate cost effectively. Grapes grow on trellises. They do not all ripen at the same time. The pickers had to make several passes through the vineyard picking only the rip ones each time.
What did Chavez really do? He made human pickers so much more expensive that it became easier to justify the cost of an automatic grape picking machine. They had to widen the space between trellises. That made the fields less productive but it was worth it to get rid of Chavez’s various requirements.
How can the machine tell if the grapes are ripe and only pick those? They switched from wood to wire trellises. The wire has to be tightened to a certain tension. The machine has a metal wand that strikes the wire with a precise amount of force. That amount of the force that knocks the ripe grapes off, but not the unripe ones. They fall into a trough that is part of the machine. As with the humans, the machine must go through the vineyard several times during the harvest as additional grapes become ripe. If you drive by a grape vineyard nowadays, you will see that the alleys are wider and that the grapes grow on wires, not wooden trellises.
Thank you, Cesar Chavez, our hero, for getting us all fired.
Do you have to be big time or rich to automate? Nah. There are now vacuum cleaners that wander around your house when you are out and go over to an outlet and plug themselves in to recharge when necessary. Ditto pool cleaners and lawn mowers and kitty litter boxes that clean themselves.
I work out of my home office and have no employees. I remember once being on the phone when around me the answering machine picked up the second line, a fax came in and was printing, my printer was printing out a book on both sides of the paper, and various reports were being created on the computer screen in front of me. That’s automation—automation so cheap you probably have most of it in your house.
In the long run, greater productivity, that is, producing more with fewer workers, increases total jobs by making us a richer country in general. That, in turn, cause people to buy more stuff, to eat in restaurants more, to take more and more distant vacations, to get more education, and so on. But the morons who vote for pro-“jobs”-policy politicians and who join unions are way too ignorant and unable to delay gratification to see that.
So this is a good thing, IF you automate and reduce your number of employees.
The “job” of the future in America: being a self-employed guy with an automated work force.
Workers of the world, get lost. You’ve become too far too expensive and far too much of a pain in the ass.
John T. Reed