S&P Says: Wealth Gap Slowing Economy

Well, DUH! When economic resources congregate in too few hands the rest of the population has too few dollars to spend and keep the economy growing. It is basic sense. It is basic math. It is basic logic.

If manufacturers of cars want to sell more cars, how can they if the buying public has fewer dollars available to buy the new car? If food costs more and household income does not grow, lesser food is purchased. Families go on diets whether they want to or not, or eat cheap, junk food. All too evident the latter is pointed out in poorer neighborhoods. Obesity grows in times of recession. Counter-intuitive I know, but just the same, true.

If a family has money enough to pay household expenses and manages to save a few dollars, then they will have money enough to pay for something not absolutely necessary. That is disposable income. When incomes are pinched or lowered, while costs continue to rise, disposable income becomes lesser. Sooner or not, disposable income disappears entirely. No new cars for that family. No new furniture, TVs or fun new clothing, either.

That’s how the economy works. Starve the masses of household income, and the economy starves, too.

The wealthy are small in number and proportion to the entire public. They buy too few things to actually make an industry succeed, unless it is luxury yachts or travel destinations and resorts. The wealthy keep those industries alive and thriving. But those are not the big industries of a nation. No, the big industries are medical, education, utilities, construction and manufacturing.

If the masses have lower marginal income, then the economy in baseline industries are starved for revenue. Their inventories grow. Their profits decline. Workers are laid off until inventories are worked down. And the cycle of recession and decline renews again.

Now. What to do about it? Here are some easy solutions:

1. Change Social Security and Medicare premium tax collections to all earnings; this will improve the funding condition of both programs enormously. It also will allow retirement benefits to be improved for the poorest among us.
2. Sell bonds to pay for revitalizing public infrastructure: water and sewer systems, highways and bridges, public buildings including schools, and government facilities. This will create jobs. Trillions of dollars worth of infrastructure projects have been sidelined in the pasts 15 years. It will take at least 5 years to make a meaningful dent in that backlog of work. And job creation will increase income taxes, sales taxes, and household incomes all at the same time. In turn this will grow the economy among many industries.
3. Provide scholarships to all citizens to acquire the education that fits their talents and interests the most. This will improve the labor pool immeasurably. Improving the reach of education to adults who have experienced career obsolescence is also a target of this approach to funding public education. Learning new skills that will keep up with changing technology and market demands will smooth cycles of bubble and bust.
4. Make a commitment to replace oil as the primary energy source for America by the year 2025. Not only will this create huge new industries for energy production but also conservation technology industries, too. A lasting benefit beyond these two will be the lessening of international tensions over who owns and controls oil supplies. The change in influence and stability of the Middle East will revolutionize peacemaking around the globe. And Russia will no longer be able to threaten shutting off natural gas supplies and oil to their neighbors. There will be other supplies of energy and will support their independence.
5. Declaring war against all pollution – of air, soil and water – will create entirely new and robust industries as well. The oceans cover 75% of the globe. They are dying from pollution and abuse. It is time to protect them, clean them and help them support human life on a much more balanced protocol.
6. Make peace, not war. This is a biggie. But for far too long American industries have profited from war and the threat of war than those profits focused on peace. It is time for mankind to find ways to live peacefully upon this earth. And to collaborate on the doing of just that. The global economy will thrive on the resultant stability.

There are many other steps we can take to reverse the present gap between haves and have not’s. To make the turnaround, though, we will need to trust one another around the globe and fight hard for the common good of all people. It is that basic. It is a turning away from greed and protectionism and a turning toward a higher common denominator in life.

For far too long American society has been greedy and celebrated the lowest common denominator. It has created a hideous threat to our quality of life. Share and seek humility. The good things will filter up to the most, not trickle down to the least.

It’s time for fundamental change in America and throughout the globe. Let the process begin.

August 8, 2014