It was the third trigger of the recession indicator in less than two weeks.Bondsread more
U.S. manufacturer growth slowed to the lowest in almost 10 years in August, the latest sign that the trade war may be exacerbating the economic slowdown.Marketsread more
Philadelphia Fed President Patrick Harker said he doesn't see the case for additional stimulus after the Federal Reserve's July rate cut.The Fedread more
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Former Prudent Bear Fund manager David Tice is urging investors to brace for a massive downturn.Trading Nationread more
German Chancellor Angela Merkel said a solution to the Irish "backstop" is possible before the October 31 Brexit deadline.Europe Economyread more
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Corporate profits posted modest growth in the second quarter as companies brace for slowing global growth.Retailread more
It's a debate as old as politics itself, but now we may finally have a winner. Or at least a loser.
The finale to the age-old argument over the state's proper role in the economy is playing out before our very eyes as a trifecta of headline-grabbing misfortunes dumps cold water on the leftist belief that greater government intervention in the market leads to greater prosperity.
Because economies are so complex and dynamic, and statistics so easily manipulated, both socialism-loving liberals and laissez faire–leaning conservatives have long been able to find evidence to support their respective philosophies. But as Venezuela implodes, progressive experiments with raising the minimum wage on the West Coast prove disastrous, and deep-blue Illinois falls deeper into the red, the Left now finds itself very light on rhetorical ammunition with which to defend its treasured economic model.
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Though liberals may now try to distance themselves from the chaos in Caracas, the Venezuelan government was once praised by a cadre of revered upper-echelon leftists including Jeremy Corbyn, Oliver Stone, and Bernie Sanders. Past adoration was such that far-left website Salon referred to Venezuela's socialist economy as a "miracle."
Such praise hasn't aged well, however, as the grossly irresponsible redistributive policies that helped Venezuela to achieve one of the lowest wealth gaps in the Western Hemisphere have now brought the country to its knees. As oil, the country's chief export and cash cow, tanked, the socialist government doubled down on its invasion of the free market with price controls, rationing, and restrictions on imports, creating a cauldron of corruption and uncertainty that made Venezuela unattractive to international companies. Or any company for that matter.
The country's currency, the bolivar, has declined 94 percent over the past year, and there are now horrific shortages of basic necessities such as toilet paper fomenting historic civil unrest and, in turn, increasingly brutal crackdowns by a government that claims to be for the people.
Some miracle. And because state power is rarely relinquished easily, the crisis in Venezuela shows no signs of ending soon.
Nor does the lunacy north of the Equator, where some of this country's most progressive major cities have begun to experiment with price controls of their own.
From San Francisco to Seattle to Portland, numerous leftist locales have decided to buck conventional wisdom and raise their minimum wages in a bid to outrun the same economic boogeyman that haunted and sank Venezuela: income inequality. Despite tomes of research concluding that artificial wage hikes are detrimental to society's most vulnerable workers, these cities are succumbing, one after the other, to the all-too-common urge to do what feels good rather than what works.
The results have been, shall we say, predictable. In Seattle, a minimum-wage increase from $11 to $13 resulted in reduced hours worked and reduced payrolls for minimum-wage earners. And in San Francisco, where the restaurant industry employs the lion's share of minimum-wage earners, researchers found that
higher minimum wages increase overall exit rates for restaurants. . . . A one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 scale).
Bottom line: In their quest to fight income inequality, the economic geniuses on the Left Coast have not only reduced wages for the lowest earners but also made it harder for such workers to find employment in the first place.
But nowhere is the Left's downward spiral more obvious than in Illinois. The stalwart liberal state has voted for the Democratic presidential candidate in the last seven elections, has long maintained a left-leaning congressional delegation, and has a Democratic-majority state legislature. It also may well become the first state to declare bankruptcy.
Illinois's pension funds alone are billions upon billions of dollars in debt — a quarter-trillion dollars, to be exact, a number that will almost certainly continue to grow given the state's penchant for kicking the can down the road. The pensions, negotiated by unions and used as slush funds by liberal politicians, are now a specter haunting the state's coffers to the point that every household in Illinois would need to contribute $56,000 to solve its retiree pension and health-care crisis.
And this is one of the most heavily taxed states in the country.
Illinois's political mindset is perhaps best represented by its trademark metropolis, Chicago, a shining example of liberal politics run amok. The city's teachers' union has ensured never-ending budget shortfalls by repeatedly insisting on greater compensation for its members (who already significantly outearn the city's other college-educated professionals) despite mounting municipal debt. Such unrealistic demands led to the city's school system recently receiving the dreaded "junk bond" rating from Moody's.
Meanwhile, Democratic mayor after Democratic mayor has catered to the city's minority communities in exchange for votes, and yet today the South Side's poor cope with notorious homicide rates while the rich in Lincoln Park drop thousands on the Magnificent Mile before lunch. The city's racial wealth gap is visible from outer space.
And yet despite the overwhelming evidence linking liberal economic policies to the state's decline, Illinois seems intent on going down with the ship, much like the Venezuelan government and the West's once-great cities. In fact, Springfield is now pushing for its own statewide minimum-wage hike, a move that according to the American Action Forum could cost Illinois nearly 400,000 jobs by 2025. It's an interesting remedy for a state bleeding to death financially.
This unfortunate confluence of events should serve as a warning to an increasingly left-leaning Democratic party and the growing number of young voters who tend toward socialism as an economic solution. But it's unlikely to have much of an impact. Though leftists claim science as their ally, they simultaneously shoo away inconvenient data as if it were a fly.
Commentary by Greg Jones, who runs the Drunk Republican blog and writes for the National Review, the Federalist, The Week, Reason and the Daily Caller. Follow him on Twitter .
For more insight from CNBC contributors, follow @CNBCopinion on Twitter.
©2017 National Review. Used with permission.