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Obama And The Triumph Of Cargo Cult Economics

Over the past four years the American middle class has suffered an unprecedented decline. At this writing the labor for participation rate is the lowest since 1981 and for men it is the lowest since that statistic has been gathered. Household income has plummeted by 7.3% equating to over $4,000 per family. The number of persons on food stamps has nearly doubled in a mere four years. The unemployment rate continues to decline only by statistical legerdemain and reducing the number of people actively looking for work by demoralizing them.

Instead of taking firm action to preserve the middle class, the Obama regime has engaged in a full frontal assault on the middle class in order to reduce it to a state of government dependency.

Our home loans are no longer held by local banks, they are secured by the United States government. Superficially private sector jobs in industry sectors chosen to be winners by government bureaucrats only exist because of extravagant government subsidies… and some of those jobs being created in foreign countries. The agricultural sector is being wildly distorted in the service of ethanol production. Students are being inveigled into taking out loans to acquire an education that is either irrelevant or superfluous in the modern world (really, a master’s degree in jazz flute? What did you think was going to happen?)

As we’ve chronicled over the past month, the economic strategy pursued by the Obama regime is nothing more that cargo cult economics (here | here | here | here). Simply put, the regime has attempted to bolster the middle class using exactly the same method that Neolithic South Pacific islanders have used to continue receiving food and supplies from the United States. Instead of building a bamboo C-47 they are creating the trappings of a middle class society, e.g. a college education, a job, etc., without strengthening the underlying economy which supports it.

One of the centerpieces of the Obama strategy was using the laudable goal of providing medical coverage for everyone as a stalking horse for a federal takeover of roughly one fifth of the nation’s economy.

The scheme was rather elegant: require all larger employers to provide a health care package in conformance with the law or pay a fine and dump the employee on a government run “exchange.” The end game for Obamacare has always been the bankrupting of private insurance providers and ushering in a “single payer” system.

Just as with the cargo cult mentality that has led to the funding of performing arts centers in dystopic mill towns, the downfall of the scheme lies in the fact that virtually no one involved in the development of said scheme had actually worked in the private economy. Enter bottom line economics, stage right:

The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting costs from President Barack Obama’s health care law.

Darden Restaurants Inc. declined to give details but said the test is only in four markets across the country. The move entails boosting the number of workers on part-time status, meaning they work less than 30 hours a week.

Under the new health care law, companies with 50 or more workers could be hit with fines if they do not provide basic coverage for full-time workers and their dependents.

Starting Jan. 1, 2014, those penalties and requirements could significantly boost labor costs for some companies, particularly in low-wage industries such as retail and hospitality, where most jobs don’t come with health benefits.

Darden, which operates more than 2,000 restaurants in the U.S. and Canada, employs about 180,000 people.

Raise your hand if you didn’t see this coming. Didn’t think so.

This decision, if copied by other businesses will have the interesting result of making the federal government, by way of either Medicaid, insurance exchanges, or Medicare, the source of health insurance for the overwhelming majority of Americans. But unlike the plan passed by Democrat chicanery there will be no offsetting revenue stream from penalties on companies who do not provide insurance.

While the savings in health care costs is the driver for the change, in an environment with a surplus of qualified labor changing the work force to a primarily part-time one brings other savings and cost avoidance.

In the economy created by the current regime, an employer does not have to compete for workers. To the contrary, it is the quintessential buyer’s market for employers. Because of the economy, most job applicants do not have the flexibility to walk away from either a job or a job offer. At the same time, the economy is creating incentives for employers to reduce all benefits and amenities associated with maintaining a workforce.

For those who think part-time only applies to restaurant workers, think again. Look at the history of mortgage brokers who have moved from being bank employees to largely independent contractors. Is there any reason IT jobs can’t be part-time? Retail? Nurses? Teachers? There is no logical reason for a company to retain any of these positions as full-time jobs.

That will be the legacy of the the Obama regime. A middle class that is a fraction of the size the past century has led us to expect. An economic environment where a worker must hold at least two jobs in order to survive, where sick leave and vacation days are unheard of, and where health care will be unavailable to most people simply because the government cannot provide it for everyone who demands it.

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