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Ok, so we've avoided the Fiscal Cliff with the $400k Tax Deal.  Those on the Left are angry and upset that it wasn't $250k and above, the on the right are angry that it was anything at all.  Either way, the primary issue of "uncertainty" that has supposedly been paralyzing the economic sector is now a settled matter.  It's a done deal.  The horrible constricting worry that the "job creators" have had hanging over them like the Sword of Damaclese has been removed.

So the engine of he economy should just begin to Roar shouldn't it? Certainly the Dow Jones is up.

Yeah, - well - what if it doesn't?  What should the primary agenda item from the Obama Administration be going forward?

I think it should be one thing, one issue which we should be focused on with laser-like intensity.

We Need to Raise the Federal Minimum Wage.

Obama has, just today put forward his post-cliff agenda as Rachel describes and highlights here.

Rachel points out that after all these years, Republicans have suddenly discovered that Tax Cuts Don't Pay For Themselves.  That in order to reach balance based on the current deal, Darrel Issa now states that we will need to cut $4.6 Trillion in spending (actually $3.64 Trillion according to the CBO with the $400K cutoff of 39.6% income and 20% capital gains tax).

Instead of cutting ourselfs to the bone from here on out, I have a different idea. In her presentation Rachel displays this chart:

As you can see the largest contributor to the deficit has been the Bush, now Bush/Obama tax cuts - however the second highest contributor to the deficit has not been "Spending" other than cost of Bush's Wars. TARP has been paid for and mostly paid back.  The Detroit Bailout has largely been paid back.  Most of the Stimulus was either Tax Cuts or Loans, which are now over or are being paid back.  ObamaCare LOWERS the Deficit over the long haul.

No, it's none of those.  The second largest contributor to the deficit has been the economic downturn, specifically it's been the loss of tax receipts due to people losing their income.

So jt's only obvious.  We need to raise people income which - coincidental  - would do a great deal to close the ever increasing income gap, which even Forbes says is more than just annoying - a href="">it's dangerous.

New research indicates that growing income inequality isn’t just unpleasant; it is seriously hurting the U.S. economy. And economists are figuring out just how the damage is done, according to a fascinating new article by the journalist Jonathan Rauch in National Journal. This challenges a long-standing consensus that, as Rauch puts it, “inequality is the price America pays for a dynamic, efficient economy. . . . As long as the bottom and the middle are moving up, there is no reason to mind if the top is moving up faster.”
He begins by pointing out that we have learned in recent years that a rising tide does not necessarily lift all ships. The Congressional Budget Office recently reported that between 1979 and 2007 the top 1% of households doubled their share of pretax income while the share of the bottom 80% fell. Then came the great recession. Economists including David Moss of the Harvard Business School noticed that “the last time inequality rose to its current heights was in the late 1920s, just before a financial meltdown. . . . In 2010, Moss plotted inequality and bank failures since 1864 on the same graph; he found an eerily close fit.
It's clear that the income gap began in 1981 when Reagan cut taxes for the rich by as much as 40% while raising taxes on the poor.  Even though the Clinton rates reversed this strategies impact on the deficit and eventually created a surplus, it didn't reverse it's impact on income inequality.

Demos has generated a Detailed Report that indicates that if Retail Workers were paid more - this would happen.

  • A wage standard equivalent to $25,000 for a full-time, year-round employee would lift 734,075 people currently in poverty – including retail workers and the families they support – above the federal poverty line.
  • An additional 769,191 people hovering just above poverty would see their incomes rise to above 150 percent of the poverty line.

The economy would grow and 100,000 or more new jobs would be created. Families living in or near poverty spend close to 100 percent of their income just to meet their basic needs, so when they receive an extra dollar in pay, they spend it on goods or services that were out of reach before. This ongoing unmet need makes low-income households more likely to spend new earnings immediately – channeling any addition to their income right back into the economy, creating growth and jobs. This “multiplier effect” means that a higher wage standard for retail workers will also generate new jobs. Our estimates of the job creation effect are derived from widely accepted multipliers on consumer spending.4 It includes the benefits of a raise on disposable income and accounts for the impact of any additional costs to the firm and the potential for businesses to pass-through the cost of decent wages onto their customers through higher prices. In order to account for uncertainty regarding the firm’s willingness to pay for the raise out of profits, we offer both low and high measures of the total impact of the raise. Estimating both low- and high-end estimates, our study finds that:

    A wage standard at large retailers equivalent to $25,000 per year for full-time, year-round workers would increase GDP between $11.8 and $15.2 billion over the next year.
    As a result of the economic growth from a wage increase, employers would create 100,000 to 132,000 additional jobs.

Now, Demos only suggests what would happen if companies like Walmart voluntarily raised their lowest pay from $10/hr to $12/hr - but the same thing would occur if we raised the national minimum wage from it's ridiculous 51 year Historic low to something far more reasonable and fair.

