Good companies benefit from good regulations

The New York Times had an article on a small group of business in Toledo that thought less regulation would help their businesses.

See “The President Changed. So Has Small Businesses’ Confidence”, Landon Thomas Jr, 2107-03-12
2017-03-14'

Many people fail to realize that government makes businesses run more smoothly because it levels the playing field by keeping other businesses honest.  Government is the force that reduces externalities.

Does a quality restaurant want to compete with a sloppy restaurant that has unsanitary conditions, pays extremely low wages, and just dumps its garbage anywhere.  Food inspections have saved lots of lives and protected other restaurants from unfair competition.

Does a trucking company that follows safety laws want to compete with a company that overworks its drivers who are encouraged to speed.

Does a quality manufacturer want to compete with a manufacturer who cuts costs by avoiding a lot of safety practices?

Does a food processor want to face a law suit from a person who has a really bad reaction because the company didn’t follow government labelling regulation?

Does any company want to do business with a bank that doesn’t keep a government-mandated reserves?  It has happened over and over again that people and companies have lost a great deal of money when a bank went belly-up.  The Federal Deposit Insurance Corporation (FDIC) has certainly reduced the losses of many a company.

If a government didn’t enforce certain standards of safety and fiduciary responsibility, would more businesses be looking at costly law suits?  By showing that they were making every effort to follow the regulations, wouldn’t they blunt these suits, especially if they kept good compliance records.

And well-run companies will also pay less insurance than their slap-dash competitors.

Oh, yes, I almost forgot patents and copyrights.  Boy, lots of companies would be screaming bloody murder if their intellectual property wasn’t protected by government registration.

Tips and minimum wage

Sometime ago there was a big argument about raising the minimum wage for restaurant workers.  One of the anti-arguments was that some servers earn $100,000 a year with tips.  That is a rather short-sighted view.

For sake of easy arithmetic, let's assume $100,000 a year in tips, as if many servers should be so fortunate.  Why did the server earn so much in tips?  If you assume all diners tipped at 20% (lucky server), then that means the restaurant had $500,000 gross income a year.  So, if the waiter was earning a base pay of $10/hour with 40 hours per week, the cost to the restaurant would have been $20,800 per year, not a bad investment to have a return of $500,000.  Gosh, members of boards of directors often get $100,000 per year or more for six meetings a year, don't get sore legs, and they often have other full time jobs.

If the restaurant had more tight-fisted customers and the average tip was only 10%, then the server would have been bringing in $1,000,000 gross income for the restaurant.  For that amount of income, shouldn't an employer treat a server as an asset instead of a cost?  As Adam Smith wrote, when the profits go up and the wages go down, that is a sure road to ruin.

Republican spending vs. Democratic spending

Pete Langr wrote an interesting column this week on how the Republicans and the Democrats are looking at the budget, each from the wrong perspective: "Taxes aren't the problem: the real solution is to control supply costs".  As of my writing, the Duluth Budgeteer has not posted his article on line.  Watch for it at http://www.duluthnewstribune.com/event/tag/group/Budgeteer/tag/Budge%20Opinion/

My take is that the Republican goes to a certain restaurant every week and pays one dollar for his dinner and leaves a dime tip.  One dollar for dinner?!?  Yep, I could do that in the 50s when I worked at a grocery store.  Meat, potatoes, and a vegetable for one buck.

But the Republican refuses to spend more than that dollar for his dinner.  Over the years he gets less and less food.  After a time he refuses to tip because he isn't getting his "value".  Now he is lucky to get a half a cup of diluted coffee for his buck.

Meanwhile the Democrat orders the same meal and pays whatever is on the check.  The restaurant, appreciative of his business, gives him more food, of course charging more over time.  The Democrat is getting so much food that he needs "a box" for the extra.  But he never asks to get less food for a lower price.  Because the customary tip has changed from ten percent to twenty percent, he willingly includes that in his bill.  Now he is paying more than $36 for what once was $2.20 bucks worth of food.  And he is happy to do so.

Social Security: Raiding the tip jar

Deficit hawks often lump Social Security as one of the drains on the budget; according to them it should be reined in to reduce the deficit.

But this is like a restaurant owner lumping the contents of the tip jar in with his overall income and then considering paying the contents to his employee as an expense.  If he reduces the expense of the tip jar, then he can improve his balance sheet.  He completely ignores that the tip jar is funded by customers with the intent that the contents go to the employees.

Similarly, Social Security is funded by the payroll tax.  Current revenues, by law, go into government securities.  This practice gives rise to the notion that the government is raiding Social Security.  You wouldn't want the money kept in a bank that might fold, would you?  And you would like to see the money earn interest, wouldn't you?

So, the anti-Social Security folks raise a hue and cry about Social Security contributing to the national debt.  Reduce Social Security payments and we can reduce the national debt.

I wouldn't want to be wait staff in a restaurant run by these people.