Sunday, February 21, 2016

The Only Way To Give People More Money ...

... is to actually give them more money.  But, unfortunately, over the past two decades, we've been actively moving in the opposite direction.  Two big reasons behind that move are discussed at some length here and here.

I remember how disappointed I was back in 1996 when Bill Clinton signed the Republican sponsored-and-passed "welfare reform" bill that did, in fact, end welfare as we knew it.  Truthfully, it's more nearly correct to say that it ended welfare, period.  Under the new law (still in effect, of course), either you find a job in five years, or tough luck, buddy.  The only exception allowed in the law: the ability to request a Presidential waiver of the five-year requirement during a national economic crisis.  Of course, the economy was booming at the time the bill become law, so no one thought waivers would ever be needed.  But guess what President Obama has needed to given to more than one Republican governor?

"Welfare reform," as designed by Republicans, was built by people who believe that it really is possible to make a dog hunt by beating it.  All you need to do to create full employment is to threaten everyone to get jobs that may or may not exist.  Clinton, of course, signed it only to guarantee his re-election and to head off any effort to impeach him.  In the end, he had to settle for thinking that one out of two isn't bad.

The rest of us, however, had to deal with the consequences of his short-term calculation.  By taking away the guarantee of an income for families with children, he effectively cut consumption throughout the entire country.  Stores could sell less food, and other consumables.  The companies that produce those consumables have less revenue, and need fewer workers.  Those workers have less money to spend.  And so the ripple effect has gone on.  And all those "jobs" that welfare "chiselers" were supposed to be scared into taking disappeared.  It would have been far better to step up efforts at investigating fraud. That would have punished only the guilty and created jobs at the same time.

At least, during the Clinton years, it was still possible to raise the minimum wage.  Republicans were still too insecure about the reach of their power to resist Democrats on that subject. But no longer. Today's Republicans race each other to the bottom to see who can eliminate the minimum wage fastest.  Which is one reason why the minimum wage, to have any ability to keep people out of poverty, would need to be well over $20.00 an hour.  Most progressives are only asking for an increase to $15.00 an hour.

If we even got that much of an increase, and the kind of welfare reform we needed that combined guaranteed benefits with stepped-up efforts at combating fraud, the increase in both consumption and investment would send the economy through the roof.  And the federal budget battles might come to an end; we could pay down the national debt, safeguard Social Security and give average Americans tax cuts paid for with real money.  After all, it's consumers, not investors, who are the real job-creators in America.  Investors have too many off-shore options; consumption generates spending and investing among the consumers within our own borders.

It was Chief Justice John Roberts who famously said that the only way to end discrimination based on race is to end discrimination based on race.  Unfortunately, he was wrong about that.  But it has always been true that it takes money to make money.  Which is why the only way give people more money is to do exactly that.  Raise the minimum wage, create real welfare reform, and Americans will have the financial floor they need to reach for their dreams.

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