It's simple, putting real money in the hands of real people - would increase demand.  It might have a risk of price inflation, but that would be offset by increased sales volume as many of the people who currently can't afford to buy available products would now have that flexibility.  Employers would only face a payroll "hump" for the first pay period, because after that - they would have more customers, and they would need the same or possibly even more employees to handle that increased demand. The Demos study shows that this have a very positive stimulative affect, and in the absence of any other appetite for stimulative spending by type of product providers - infrustructure, investment -  increasing the buying power of consumers within the market has a far better chance of breaking through ideological Republican gridlock than trying wrangling any more direct stimulative spending when Republicans are now hungry for nothing more than spending cuts.

We need to make resubmitting the Harkin-Miller Minimum Wage Act of 2012, which raises the minimum wage from $7.25 to $9.80 per hour and continue to index it to inflation from then on in the same way that the estate tax is indexed to inflation.

The Economic Policy Institute estimates that the Harkin-Miller proposal would generate more than $25 billion in new consumer spending, which would result in more than 100,000 new full-time jobs. EPI also estimates the Harkin-Miller bill would increase wages for nearly 30 million Americans – roughly one-fifth of the workforce – as raising the wage floor improves pay for workers who earn at or just above the minimum wage.
Sniff!, that smells like Stimulus to me.  Fat juicy Stimulus that would put about $2,000/year into the pocket of these workers and unlike the payroll tax holiday wouldn't add a dime to the deficit or threaten the social security trust fund.   We've jumped the curb, now it's time to downshift and start climbing that hill.


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Comment Preferences

  •  Vyan - is there any data on who pays for it? (2+ / 0-)
    Recommended by:
    PatriciaVa, Neuroptimalian

    I have seen data that suggests that higher minimum wages don't impact job creation, although it's impossible to hold enough other variables constant to really know. However, I have not seen any data on what group of workers earn the minimum wage, and who pays for it when it is increased? Do customers pay through higher prices, or do business owners or shareholders pay through lower profits? I am curious to know if you or others have seen any data on this topic?

    "let's talk about that"

    by VClib on Thu Jan 03, 2013 at 08:30:12 AM PST

    •  Same people who pay $$$$ executive salaries. (2+ / 0-)
      Recommended by:
      JesseCW, Odysseus

      This is a glib answer, and I hope for a Serious Person who is informed about these issues to jump in with the info you asked for.

      But really, who's been paying the tens-to-hundreds of millions of dollars salaries that all the folks at the top have been dealing themselves? Somehow, business has gone on, and widgets are still getting sold.

      I imagine the Job Cremators could figure out how to pay their serfs a few cents more and still keep their doors open, without driving away custormers.

      You know, run a business.

      OK, snark off

      Life is a school, love is the lesson.

      by means are the ends on Thu Jan 03, 2013 at 08:50:43 AM PST

      [ Parent ]

      •  means - I don't know enough about who earns (1+ / 0-)
        Recommended by:

        the minimum wage and that is part of my question. But take for example a fast food worker. Nearly all fast food places are owned by a local franchisee who pays certain fees to the parent. When the national minimum wage is increased does the chain raise prices nationally to adjust or does the local owner take the hit? The CEO of the parent is paid mostly in equity, which isn't a cash cost, but the salary and bonus comes from the franchise fees. Do higher minimum wages impact the transfer of cash from the local franchisee to the parent franchisor? I am just curious.

        "let's talk about that"

        by VClib on Thu Jan 03, 2013 at 09:14:25 AM PST

        [ Parent ]

    •  It's a little of everything (4+ / 0-)
      Recommended by:
      VClib, FG, JesseCW, Odysseus

      the Economic Policy Institute Report seems to indicate that it doesn't necessarily raise prices or lower profits because it also increases the potential pool of customers increasing demand and volume. Prices don't need to go up and profits don't go down because sales volume goes up.

      The immediate benefits of a minimum-wage increase are in the boosted earnings of the lowest-paid workers, but its positive effects would far exceed this extra income. Recent research reveals that, despite skeptics’ claims, raising the minimum wage does not cause job loss.4 In fact, throughout the nation, minimum-wage increases would create jobs. Like unemployment insurance benefits or tax breaks for low- and middle-income workers, raising the minimum wage puts more money in the pockets of working families when they need it most, thereby augmenting their spending power. Economists generally recognize that low-wage workers are more likely than any other income group to spend any extra earnings immediately on previously unaffordable basic needs or services.
    •  VC, I've seen it argued both ways (0+ / 0-)

      The other side is that increasing minimum wage must marginally increase consumption because of the target population propensity to consume rather than save as a matter of necessity. If the government would guarantee employment doing useful work, the way it guarantees banks their profits, that baseline service job would constitute the minimum wage and benefit package in the economy. Wray and others in the MMT community have done a great deal of work showing the viability of such a full employment policy. Here is more from Wray's MMT Primer.  

      •  Old Surgeon - that's very interesting work (0+ / 0-)

        But my question is a really simple one and someone knows the answer because the data exists. If the minimum wage is increased does the local McDonalds franchisee raise prices or absorb the increased cost? It's a very microeconomic question. I am not debating the merits of a higher minimum wage.

