Learning from Limbaugh

"At length I recollected the thoughtless saying of a great princess, who, on being informed that the country people had no bread, replied, 'Let them eat cake.''" -- Jean Jacques Rousseau, Confessions

[In 2008 Rush Limbaugh was paid $38 million. In 2014, Rush Limbaugh earned $66 million. For terrestrial navigation he drives, among other things, a Mayback 57S that costs $450,000 fully loaded. For celestial travel he flies in a Gulfstream G550 that cost $54 million.]

April 2015 was noteworthy for reasons having nothing to do with the income tax. On April 19, 2015, Dan Price, the CEO of a company called Gravity Payments, a credit card processing company located in Seattle, Washington, announced that he was cutting his own salary and raising the minimum annual salaries for everyone in his company to $50,000 immediately and over the next three years, to $70,000. In doing so, he was cutting his own annual salary from $1 million to $70,000. In making the announcement at a quarterly firm meeting, he was understandably greeted by a standing ovation from employees. He explained that he was doing it partly in response to a study conducted by Princeton that concluded that emotional well-being rises when income reaches about $75,000 a year. Mr. Price said "I want to be a part of the solution to inequality in this country, and so if corporate America also wants to be a part of that solution, that would make me really happy."

One week later there was a story in the New York Times with the enthusiastic headline: "Democrats are Rallying Around $12 Wage Floor." The headline gives the impression of a gathering of politicians eager to do something similar to what Mr. Price did. That was a bit misleading. What Democrats wanted to do would happen only incrementally and the goals were more modest than those of Mr. Price. The Democrats hoped to see the minimum wage go from $7.25 an hour or $14,500 a year to $12 an hour or $24,000 a year by 2020. Of course no one thinks that will happen. It is simply aspirational. There is no reason for a minimum wage worker to expect anything to change with respect to his or her earnings if an increase depends on Congress.

One day before that story appeared, the Washington Post had a story about Charles Gladden, a homeless man who works in the basement of the Dirksen Senate Office Building. According to the Post, "For eight years, he has greeted senators, staffers and lobbyists in the hallways and the cafeteria, at exclusive banquets and special functions." He earns about $18,270 a year serving the elected nobility, assuming he works 52 weeks a year. Of course, he doesn't. The Senate takes lots of paid vacations and when they are on paid vacation he, too, is on vacation -- unpaid. Part of the time he lives at the McPherson Square Metro Station which is about 2000 feet from the White House. He moves around quite a bit since he is homeless and hasn't had a permanent residence for more than 20 years.

Charles Gladden won't start a conversation. The minimum wage won't start a conversation. Dan Price started a conversation. Rush Limbaugh and others joined the conversation. Rush knows a lot about how compensation affects workers and he shared his knowledge with his listeners. And it didn't take him more than an hour or two. He described what Dan was doing. Dan is taking 80 percent of the $2.2 million in company profits and using them for the salary increases. Rush sees through Dan Price. In his radio show, Rush explained the fallacy in what Dan Price is doing. "What he [Dan Price] doesn't understand is, happiness does not equal productive. Happiness equals comfort. 'Seventy grand, well, I can stop working hard' is what it means... This is pure, unadulterated socialism, which has never worked. That's why I hope this company is a case study in MBA programs on how socialism does not work, because it's gonna fail... When you take care of people they tend to take care of you. For a while, that will be true... For a while they're all gonna appreciate it, but it isn't gonna take long before the appreciation dries up and the expectation settles in, and it doesn't take long at all for the appreciation to vanish."

Rush knows about appreciation. In 2008, his syndicator Clear Channel Inc's Premiere Radio Network Clear Channel Radio entered into a five-year contract with Rush for $38 million a year plus a $100 million sign up bonus. He appreciated that. The following year, Clear Channel fired almost 3,000 of its employees, about 12 percent of its workforce. It did not fire him. He appreciated that. It is not known whether any part of Rush's $38 million could have been used to keep some of the workers employed. Rush was almost certainly grateful for the $38 million salary and $100 million sign up bonus he got. But as he explained when addressing Dan Price's actions, people don't remain appreciative. As Rush said, "appreciation dries up." That explains why in 2014 it was reported that his earnings now come to $66 million a year, making him the 59th highest-paid person in the United States. He obviously needed more money than what he got from his meager salary negotiated in 2008. When his contract comes up for renewal in 2016, he will probably ask for a raise. Increases in Rush's income is what keeps Rush's appreciation from drying up and permits him to focus on explaining to his fans why Dan Price is making such a terrible mistake by paying his workers enough to live on. And what's more, his salary will never be a case study in how socialism does not work.

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