Now enjoy a more manageable
Imagine for a
moment that we could implement the two above-proposed solutions at the ballot
box, and perhaps could even begin to erode the excess power presently vested in
business and wealth institutions. Simultaneously
taxing labor and subsidizing capital over the long term has had a compounding
effect, each reinforcing the negative economic impacts of the other. If
Such an economy would be much more responsive to Keynsian fiscal management, which balances the federal budget at a defined level of full employment, banks a surplus when the economy overheats, and runs a deficit when the economy lags. Full employment could be defined in terms of minimum frictional levels rather than a permanently underutilized workforce. A marginal fiscal spending increase triggered at, say 4% unemployment, would flow through an economy more likely to respond to stimulus with marginal employment rather than bubbles, outsourcing, and automation. Conversely, a reduction in fiscal spending triggered by a return to, say 3% unemployment, would more effectively prevent cost-push inflation and pay down the national debt.
Today's monetary policy is likewise rendered largely ineffective by vast pools of liquidity among banks, corporations, and wealthy individuals. Increases in money supply that are intended to stimulate real increases in economic activity instead only trigger commodity and stock-price bubbles. With greater free-market participation by labor and the middle class, money flowing through the economy would not be trapped in these liquidity pools, and unemployment would take care of itself. Monetary policy could focus on the health of the currency instead of the fragmented mission-impossible of managing unemployment as well. Let the bankers be bankers!
If government allowed free markets to function within a framework of regulation designed to guarantee free choice rather than grant favors, good things would happen. Enormous savings in the cost of safety-net programs would be realized as labor markets became energized. Eliminating subsidies and penalties would reduce friction in markets for labor, materials, and even capital.
Such an environment would make our discussion about minimum wages far less relevant than it is today.
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