Once upon a time, before Ronald Reagan’s group of associates invented the fantasy of “trickle-down” economics, many more people made a living. People were able to save, a person making minimum wage could live off of it, medical and college expenses did not put you into debt for the rest of your life, …
But “trickle-down”, created by the rich to suck in more wealth, kept reducing the amount that the non-rich could keep and save. Minimum wage slowly descended into starvation wage and not only were the non-rich not able to save but they ended up plunging into a huge pool of debt (national and personal).
Who Did It?
Neither political party (leaving out parties other than GOP/Dems, sorry folks) has anything to be proud of. While it is true that national debt expanded much faster under the GOP tradition of “borrow and spend”, it still went up (except under Bill Clinton) slowly under the Democratic tradition of “tax and spend”. Although “tax and spend” is a much more reasonable budget approach, it is easy to notice that both approaches have SPEND dominantly in the approach. The GOP approached spending with giving out huge military contracts, starting wars, and reducing taxes for the wealthy who already had much more than they needed or could reasonably spend. Democrats spent on creating band-aids that would allow more people to survive the various things going on in the country but did not have the backbone to address the underlying issues.
I doubt anyone can give a solid answer to this. It is much easier to call out the reasons why it continues to get worse and worse. Most legislators don’t know much about anything other than their own profession (and about 40% are lawyers). So they rely on their aides and the industrial sector to put together the words of legislation. Need a bill to create a national dairy policy? Listen to the Dairy Lobby (note, they represent the larger dairy distributors much more than the dairy farmers), maybe ask them to write it and then have your aides go over the potential legislation with them. How about a farm bill? Talk to the lobbyist associated with the international grain market (once again, this has very little connection to the individual farmers (decreasing in number every year)), and put them to work.
Some of this is necessary. Every member of Congress cannot know the ins and outs of every sector of the economy. But they are talking almost exclusively with the highest echelons of that economic sector. Call them the “executive class”. These lobbyists know what the high-level people in the business want and are able to pass along legal campaign donations as well as (much too often) illegal trips to Paris and subsidized ground care for the country hideaway and so forth. This by-passing of the people who actually do the labor and production leads to laws, and funding bills, that continue to favor the rich and ignore the working folk.
Reduce Influence of the Super-Rich on Government and Tax Policies
There are no grounds for thinking that we could ever get rid of all inequality between people. We just aren’t perfect and that would require full, selfless, cooperation between all people. Although it is probably worst in the United States’ “uber-capitalism” where taxes are used to support businesses rather than businesses supporting the general populace, the over-influence of the wealthy/powerful exists all over the world and under many types of government and economic systems.
But that doesn’t mean it isn’t very much worth the effort to try. In the United States, the oligarchic-supporting “Roberts Court” of the U.S. Supreme Court has made a number of rulings that twists the Constitution to pamper oligarchs. Unless explicitly mentioned in the Constitution (in which case, Amendments are required), most rulings can be overridden by laws enacted by Congress. (Of course, such laws are reviewable, once again, by the Court system.)
So, make laws that eliminate the notion of a company as a person and part of the general electorate. Get rid of the possibility of the super-rich legally purchasing legislators (still might happen behind the scenes). Forbid ex-legislators from becoming lobbyists and using their inside knowledge of the workings of Congress to bypass the limited checks and balances on the system.
Reversal of the Elimination of the Middle-class People.
As should be obvious, make sure that the people doing the labor and production receive enough income to live. That includes being able to save so they have a financial cushion needed to survive the normal ups and downs of life. Right now, there are areas of the country that have increased the “minimum wage” above the national wage but, even in those states, the minimum has not been lifted to beyond survival wage amounts.
We have an issue on the rise, right now, in that AI and robotics are being used to eliminate jobs for people and increase profits for the owners. This is without any type of national guidelines or some type of path of least pain. It is said that AI and robotics will remove folks from the more routine tasks to leave more time and (new jobs) to tackle the abstract and creative. Perhaps so — but it won’t get to that point without some type of coordination.
