Wake Up America!

The Scourges of Our Times

Thanks to human technology, coronavirus is a reminder that we are all part of a global economy. With the first case of unknown cause just one county away from me, and with seven weeks with the ordinary flu this year under my belt, I’m worried.

But more than this, I’m grieving the loss of what I thought was my proud country over the past three years. And I’m sad about the hardships so many of us are encountering when it comes to finances and hopes for a better future.

For the past four years I’ve written less and less because politics and the President’s daily doings have erased economics in the Trump era. Even conservatives who espouse Adam Smith’s political economy, Ronald Reagan, and right-wing libertarians aren’t getting much news coverage.

Why Our National Economy is Not Really Booming

Coronavirus is inspiring me with carpe diem whispers to write about an idea I wanted to write a book about. Here is that idea.

Liberal economists today still rely on much of what Lord John Maynard Keynes wrote about in the 1930s.

Keynes’ General Equilibrium Theory dates back to the 1870’s when it was inspired by a French economist, Léon Walras.

Walras’ contributions to liberal economists’ Micro- and Macro-economics are 150 years old.

Walrus wrote just a few years after Karl Marx published Das Kapital, a book that even inspired a budding IRS in the United States to pit capitalists’ “passive income” against workers’ “earned income” in our federal tax code.

By the end of the 1800’s and beginning of 1900’s, Lord Keynes and other economists in Europe were frantically trying to erase Karl Marx out of all economics literature.

In the late 19th century Alfred Marshall, Keynes’ mentor at Cambridge University in England created Microeconomics, the study of factories, businesses, households and other parts of national economies.

In the early 20th century Keynes created Macroeconomics, the study of national economics in which he emphasized the use of mathematics. Keynes’ mathematical formulas were instrumental in pulling our country out of the Great Depression in the 1930s.

Most recently Keynes’ theories were used to promote the stimulus of big corporations as the antidote to the financial crisis and mortgage collapse of 13 years ago.

But here’s why I think Keynes’ formulas are obsolete, and they will not work for our century. In fact Keynes’ formulas are what fostered the huge income inequality that we lament today,

The Pluses and Minuses in Keynes’ Formula

Keynes’ formulas are written using initial capital letters. Each letter stands for a group of actors in the economy. Each letter gets a number attached to it when there is a survey of how our national economy is doing.

The numbers are added and subtracted to try to “balance the books” of our nation. Either there is a surplus, or more likely, a deficit in our budget. A deficit is the difference between spending (minus) versus revenue (plus).

Right now, with Trump tax cuts for the wealthy last year, excessive military spending, and mandatory spending that has been unfunded from October 2019 to September 2020, we will have a deficit of $1,083 trillion dollars.

In 2021 the deficit is projected to be $4,829 – $3,863 = $966 billion.

Keynes’ complicated formulas include variables (unknown numbers) that calculate G for total Government deficits and surpluses. Also his formulas  included T for total Taxes paid, and S for total Savings Americans have made.

However, Keynes’ most important formula is called the Consumption Function for the national economy.

As you’d guess, this formula contains letter C for total Consumer Spending. This formula also contains letter W. As you’d guess that’s for total Wages Workers earn.

Those two variables are said to offset each other. On the national bookkeeping ledger, Wages are a plus for total revenue and Consumption is a minus for total spending in our economy.

But here’s the thing about that. We all know there’s a huge gap in incomes of the top one percent and the lower 99 percent of us. That’s because the vast majority of us are both Workers and Consumers.

Wealthy people spend more than we do. However they grow way richer by investing. And yes, Keynes formula also includes an I for Investments a.k.a the IRS’s “passive income”.

Here’s the how the wealthy have kept money flowing into their bank accounts. And here’s why a lot of that of that money is fast disappearing this week.

Like the disease (tuberculosis) that ate away at people in the 1930s, Keynes’ Consumption formula has eaten away at workers’ paychecks for decades.

Tax breaks for the rich have made them even richer, while wages have stagnated for 40 years, pensions replaced by 401K’s, and Social Security raises retirees income 2% or less every year.

Rich people buy luxuries but they prefer to invest their money. In doing so they inflate (i.e., bid up) the worth of assets many times until the bubble breaks and we all are forced to get real. 

People’s Taxes Should Go to Pay Shoppers!

Here’s why government taxes should pay people for shopping. CONSUMPTION of goods and services requires WORK! Spending takes time and effort. It’s work, even if we love it.

Online or brick & mortar shopping; either way, there’s a ton of research involved in trying to apportion your income to get just the right things for you.

And there are lots of hazards in our way, con artists, high-pressure salespersons, and just plain shoddy products to be avoided. 

However, without spending by millions of Americans there would be no revenues earned by any Americans.

Note that we, the majority of the people who WORK for a living, are the CONSUMERS, i.e., spenders of the little money we make working. And it is the wealthy who are SAVERS through INVESTING and not paying TAXES.

The one percent have been skimming half of the profit that they “earn” off the work that we do. We workers are making the rich richer. Yet we pay the highest taxes in the land and they do not pay much—or anything.

This is why SHOPPERS, not CORPORATIONS, should be paid for buying things. This is the way to balance out the Keynes formula between revenue and spending and bring the economy towards “equilibrium” (i.e. more income equality).

How This Will Work

I’m sure economists could balance some part of the wealthiest people’s income to offset the costs of those workers who wanted to go out and shop. After all the owners of big companies would still benefit from profits made.

For example, look at how cheaply Elizabeth Warren’s proposal to tax the wealthy on behalf of children, students, and workers (who are also consumers) is now. Two percent! on those higher incomes!

Do you pay 2 percent tax! on your income? Do you pay nothing! Like big corporations get to do? Heck no!

As the Mayor of Grafton, Illinois told Marcus Limonis’ on Marcus’ TV show the Profit, after the Mississippi flooded the town, “Working people don’t want a handout. They want a hand up”.

People’s feelings count. Americans are proud of the work we do and the country we live in. The C –  in Keynes’ Consumption formula should be replaced by an A +  for All Americans, rich and poor. Just as soon as we defeat this vicious virus.