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Saturday, 15 July 2017

Fifteen is Not Enough

You can't draw water from a dry well. Just take that as gospel. If you don't know what a well is, search "Timmy" and "Down the" at your earliest convenience. But for now assume that the well is metaphor for the working class, and we are (have been for a long time) running on dry.

When adjusting the minimum wage from our hey day years of the 40's through the 60's, economists tend to put the minimum wage between $12 and $20 per hour, or somewhere between 24,900 and 41,600 a year before taxes in today's dollars. Another way to look at this kind of money is this: enough to make the three times rent margin with most apartments, enough money to purchase a new car, enough to afford a house costing between $70,000 and $120,000. Of course not everyone will do all of those things. Who needs to rent an apartment and buy a house; not everyone wants a new car. So instead, with this kind of money, people will do other things. Go to more movies. Buy more trinkets. Go on vacations. Spend more on groceries. In short, they'll dump that money into the economy.

Evidenced in the post war boom in America, where wages and middle income soared, more money for the middle meant more money for everyone. The gilded age of the 60's saw the rise of American purchasing power--something that is still happening today, though we can barely afford it anymore. If the 1980's and 2000's have taught us anything, it's that giving money to those who already have more than they know what to do with will only hurt us. Reagan created one of the largest deficits in our history with his planned tax cuts, which he then reneged on in order to make the government solvent. Similarly, W's tax cuts in the 00's turned our surplus nation on it's head, leaving us in a deficit that we are still in, seventeen years later.

The rich will only hold on to their money. That is what makes a rich person rich: miserly behavior. But a middle and working poor American will spend. They, after all, need to spend. The kids need shoes or new shorts for school, and the fourteen year old Focus dad has been driving to work is about to crap out. Americans will spend because of necessity. Then they will spend because they feel they deserve it; a long day of working on the Focus deserves a stop at the local ice cream shop, or local theatre.

But there is a caveat to all this. In order for this kind of economic boom to happen, you need people in the black right off the mark. This was the problem with Obama's big tax breaks during his first term. He managed to push some big tax breaks for the middle through, but the middle was already saddled with debt, under water mortgages, and financial PTSD. Instead of spending and jump starting the economy, they socked the money away, or paid of their long overdue bills. And to economy petered on, making it but barely.

To jump start the economy the way Obama foresaw, and Bernie dreams about, a wage increase of astronomical proportions is due. The fight for fifteen is not enough. Fifteen won't buy an apartment in Detroit. It won't buy a new car either. If we are to see the golden years like the 50's and 60's we need to see wages go up to at least $20 per hour for every full time worker. It will mean that the profits won't be astronomic for our corporation, but, to be honest, they've made a nearly immoral amount of money over the past few decades at the expense of the American people. If you want a growing economy, you need high wages. The more money you give the middle, the more they will spend it on the things that companies make: more phones, newer cars, more houses, more movie tickets, more ice cream at the local shop. Corporate America will have to get used to the idea of being just rich, instead of filthy rich.

If something isn't done soon, there will be no saving the middle of America. Not only will we have been too poor for too long, but there won't be anything left to give back. If Trump's tax plan, Trickle Down Redeux, goes into effect, there may be no money left in the economy to go back to the middle. It will all be tied up in investments and savings accounts in the Cayman Islands. The top one percent already has most of the nations wealth. How much longer until they get the rest?

And it will only be after they've gotten all that money that they'll realize: it does nothing to make phones or cars when there is no one left with a dollar to spend on them. But don't expect that to be a lesson learned. Misers will always be.