Introduction: According to folklore, President Eisenhower insisted that each of his cabinet heads deliver a one-page report every morning that summarized the important activities going on under his/her control. What a stroke of genius! Ten chiefs delivering 10 sheets of paper meant that Ike could read them in 10 minutes, then he was off to play golf. It’s no wonder that Ike had a low handicap. And he stayed up-to-date on what was going on in the country and around the world. He gave us the Interstate Highway system, but he refused to give me a pay raise. So he was efficient, but a parsimonious tightwad.
Sooner or later every president comes to the same conclusion about summaries. It is easier to read a summary than a lengthy treatise on any subject. Besides, it forces your section heads to crunch down activities into short words and simple sentences. Soon you can compartmentalize them and ask pertinent questions about how well issues are being resolved. You can even demand that they get solved faster. The country needs it, you need it, and voters need it. Why make things complicated?
With that said, I have just given myself the same challenge, only harder. Can I describe what is basically wrong with the US economy, and how to fix the underlying issues in a single page? That could be the biggest challenge ever taken on by anyone in human history. Except for Einstein. He took on the task of describing general relativity throughout the universe in a single equation. He never produced it. That could have been expected in his tight little apartment at Princeton.
Enough said. Let’s go.
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The underlying cause of all our economic woes is the huge inequality gaps—in wealth and income. On the high end the wealthy are getting richer while their riches coalesce into dynasties; while the poor are getting poorer, thus relying more and more on the government for assistance. All the conditions of opulence and poverty stem from these two gaps, while they are accelerating us toward an aristocracy at the cost of freedom. Break these two strangleholds and our socio-economic woes will shift toward prosperity for all.
Cause: How? Lopsided wealth is the inevitable outcome when 70 percent of new money flows to the already wealthy, and when that same wealth doubles every 10 years at 7.2 percent CAGR, and when huge inheritances move within families, unearned and untaxed. If semi-literate billionaires know this, so can you. Correction: Now you know it also. Yes, Bill Gates, Elon Musk, Jeff Bezos and 840 other billionaires are not your friends. You mean nothing to them.
Consequence: Banks currently direct 70 percent of all new money into the hands of the wealthy where it does not, and cannot, help the economy. The current 30 percent of new money lent to small businesses and to individuals is too little. The two percentages need to be reversed. Sustained for 20 years, poverty can be replaced with a fair Living Wage of about $80,000 per year per household across the nation. That can only be achieved by directing more new money to credit unions, and less new money to banks. In 20 years, our economy will be producing $77.4 trillion of new GDP v. $36.1 trillion with no changes. We will have put into place the cornerstone to prosperity for all. Here’s the math:
Now: $20 trillion X 1.03^20 = $36.1 trillion
New: $20 trillion X 1.07^20 = $77.4 trillion
The Fix: At the new output levels, employers would need to start raising wages to full employment. We would also need to open our immigration channels to welcome new, educated residents from around the wold. When we reached the Living Wage level, we could fine tune the two money flows to sustain our new income and wealth goals. We would need to lock these gains into place by new laws and new changes to our Constitution.
Conclusion: Concurrently, we would see the health care and education needs of all residents fulfilled. A healthy and educated resident is far more productive than is a sick and ignorant one. Crime and literacy rates would fall, hunger would disappear, drug usage would drop, incarcerations would fall, life expectancies would rise. With each change, freedom would creep back into our vocabularies, into our expectations, in our goals, our lives, and in our hearts.
I rest my case. My golfing friends are calling.
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P.S. Now your task is to copy this short narrative and email it to: 1) the President’s Council of Economic Advisors; 2) to the National Credit Union Assoc. president; and 3) the Federal Reserve Board of Governors. Then ask 5 of your best friends to do the same. Do your part, and through the power of compounding, we will light up their PCs like a Christmas Tree.
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