Minimum wage and the price of inflation

In 1938, President Franklin Roosevelt signed the federal minimum wage into law. It was signed to keep workers out of poverty, to stimulate the economy and to increase the consumer spending. In President Barack Obama’s State of the Union speech, the president made the same argument when he proposed raising the minimum wage to $9. One new thing President Obama would like to do is attach the minimum wage to the rise of inflation to help lift workers out of poverty in order to increase consumer spending and to stimulate the economy.


President Obama would like the raise to be done in slow increments by 2015, much in the same way it was done in 2007 when President George W. Bush raised minimum wage to $7.25.


Sadly the GOP is already balking at the idea of raising the minimum wage. House Speaker John Boehner told the press the day after President Obama’s speech that he would not put a minimum wage raise bill up for a vote. In 2007 Speaker Boehner voted against the last wage raise. But let’s say that the bill is put to a vote and passed. Does that mean that every state will be at that level? According to the nullification theory the answer is no.


According to the Daily Paul blog, “Nullification is the legal theory that, under the 10th amendment, the states have the right to reject laws passed by the federal government that it deems unconstitutional. This theory places the states above the federal government and even the rulings of the U.S. Supreme Court.”


It sounds both liberating and freighting. If nullification is real, then states can protect the people from any laws passed by the federal government that would do states real harm, but that also means states could harm the people in areas of discrimination, fair pay, civil rights, and yes even the minimum wage because all a state would have to do is say that the law is unconstitutional, which could be a real problem if the judge decides to side with the states.


The 10th amendment states: “The powers not delegated to the United States by the constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” This amendment seems to validate the nullification theory.


There is no minimum wage in Louisiana, Mississippi, Alabama, Tennessee and South Carolina.


One would think that the federal government should be able to take legal action against those states, but not according to the 11th amendment that was ratified in 1795. The 11th amendment states: “The judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.”


The 11th amendment simply recognizes that states have a certain degree of sovereign immunity from the federal government. While the original constitution gave the Supreme Court jurisdiction over the states when non-citizens brought actions against them, the 11th amendment was a legitimate change to the original constitution, and was ratified by three-fourths of the states thus making a binding limit on judicial power. If a state firmly believes a law to be unconstitutional then they can pretty much get away with whatever they like without fear of reprisals.


Raising minimum wage would be more beneficial than harmful to the economy because the states that would raise the wage would be helping their people. It would boost morale and give more money for people to spend on products they want. Unlike rebate checks the federal government occasionally passes around, most of the extra money would be spent because it would constantly be in people’s paychecks.


Logically it does make sense that people spend more when they make more. That’s just how the world works. It really is why we like to earn money in the first place. If businesses are scared of a wage hike then maybe they should look at a company like Costco, a retail store similar to Wal-Mart’s Sam’s Club. Costco’s CEO makes around $500,000 annually, pays their lowest employees an average of $17 an hour with healthcare benefits, and last year they raked in nearly $100 billion in annual earnings.


So the proof is in the pudding. The more you make, the happier you are, the more money you’ll spend and the more need for expansion in employment will occur to fill the needs of the customer.