Dear Jared Burnstein and others:

I don't give advice to advisors. Showing a parsimonious solution with exceptional rewards to a long-standing issue not under discussion, however, is a different matter. This is such an issue with an exceptionally rewarding solution. I sent you and 50 other prominent economists the outline of a growth proposal earlier this week. This outline fits the category, "Go Big, or Go Home." It shows how to increase GDP by $57 trillion over 10+ years, without raising taxes on anyone. That potential sum of money could be a god-send when applied to a long list of issues. Apply it to wages and employment, and a long list of issues disappear by themselves. So I am either delusional or a genius. There is nothing in it for me, so I am probably delusional, but with a Ph.D and 45+ years of practical experience, I am confident about both my abilities and my limitations. My proposal features three steps in how to achieve Prosperity for All in America.

First, it establishes the MIT/Glasmeier Living Wage scales as a visionary goal for the Biden Administration to adopt for America. (You may recall that Pres. Geo. H.W. Bush could not handle that "vision thing" and its consequences when he ran for re-election in 1992). These scales set the national average for a Living Wage at $75,000. They are unique to every county in America--all 3,006 of them. A living wage is calculated by Prof. Amy Glasmeier of MIT as enough for an average household of 2.58 persons to live independently without help. It covers food, fuel, housing, health care, transportation, education, and a small misc. category. There are no allowances for dining out or for taking an annual vacation. So it is realistic and frugal--as well as do-able. It ranges from $60,000 for counties in Mississippi to $90,000 for New York counties. It provides an important Vision of what could be for promotional purposes by both the government and by private businesses. It also provides a simple, but understand-able measure of how well you and others would be doing at your jobs once this change is implemented. The Living Wage scales are viewable on the MIT website at LivingWage.mit.edu.

Second, it reinstates the Inheritance Tax to their 2015 rates for inheritances over $5 million. The wealthy (top 10 percent) already hold $112 trillion in net worth. This amount has historically increased by about 7.2 percent CAGR. At that rate, wealth doubles every 10 years. That is the 50-years average growth rate (calculated from the Fed's Household Net Worth tables). In the next 50 years, it is projected to increase by 32.34 times, or to $3.6 quadrillion dollars. A projection is not a prediction, but it is a good reference line. That total assumes the normal growth rate that accrues to (stocks, bonds, and real estate) via dividends, capital appreciation, interest, and rentals. For inheritors it's all passive income unless anyone considers choosing their parents wisely as work. So the Inheritance laws are truly the "gift that keeps on giving." Warren Buffett correctly calls them "dynasty building." (Example: the Walton siblings inherited $23 billion in 1993 from their father (founder of Wal-Mart), unearned and untaxed. Today they are worth $175 billion, all still untaxed and unearned).

Third, we need a small "tweak" to the law that currently limits the Fed's discretionary authority over how much and to whom new money flows from them to financial institutions. Currently, the great majority of new money is accessible only to commercial banks. The 4,300 bankers apportion it thusly: 70 percent to savings, and 30 percent to the economy. The numbers are $13 trillion (to M2 - M1), and $5 trillion (to M1). Therein lies is the problem. With only $5 trillion in M1 the economy grows thusly: $5 trillion X 4.4 turnover rate = $22 trillion annually. Most of the Savings end up in the wealth accounts of the ultra-wealthy. It's how their wealth doubles in value every 10 years. It is a cozy arrangement between bankers and the wealthy, while the economy lumbers along with chronic unemployment, poverty wages, and all of its consequences: hunger, illiteracy, crime, illegal drug usage, teen pregnancies, incarcerations, mental health issues, suicides, lower life expectancies, and social immobility.

The Tweak: We need to reverse the two money flows. If the Fed directed new flows of $13 trillion into M1, and $5 trillion into (M2 - M1), we would find: $13 trillion X 4.4 = $57.2 trillion in new GDP. And if that occurred over 10 years, that would come to $5.7 trillion per year in new GDP. That $57 trillion GDP total (.15%) would generate $8.58 trillion in new federal tax revenues. There is your revenue to fulfill the Living Wage promise, while it also would reduce the dual inequality values, provide funds for infrastructure upgrades, work harder on climate change, and reduce all the consequences of poverty. Even the reduced flow of money into M2 - M1 would be augmented by higher profits, higher wages, and new wealth opportunities.

How? The Fed needs the legal authority to direct larger amounts of new money to credit unions. There are 5,009 of them with 105 million members who are ready, willing, and able to borrow from the Fed Window and begin lending more and more of it to small businesses and to individuals (the same group that creates 70 percent of all jobs). In response to a few objections that ne're-do-wells always posit:

What About Inflation? The Fed has 400 Ph.D. economists who know how to track, monitor, and keep inflation in check. That's what they do.

What About the Fight from the Right? The ultra-wealthy must argue that huge tax-free and unearned inheritances are a) deserved and fair despite the heavy burdens they cause; b) that huge passive incomes flowing from those unearned totals (in perpetuity) are also deserved and fair; and, c) that blocking 65 percent of our population (215 million residents) from Fair Wages and modest amounts of prosperity is also fair. These arguments could be demolished by Econ 101 students with ease.

That's it, Jared. I have listened to and observed you in action many times. Nobody could deliver this message with the sincerity and the persuasiveness that you possess. It's an old issue that grows each year with greater and greater urgency. But to my knowledge, there is not another solution on the table that stands in the way of that enormous future wealth total of $3.6 quadrillion unearned and untaxed dollars awaiting the top 10 percent--to the detriment of all others-- just 50 years down the road. Left unchecked, it would place a dynastic subjugation mantle around the necks of all the rest of America. Ask Paul Krugman or Robert Reich if this is a realistic analysis and projection, and what it portends for America's future:

                                                                                      $112 trillion X 1.072^50 = $3.6 quadrillion.

Ed Phillips