Poverty

True or False: More money equals a stronger, healthier economy.
Answer: Sometimes.

   Much has been said in recent years about the New Gilded Age, where a small number of Americans own a disproportionate amount of the total wealth of the country. The number being batted around is the 1 percent who have more than half America's wealth, and the comparison is to the 1890s, when a few families were super-rich, and most families were not.
   (The phenomenon is not unique to America. Watch the TV series Downton Abbey for a depiction of the difference.)
   So to raise the economic health of the many, President Obama has called for an increase in the federal minimum wage to $9 an hour, and tie it to the cost of living also. In his State of the Union address, Obama noted that a family supporter working full time and earning the minimum wage of $7.25 an hour, makes a total of $14,500 in a year. That's well below the national poverty level of $22,000. Something to consider, though, is that many states already have mandated higher minimums, so raising the federal floor will have no effect in those states. Also, the market minimum may be even higher, making the national figure even less meaningful.
   It's important to remember that the term "poverty level" can imply a different number in various levels. For example, a family of four in Manhattan with an annual income of $22,000 would have a difficult time, while that same amount in rural Appalachia may be more than sufficient.

   There is a correlation between money supply and economic growth, and while it is true that money fuels an economic engine, it does not always follow that pumping more cash can make the engine go faster.
   Equally true, it does not follow that raising the minimum wage changes the poverty rate.
   Consider this question: Is it true that since Americans have more money than they did 40 years ago, they are wealthier?
   Answer: Some are, but many are not.

   Try some numbers. In 1970, the total amount of cash and cash equivalents circulating in America was just of $54 trillion, and the economy generated $1 trillion worth of goods and services (GDP). Forty years later, in 2010, the money supply was about $945 trillion, and GDP was $16 trillion. Each had grown by a factor of 16. Meanwhile, the population was half again as big, expanding from 203 million to just over 300 million.
   So with all that money kicking around, were Americans richer? Yes and no.
   While the cutoff line to define poverty for a family of four rose from almost $4,000 yearly to more than $22,000, the percentage of Americans living in poverty remained about the same -- 12.6 percent in 1970, and 14 percent in 2010. And the number of Americans living in poverty increased from 25 million to 44 million -- numerically, nearly doubling.
   The issue now becomes this: Are we really better off, if income rises by a factor of 10, and prices increase proportionately?