Written by William F. Pickard   

Americans have not officially enshrined an inflexible caste system. Poor but proud youths can work hard and get ahead, far ahead. While privileged kids can embrace a wastrel life style and, almost effortlessly, end up penniless and pitiable. On the other hand, is our society fair? Or is it structured so that the system can be gamed? Could it be that Congress has legislated in such a way that the well-to-do become ever more prosperous while a glass ceiling between them and us grows more impervious? Here’s a test for you ...

Are you striving more now but enjoying life less?
Do you feel bamboozled in your quest for success?
If you answered “Yes.” to either of these questions, you may qualify as a keen observer of the society and no whit paranoid. Maybe America is no longer the Land of Opportunity that it once was?

It is a verifiable fact that the Bureau of Labor Statistics’ tabulation of “Median usual weekly earnings – in constant (1982-84) dollars” hasn’t budged in thirty years: $328 a week, give or take $17. During that same period, the real Gross Domestic Product per Resident increased by about 75% . In current dollars, that translates to roughly $22,000 a year more per resident, except that the median wage earner has seen precious little of it.

The old adage that “A rising tide lifts all the boats.” is economic piffle. The data are in. The analogy is inoperative. Even though John Fitzgerald Kennedy liked this adage, it still can’t be trusted. And perhaps one is better advised to side with another great Democrat, William Jennings Bryan, who said in his famous Cross of Gold oration, “There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.” To me the latter sounds far more realistic. And the reason is ...

Marginal Propensity to Consume. The concept of MPC is a little amorphous, but should be clear after a simple thought experiment. Suppose an individual at the bottom of society is cold, hungry, homeless, and broke -- and that he encounters a fifty dollar bill blowing down the sidewalk. Rational behavior dictates that he first head off to Goodwill to buy a coat, that he then eat a full meal, and finally that he go to a shelter and put the rest of his money down on a place to sleep warm and dry. His MPC is 1.00. That is, the windfall money is immediately plowed back into the economy and increases the Gross Domestic Product. A middle class individual happening upon a similar bill might head off to the grocery, splurge on a few prime lamb chops to cook for dinner, and bank the rest (say $25). His MPC is only 0.50 , so the economy gets only half as big a jolt. And finally, a plutocrat happening upon a similar windfall (and lacking no material convenience) might just toss the bill into his cookie jar and forget about it. His MPC is 0.00 , and the economy derives no benefit at all from his windfall. That is, this simplistic experiment suggests that stimulating the economy by nurturing individuals at the bottom will generate more economic activity than will nurturing the wealthy, because the poor will tend to keep the money circulating. So surprisingly, William Jennings Bryan, despite his stance in the Scopes affair, might not have been all bad; and, were he alive today, he might make a decent economic advisor to the President!

Bryan was not necessarily arguing for a Robin Hood type redistribution of wealth. Rather he seemed to favor policies that tended to raise the salaries at the bottom more than the salaries at the top. One way to do this might be by raising the Federal minimum wage to give an upwards tilt to the low wage end of the salary spectrum, while putting a special Performance Tax on accumulated wealth to force that private capital to work harder for the good of the general public. For example, private foundations in the United States are required to pay out each year at least 5% of the value of their endowments. So maybe ordinary taxpayers (or couples) should be taxed at some modest percentage of their capital accumulation? Purely by way of illustration, how about: X% of their equity in a home (above some threshold, such as the average cost of a new home of more than 1500 sq. ft. in their region); plus Y% of the net worth of their investments not in approved retirement plans; plus Z% of their personal property explicitly listed in insurance policies?

Does this sound a bit like Socialism? No way! But it does sound like doing unto others as we would they should do unto us. Something really does need to be undertaken to encourage bootstrapping within groups that are not in the top 20% (or 10%, or 5%, ...) of the income distribution. And despite a small Performance Tax, the folks near the top of the heap would still lead lives of enviable affluence.




William F. Pickard, older ‘n’ dirt, is a retiree (from Washington University in Saint Louis) who specializes in energy matters. He’s pretty much clueless as to how to how the crises confronting America might be surmounted. But at least he has had the good grace not to stand for public office.