Money Talks, But Who Listens?

   Money talks, the saying goes. And politicians listen, especially when money is talking directly to them, and helping to finance their campaigns.
   But there is another message that money brings to those willing to listen, and that is that despite the economic recovery of some businesses and the very wealthy, the folks in the middle are still muddling, with their income levels unchanged for two years. In fact, it's down from pre-recession levels.
   As noted here a few days ago, the top 10 percent of Americans own more than half the wealth of the country, and they have recovered quite nicely from the Great Recession that began in 2007. And the uppermost 1 percent control 20 percent of American wealth.
   But median income of American households has stalled, according to Census Bureau data released today. It's stuck at $51,000, unchanged for two years. To be exact, median household income was $51,017 in 2012, and $51,100 in 2011, a difference that the Census Bureau calls "statistically insignificant." Moreover, that figure is down 8.3 percent from 2007, before the downturn began in the latter part of that year.
  Meanwhile, some 46.5 million Americans -- 15 percent of the total population -- live in poverty, the Census Bureau said. By definition, poverty is when a family of four has income of less than $23,492. And the poverty level also has not changed in two years.

   Here's what was noted in this space August 23: At $10 an hour, the yearly total for a worker is $20,280 for a full 52 weeks, no vacation, and that's still below the government-defined poverty level. But the federal minimum wage is only $7.25, and many restaurants are exempt from that requirement, supposedly because their employees get most of their earnings from tips.

   What's to be done? Granted, raising the minimum wage would result in higher prices for many items, but competition and greater business efficiency could compensate for part of that. But increased prices at high-end restaurants would not elicit much sympathy for the super-wealthy 10 percent, much less the stratospheric one-tenth of 1 percent.
   A pay increase of any kind, no matter the source, results in a boost in spending, even if the worker devotes the same percentage of income to food, clothing and shelter. And a boost in spending helps to fuel economic recovery. Moreover, increased income among the very wealthy does not fuel more spending; rather, it sets aside more savings. And that helps no one. In fact, increased saving is harmful, because it counterbalances spending, and spending is what fuels economic recovery and activity.
   It's called the Paradox of Thrift. 

   So the way to come out of an economic downturn is spending. Republican officials knew that as the Great Depression began in the early 1930s, as they urged Americans to spend.
  Unfortunately, those in the middle class could not, and those in the Gilded Age would not. Therefore, if the private sector could not or would not, it fell to government to prime the economic pump through spending programs. And once things got rolling again, government could then cut back and leave spending to the people.