There are few under-performing macro economic issues in any market economy that cannot be fixed by simply growing the economy. That outcome requires only that consumers, businesses, and legislators each act in their own interests, while respecting each other’s best interests, thus allowing for an optimal allocation of resources and the prospect of prosperity for all. If businesses and government legislators, for example, collude to give each other an undo advantage, the result is, at best, an unequal or sub-optimal economy. Continued artificial advantages over time create smaller profits and wages, a lower production of goods and services; too little government revenues, too much unemployment, and increases in the conditions of poverty including: physical and mental health issues, hunger, crime and incarceration rates, illiteracy rates, death rates, suicides, teen pregnancies, lower life expectancies, and reduced upward mobility. When such issues are muddied and magnified via dishonest TV ads, slanted and biased newspaper articles, and fake political party maneuvering, they become the source of disinformation, malice, and outright hatred that tend to be as bad for progress as are the issues themselves.

Prosperity for all demands fairness for all. The US economy is not producing enough goods and services, at fair profits and wages, to solve its self-inflicted wounds. As a consequence, we have both the largest economy and the most severe income and wealth inequality gaps of all the industrialized nations. More tax cuts and more advantages to the already advantaged only make matters worse. In time they could become the source for a bloody uprising.

Former Speaker of the House, John Boehner, used to say: “We can’t spend our way to prosperity.” Actually, if he had ever studied economics seriously for just one day, he might have learned that spending is the only way to prosperity for all. The math is right there in front of his and everyone’s eyes: M1 X V1 = GDP. This simple relationship means that when we raise either money in circulation (M1), or our spending rate (V1), or both, GDP absolutely must go up! No ifs, ands, or buts about it. And a rising GDP means more profits, more jobs, higher household incomes, more tax revenues, and falling budget deficits. Those outcomes are known as the realization of prosperity for all! Putting them into Boehner’s repertoire of songs including “Zippity doo dah” will not create a dime’s worth of prosperity. Greater spending by consumers will get us started in that direction. But there is a lot more we need to do.

Our Guiding Vision 

Every US resident deserves the opportunity to pursue his or her dreams. Jefferson referred to them as life, liberty, and the pursuit of happiness. In our complex economy it takes a discernible amount of income and wealth to achieve those pursuits. Moreover, the Preamble to our Constitution sets for the principles under which we all must live. They are: to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.

Let us resolve to create the promise: Prosperity for All

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Wages. We need to stop talking about poverty levels and minimum wages. We need to focus instead on a LivingWage scale. That wage is not $7.15 per hour, nor is it $24,000 annually for a family of four. It is a minimum fair household income of approximately $80,000 per year across the land. That is the level needed today for a household of 3 to meet their food, fuel, housing, health care, transportation, and education needs. It also means we need to get to work in changing our national output so that 52 percent of America’s households (152 million residents) can share equitably in our prosperity.

How Much Additional Income is Needed? The amounts vary by location. A team of economists at the Massachusetts Institute of Technology led by Professor Amy Glasmeir gave us an enlightened guide. A first estimate puts the additional personal incomes needed to reach a fair wage for all at $2.58 trillion annually. Local conditions vary. The MIT team has a unique dollar value for each of the 3,006 counties in the US. Let’s use my $2.58 trillion estimate as a starting goal. It can be revised later with more accurate data. Here is the basic math:

.52 X (155 X 106) X Δ$32,000 = Δ$2.58 trillion
where: percentage of wage earners times average income shortage = total annual wage shortage today

Preliminary Steps. Whatever the final dollar tally, we will need to look forward at least 10, and perhaps 20 years. By allowing for inflation, we find that our 20-year goal would need to be approximately double the present need, or $5.16 trillion. To track the efficacy of this estimate, we would not need to track every dollar in circulation. Instead we could monitor two key indexes: The Gini Coefficients for income and wealth. They are .48 for incomes and .90 for wealth, where 0 means equality, and 1 means 1 person has it all. There are 400 Ph.D economists employed by the Federal Reserve Board. Empower them to monitor with greater precision how to cut both coefficients approximately in half over a 10 or 20 year time frame. To achieve that goal, they would need to establish with greater precision the percentage of new funds that flow into M1 and M2 and manipulate them to achieve full employment and inflation constraints as required by law.

Expand the # of Small Businesses. Small businesses create 70 percent of our jobs. Fortunately, credit unions lend out 70 percent of their available funds to individuals and small businesses. In contrast, commercial banks lend only 30 percent of their available funds to individuals and small businesses. It follows that we must assure that more money gets into the accounts of credit unions. They are the key to creating more jobs that pay a higher wage from an expanded number of businesses.

We also need to reduce the size of very large corporations and make them subject to competition. Conglomerates and vertically integrated business structures inhibit competition, the essential feature of a market economy that helps to create new products and services, while keeping price inflation under control.

Tax Code Changes. The wealthy must pay their fair share of taxes. We can no longer afford to let billions of estate dollars pass from parents to siblings and other heirs tax-free. Not only do such huge estates escape taxation, they consist of stocks, bonds, and real estate that double in value every 10 years. A zero inheritance tax is the gift that keeps on giving. Unearned and untaxed dollars that continue to grow are inherently unfair. Such a concentration of wealth also means they are the undeniable cause for at least 90 percent of all the conditions of poverty. That is debate material for average grammar and high school students. It is too obvious for anyone with 3rd grade scholarship credentials. We can exempt the first $10 million of inheritances, and add a progressive tax to values above $10 million.

A top income bracket of about 50 percent is justified on very large incomes. That rate is also consistent with the concept of “diminishing marginal utility of money,” or the approximate point where the tax burden is really no burden at all.1 Even the Laffer Curve shows that it is near the 50 percent point.

Immigration Issues. Establishing an objective of $80,000 as a minimum household income would attract many people to fill new jobs that would become available, especially in research. But we do not have enough people with the requisite skills to fill all the needs of a greatly expanding economy. Shortages would also attract more highly qualified immigrants by making immigration easier for them. We could not afford to get bogged down in a protracted debate about how best to attract the needed candidates beyond a new prosperity objective and by the inspirational guiding principles stated in our Constitution’s Preamble.

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Evaluation. It is easy to find listeners and followers, even leaders who will pass legislation that favors the wealthy. The top 10 percent of wealth holders today have $135 trillion of wealth. In 50 years that total will compound 32 times its present value to $4.4 quadrillon (at its historic compound annual growth rate of 7.2 percent). That burgeoning total is almost certain to spawn a bloody insurrection in less that 50 years. That is the nature of greed. It is also the beast that is holding down approximately 80 million workers and 152 million residents who are unable to satisfy such basic needs as health care and education. There are no constraints in place now that could stop either this mammoth projected wealth shift or an uprising from millions of residents from occurring.

Finally, this issue is perhaps best expressed by Newton’s Third Law of Motion: For every action there is an equal and opposite reaction. Put into economic terms: Every dollar or asset that is taken from a common pool, must leave a bigger chasm with fewer dollars or assets in their wake. Even when the pools on both side of the gaps are expanding, the contrived wealth pools expand faster. Both income and wealth Gini Coefficients prove beyond a serious doubt that these conditions exist in the US today.

Debate peripheral facts if you must, but let’s not debate facts that have been examined, analyzed, and evaluated extensively by the methods of science, the highest authority in our quest for enlightenment. Such a debate would be like yielding to nonsense as something that is more than mere sound and fury, signifying nothing.

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1 The diminishing marginal utility of income suggests that as an individual's income increases, the extra benefit to that individual decreases. That is because each subsequent dollar is satisfying less and less urgent wants.