Understanding MPC & MPS is essential to understanding What’s the Matter With Kansas… and America. And more Americans need to know how their MPC & MPS is being manipulated, so they can fix what’s wrong.
What’s the matter with America?
Answer: About half the country didn’t understand MPC the last time they voted, and they, including Kansas, are voting again.
With so many confused voters, the Supreme Court selected a guy who talked like: “Shot yourself in your foot once. Shame on me. Shoot yourself in your foot twice… Shame on, ah… shame on …you?”
Well, MPC ain’t Misquotes Per Calorie.
Even upper crust, expensively schooled, palavering patriotic Americans who may not have paid federal taxes for ten years, paid 13.9% in 2010, and may have cash, stocks, and bonds north of $300 million stashed offshore avoiding taxes and stateside investments, may not understand MPC. If they do understand it, then they don’t really give a crap about how 98% of Americans’ MPC makes the economy jell and builds a middle class.
Lower crust, poorly schooled, struggling, military serving Americans who also may have paid a meager percentage in federal taxes and have fifty emergency bucks stashed under the mattress also fail to grasp MPC’s role in making their budgets work and grow.
MPC ain’t Manipulate People’s Choices, but it includes manipulating who gets to choose how money is used.
MPC is about Multiplying Peoples Choices. It’s the choice you make, or must make, with your money. Monetary and tax policies triggers the MPC mechanism that reflects the economy’s strength.
Do legislators want an economy reflecting the dollar votes cast by the 98-99% or one based on the dollar votes consumed by the top 1-2%?
Will we have a diversity of little shops and restaurants filling the streets with the exchange of ideas and transactions where smiles proliferate and seldom is heard discouraging words?
Or will those little town streets become cold, dark, hungry, and empty of commerce, while the mansions are bright with parties where sophisticates blithely reply, “Let them eat cake,” as they depart their soirees in limos for their yachts and world-wide chalets.
Is MPC different for those connected to the little shops versus those ensconced in mansions and jet planes?
Yes… Defined…
MPC is the proportion of additional income that an individual/household consumes.
Assume you are that single mom George W. Bush praised for working three jobs to make ends meet as “Uniquely American, isn't it?”
Let’s call her Tamara Dough, earning California’s minimum wage of $8.00 an hour. In 2012, after deductions and exemptions ($2,900 for single, $3,700 for head of household), her taxable income is $11,170. She falls into the 15% income tax bracket, but after exemptions her effective tax rate is 11%; 2.9% less than what Mitt Romney paid in 2010 on $21,646,000 adjusted gross income.
That’s right: $21.6 MILLION, or 1,935 times more than Tamara’s earnings.
After Tamara pays for her rent, food, transportation, insurance, clothes, etc. from her $930 monthly laboring, she somehow saves $10 per month.
What’s her MPC or Marginal Propensity to Consume? 98.9%, or $920 consumed/$930 earned.
If she earns another $1,000 next year, she’ll spend $989 of it, or likely more, since the Great Weirding Drought of 2012 will raise this poorly nourished girl’s food costs.
What’s her MPS or Marginal Propensity to Save? 1.1%, or $10 saved/$930 earned.
Tamara and Mitt’s households reflect an economic rule: The higher your income the lower your MPC. For each extra $10,000 the rich add, the smaller the percentage they will consume and the larger percentage they will save, exponentially adding to their wealth.
Much of the Romney household’s savings/wealth, estimated at $300+ millions, sits in lobbyist created tax sheltered offshore accounts created only for the rich that are neither helping drive the economy nor investing in American workers’ creativity.
Tamara, conversely, throws everything she earns, except for that 1.1% emergency fund, back into those American streets, workers, and economy. The $200 per month she spends at Joe’s Grocery Store helps Joe earn $50,000, of which he consumes $40,000 (MPC = 80%) on his business and family needs, leaving $10,000 as savings for his kids’ college (MPS = 20%).
Tamara wasn’t born into a family that casually pays for a Harvard MBA and all it is supposed to teach about economics. She does, however, remember learning that Henry Ford paid his workers fairly, so that they could afford to buy his product and, in the process, grow American industry and its independent class of workers who would grow America’s Demand Side Economy.
Each precious dollar Tamara spends at her 98.9% rate is recycled by the next recipient at his or her MPC and MPS rate. Tamara’s spending drives demand.
When she, Joe the Grocer, and about 120 million households combine their MPCs, rational economists conclude that our economy is, roughly, a 70% Demand Driven Economy.
Give a larger percentage of your nation the opportunity to choose healthy MPS and MPC allocations and a strong economy results.
Ford paid his workers enough to buy his product, and save too. That pushed his competitors and other industrialists to give more Americans healthy MPC and MPSs.
Such sensible economics – not “Voo-Doo” Trickle Down Economics, as George H. Bush honestly called Supply Side Economics -- built the world’s once strongest middle class.
Weaken more and more American households’ healthy MPCs and MPSs and you weaken the country.
Since the 1980’s, income and wealth concentration in the US has skyrocketed to match that existing prior to the Great 1929 Crash. In the 50’s, when the Middle Class was growing, CEO’s earned about 20x’s as much as the average worker (36% unionized). Today CEO’s earn about 300x’s as much and the uber-sized CEO’s never seem to have their salary, pensions, perks, or golden parachutes cut while too many pad their financials with investments in lobbyists, financial chicanery, and offshore hideouts.
For four decades workers’ productivity has soared, while their earnings haven’t and their MPS collapsed. Meanwhile big bankers, financers, hedge funders’ wealth and income has soared, while more average workers’ (6.9% unionized) MPCs spiked, and they became poor.
In 2004 Thomas Franks wrote What's the Matter with Kansas? Much of the world retitled it as What's the Matter with America?
Kansas, once a bastion of populists and progressives strengthening family farms and expanding the middle class, like America, was hoodwinked by well-funded theorists pushing Trickle Down Economics, which might work in a community-sharing heaven but has not worked on greed-centric controlled earth.
Fixing what’s the matter with Kansas and America, as well as with Ayn Rand’s “Be selfish” and Gordon’ Gecko’s “Greed’s good,” hinges on the enlightened marginal votes of the electorate choosing to have healthy Marginal Propensities to Consume and Save.
