The Folly of Michele Bachmann's Minimum Wage Campaign Bomb

Bachmann stands by abolishing minimum wage

In 2005, Republican Presidential candidate Michelle Bachmann made a bold declaration. She suggsted that the United States should abolish the minimum wage.

In 2005, Bachmann declared that abolishing the minimum wage “could potentially wipe out unemployment because we would be able to offer jobs at whatever level.”

There was plenty to object to in this statement in 2005, and there remains plenty to object to now. For Bachmann's taste for free-market economics to crowd out any role for anything as basely protective as a minimum wage signals a lack of serious consideration of the issue.

In many regards, the United States has already effectively abolished the minimum wage. In failing to properly address the issue of illegal immigration and the undocumented labour they provide, the US has opened a de facto loophole through which anyone who doesn't wish to pay a worker minimum wage actually doesn't have to.

When asked about the minimum wage, Bachmann responded by explaining her position on job-killing regulations. It doesn't seem unfair to conclude that Bachmann thinks of the minimum wage as just such a regulation.

But it isn't merely in this regard that Bachmann has mis-interpreted the minimum wage issue -- if there in fact is such an issue. But it isn't merely Bachmann who is misreading this issue.

Consider a candidate like Herman Cain, who is campaigning on an economic program that includes steep corporate tax cuts. These cuts would certainly benefit the US economy, making it more competitive with other countries for investment. The job creation benefits are clear.

But there is one criticism of corporate tax cuts that cannot be overlooked: it does absolutely nothing for a minimum wage earner.

Left-wing Democrats can be counted on to oppose corporate tax cuts and support raising the minimum wage. On each count they are miscalculating.

For one thing, a minimum rage hike actually does very little -- almost nothing -- to help minimum wage earners. Nor do higher corporate taxes do much to help the average American.

The reasoning is simple: corporations are not, by any stretch of the imagination, nice guys. They are businesses. Large, monolithic industries with an ownership structure that diffuses responsibility across various individuals and groups. Their goal is to earn profit, so they ensure they can do this by passing their costs along to the consumer.

The costs associated with a higher minimum wage are passed along to the consumer. Costs associated with higher taxes are passed along to the consumer. In each case, everyone pays. But some will pay more than others.

Minimum wage workers will see their additional costs offset by their wage increases. Those not earning minimum wage do not. Because a minimum wage increase is infationary, everyone loses. It's a social loss.

But imagine if the Republicans were to counter the Democrats offer to raise the minimum wage and maintain high rates of corporate taxation with a plan to actually increase the minimum wage, and do it in real terms by offsetting it with accompanying cuts to taxes on businesses, across the board, and to pass these changes with legislative provisions that would allow government to punish any businesses that raise prices to recoup their minimum wage "losses" with a fine or a tax increase.

There is clear peril in this. If not properly constructed, such a law could become a means by which "progressive" political forces within congress or the judiciary could increase taxes at the first sign of price increases. The idea is not to fix the price level, but to ensure that price increases are linked to actual inflation or to actual unoffset cost increases.

That would be an approach to minimum wage that is vastly superior to Michele Bachmann's reckless approach to the issue. It would be an eminently resposnible approach that nearly any Republican -- including Herman Cain, excluding Donald Trump -- could win with.