“Minimum” wage and the ability to make ends meet
Most landlords will rent (without a co-signer) only if the rent does not exceed 50% of the person’s income. In Washington state, the current (as of this writing) minimum wage is $17.13/hour. For a four-week month (February), this gives a total GROSS income of $2741/month. Half of this is $1370.50. While there are small apartments that cost this amount (or a little less), the average rent is still above this amount. The NET income of one of my sons, who makes “minimum wage”, is $2418/month. Half of the gross leaves him $1047.50 to live on. Given a budget for groceries, transportation, insurance (car and medical), internet/communication, and so forth, he can probably meet his survival needs — with no savings or cushion. In the book “Nickel and Dimed: On (Not) Getting By in America” by Barbara Ehrenreich, she shows how easily a person can get off the path of survival (16 years ago, it is now much worse).
The above example is based on the minimum wage of Washington state. The national minimum wage in the United States is $7.25/hour. Given that amount, the above formula (for February) gives $1160/month (a qualified rent of $580/month) and it is easy to see that the national minimum wage does not even reach survival amounts. What does a person do if they only make this amount? Work two jobs (if they can find them). Forget about medical insurance. Forget about housing and live in your car if you can find a place to park safely. People do manage but most would not call it living. Survival, yes.
Minimum wage must be based on the cost-of-living of the local area. It must also have an automatic Cost-Of-Living-Adjustment (COLA) with a local review of sufficiency every ten years (COLA rarely matches true inflation rates).
Make common emergencies survivable
Beyond a living wage, medical costs are highly unpredictable and will create havoc in the United States. Having a national “Healthcare for All” eliminates this. It is politically difficult in the United States because it drastically reduces profits for healthcare insurance and it decreases administrative and general costs. Imagine (easy to do in all the countries, other than the US, which have had universal health care for years or decades) going to a medical office, discussing your health, have references issued, prescriptions written, and further care. No “am I covered?” questions. No “Can I afford the procedure (or medicine)”. Simple, straight-forward. The cost efficiency easily saves enough to pay for the expansion of number of clients.
Bubble-Up versus Trickle-down
I addressed this in another newsletter, but almost all economists agree that “trickle-down” does not work. That statement is not really true. It does work for its true purpose of redirecting money from the middle-class and poorer (and even some of the lower upper-class) to the wealthy and ultra-wealthy. It just doesn’t work for the STATED goal of making the economy work better. This downslide of the economy began in the 1980s under the theoretical oversight of President Ronald Reagan.
If we want to restore the middle-class, it is not unreasonable to capture the environment of when middle-class was healthy and still bringing people up out of the lower-class pool of people. Note that there were still problems in the 1980s and it is no good to just say “everything back to 1982”. That $7.25/hour minimum wage would translate to $25.17/hour nowadays. Make it so with the addition of COLA. Tax rates were slightly lower in 1982 than today but the EFFECTIVE tax rates does not have such a blissful analysis. For the very rich, they make use of various “legal” (but not moral) methods of tax avoidance. Much is associated with a method called “unrealized appreciation”. There are also a large number of other LEGAL loopholes. Some do also make use of illegal methods. I am not qualified, and the issues are much too large, for me to expand upon this topic. Google, wikipedia, GenAI it.
When the large pool of people earning middle to low amounts have more money, they spend more money. I call this “bubble-up” and it is acknowledged by most economists (always say “most”). This circulation of money between creators of wealth and the need for other specialized services keeps money circulating and the economy growing from the bottom up.
Conclusion.
So, there are a few major areas to re-expand the middle-class (and upper lower-class). Change minimum wage to a COLA living (above survival) wage. Legislate the oligarchs to reduce undue influence over legislation and tax codes. Have national policies to help, guide, and support transitions to new technologies and labor practices. Establish universal health care. Enact some rational policy about education, including university-level degrees. Close tax loopholes (aim for ALL, settle for most with the rest VISIBLE). De-stress the country and increase the happiness index and quality of life.