        "let's talk about that"

        by VClib on Thu Jan 03, 2013 at 01:56:09 PM PST

        [ Parent ]

        •  I think it depends (1+ / 0-)
          Recommended by:

          on what the employees decide to do what that extra cash.  As I said above there is considerable evidence that they would probably spend it rather than invest or save it - and if they spend it they would most like spend it at places that also have minimum wage workers because that's still all they could afford.  Hence, the volume of those business would increase and offset much if not all of the wage increase.  In this case the McDonald's Franchise would take little it any hit on their bottom line so they would have to raise prices.  The might do it anyway in anticipation of increased costs just before or as a minwage increase goes into effect just to hedge their bets in anticipation of those higher outlays, or they might cut total hours for their employees. It would vary from business to business, boss to boss.

          As of January 1st Ten States implemented Minimum Wage increases from 10 cents to 35 cents per hours.  Such incremental changes aren't likely to show a major difference in any direction IMO.

          A possible better example is San Francisco which has a minimum wage of $10.55/hr, which tends ot indicate a higher cost passed on to consumers - but it should be noted, most of those consumers can now better afford it, because increases in the minimum wage tend to create a "trickle up" affect for the wages slightly above them and into the lower-middle class.

          City officials and low-wage worker advocate groups have long argued that increasing the minimum wage helps the local economy by giving service industry workers more disposable income to spend.

          In addition, a 2004 peer-reviewed UC Berkeley study found that the rising minimum wage had no impact on jobs or the propensity of employers to leave the area. Instead, it concluded that restaurants in particular passed on increased costs to customers, with prices rising 6.2 percent for fast food and 1.8 percent at sit-down eateries.


          Conservative Thinktanks of course argue the opposite, but then they would probably argue that the Ocean is made of Sand instead of water.


  •  Yes. A minimum wage raise is way overdue. (2+ / 0-)
    Recommended by:
    JesseCW, tardis10

    The stagnation in wages at the low end is a back-door way for Republicans to starve the beast.  A higher income would result in more revenue collected.  

    The stagnation in wages also starves the other beast, the economy.  If the wage was raised, the jobs created from increased demand would lower the unemployment rate.  The increased number of people working enhances revenue   again in a ripple effect.

    "Democracy is a life; and involves continual struggle." ---'Fighting Bob' LaFollette

    by leftreborn on Thu Jan 03, 2013 at 09:19:00 AM PST

  •  Good idea as long as Reid takes over negotiations (0+ / 0-)

    ...for the debt limit crisis which will consume Congress for the 1Q. The WH should submit an actual detailed budget that works together and then Reid should take over and keep the Pres out of negotiations. Then some wage increases might actually have a chance.

  •  We need at least 11 bucks an hour. (0+ / 0-)

    There's no reason workers should make less, in real dollars, than they were making in the early 1960's.

    We don't need it indexed to inflation.  We need it indexed to a realistic COLA.

    "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

    by JesseCW on Thu Jan 03, 2013 at 10:26:54 AM PST

  •  The main cos that pay min wage are big fast food (0+ / 0-)

    ...and I wish there was a way to make them increase wages from min after 30 (?) days without building in an incentive to  turnover. I don't care as much about the min wage as workers being kept on it for more than a trial period.

    In San Diego you can't really hire a non English speaking undocumented worker for min wage. Housekeepers are at least $15/h, landscaping $10 - $12/h, semi skilled handy are $20/h.  So being a citizen working at say Wendys which pays min wage plus employer portions of payroll taxes, workman's comp, etc. (in corporate jobs 30% of ea wage go to payroll taxes & overhead costs) is a disadvantage.

    So, agree but suspect there are other ways to legislate low wage worker relief too.  

  •  The whole problem here is that you capitulate (0+ / 0-)

    before you begin. That has been the progressive stance throughout this whole economic debate. Progressives cannot argue against the conservatives and their debt and deficit fears, because progressives believe the shit the conservatives are saying. Unlike the radical right and the corporatists, progressives are only good at arguing what they believe, and when it comes to the economy, and particularly the debt and deficits, they believe bullshit.  

    The whole idea that our American government finances are in any way comparable to the finances of a household, a business, a state like California or a nation like Greece or Spain is ridiculous. The US is a sovereign currency issuer - the dollar is convertible only into dollars and federal tax credits. Because progressives do not understand the fundamentals of our monetary system, they argue the conservative's points for them, as is seen constantly in diaries on this site.

    The conservative economic principles (the neoclassical and neoliberal) have proven false over the past few decades, and particularly in the cases of austerity imposed on the EU periphery, all countries who gave up currency sovereignty to become currency users with constrained policy space, and Great Briton a currency issuer without such constraints who gratuitously subjected itself to austerity and so reentered recession.

    But this is exactly what progressives are proposing. Progressives need to learn about how the economy and the monetary system actually function, and how to simply understand monetary flows between sectors of the economy. Modern Monetary Theory provides a thorough explanation of the actual operation of a fiat money economy, and provides the basis of an argument against conservatism's economic dogma rather than a capitulation to it, accompanied by pleas of "yes we need the pain but don't do it too hard, pleeez oh pleeez!"  It's getting really pathetic. There is a different paradigm where we could actually be strong!

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