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:
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="http://www.forbes.com/sites/frederickallen/2012/10/02/how-income-inequality-is-damaging-the-u-s/">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.”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.
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.”
Demos has generated a Detailed Report that indicates that if Retail Workers were paid more - this would happen.
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.
- 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.
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.