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January 31, 2018


Following, slightly edited, is my response to Professor Sheila Suess Kennedy’s blog today seeking comment on  the issue of wage inequality and its negative effects on aggregate demand, the sole arbiter of economic growth.

I note with interest that Trump last night in his selection of his speechwriters’ words and phrases neglected to use the word Russia, or the word deficit, or the phrase wage inequality, and I wonder why.  As my fellow commentators know by now, I consider wage inequality to be our most pressing domestic issue (aside from nation-killing Republican attacks on our democracy and democratic institutions), and the fact that the federal minimum wage has been stuck at $7.25 an hour for 21 years (since 1997) is a scab on our economy due, among other things, to inflation (whose basket for computation wrongly excludes food and energy and thus skews the official rate downward). The purchasing power of $7.25 not only isn’t what it used to be due to the accumulated ravages of inflation but it is not realistically measured as well. Food and gas prices are going up and as to other forms of energy my daughter emails me that she paid a $325 electric bill last month. Economic growth depends solely upon aggregate demand and someone tell me how demand in the marketplace is enhanced by the payment of slave wages to workers. Who are going to buy goods and services in the marketplace, the rich? No, they are too few and already sated.

Sheila rightly notes that you and I have to subsidize the likes of Walmart by providing social services such as food stamps to its employees so that they can exist, thus paying our tax money into the coffers of Sam Walton’s heirs and devisees, albeit indirectly. We even have to provide food stamps for some serving in the military, speaking of slave wages. Walmart is not alone; you and I are subsidizing many other corporations’ shareholders and bonuses for their executives along with capital gains opportunities as their stock values on the Dow and S & P go up, but such a rise is not as a result of corporate efficiency or the patent of a better mousetrap – their compensation and stock values go up via taxpayer gifts from you and me, accentuated by the recent “tax bill” passed which amounted to a super gift to the rich and corporate maw, a trickledown super gift to the superrich which will not translate into enhanced demand, new factories, massive increases in employment etc. as claimed by Trump and his sycophants. What corporate board in its collective right mind would increase production to sit on warehouse shelves unsold because of lack of aggregate demand caused in turn by wage inequality? If any, expect shareholder suits demanding sanity in the executive suites.

I think that wage inequality and economic growth are oil and water – never to mix – and I look to whatever anemic economic growth there may be in our near future as a result not of corporate performance, Republican tax cuts and laissez faire regulation of the market but rather to more sophisticated automation, increased worker productivity and Amazon-like marketing techniques.

Keynes had it right for the ages: That our problem is not overproduction but rather underconsumption. Our problem as politically translated is that we refuse to see to it that those who would consume have the wherewithal to consume in favor of shoveling their productivity into the bottom lines of the rich and corporate (donor) class. Finally, I think that the advice of an old judge to me when discussing the economy and the intellect of politicians is germane to this discussion. He told me more than once that “You can’t get a quart out of a pint jar, Jerry.” He was and is right; Trump and the rich and corporate class are spinning trickledown fantasies long since discredited by Stiglitz and other economists for their own greedy purposes.      GERALD        E

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