A New Living Wage Objective (and how to make it happen)

Dear Mr. President:

I know you are going to be very busy in the first days and weeks of your presidency. Still, here is a very important issue that you are not likely to hear about from others, and it should be high up there on your “to do” list. Namely, you need to call in your economic advisor (Jared Bernstein would a great choice), plus Nancy Pelosi, Chuck Schumer, and Fed chair Jerome Powell, and your designated head of the National Credit Union Association. With a meeting of minds, fantastic economic results would begin to happen. Concurrently, old issues such as hunger, illiteracy rates, crime rates, incarceration rates, suicides, mental health issues, and social immobility would all begin to fall without legislation.

Here’s how. You need to bring your invitees into agreement on the need to boost the stream of new money (M1) that flows into the economy, and reduce the amount that flows into the stock market (M2 – M1). Over a period of just 4 years, GDP, jobs, wages, and tax revenues could grow significantly, while the national debt would shrink. In the longer run (perhaps 10 to 20 years) you could be remembered as the president who dropped the Poverty Level as a measure of well-being, and established a Living Wage as the new standard. See (https://livingwage.mit.edu). To paraphrase Neil Armstrong, “That’s one small step for the individual, one giant leap for humanity.” The long-run objective: $70,000 to $100,000 as the new income range for all working citizens. It is do-able. Moreover, all your other economic objectives still could be achieved.

Method. Here is the controlling math: M1 x V1 = GDP. This relationship is so simple it is a tautology. It can’t be stopped except by corporate banks who make certain that all new money injected into the economy first goes into M2-M1 to pay them huge bonuses, and into stock buy-backs that also enrich them, and to the ultra wealthy. The Fed’s 400 Ph.D. economists know how to monitor and direct dollar flows to make this all happen. Credit unions (and community banks) are already dedicated to helping individuals and small businesses. New money flows will help them to expand. They only need to know that you are a supporter.

By the way, you will also need to restore the inheritance tax for inheritances over $5 million. That is a major leak in the dollar/wealth flows that keep making the rich richer, the poor poorer, and those inequality gaps keep getting wider.

One beauty of this simple proposal is that it is way over the heads of billionaires like Charles Koch and nearly all conservative legislators.

Your friend and supporter,

Edward Phillips, Ph.D.

P.S. Call me if necessary. I am also available on Zoom