Weekly Letter to President Obama
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INAUGURATION, January 20, 2009
Drunk in its stale air
For two hundred years.
Fettered in mind and body,
The soul, the safe escape
To let me breathe the cries
Of my heart singing
Tears of mel-an-choly.
The tears flow free today
Washing the stains of blood
And sweat in brotherhood.
Raise the curtain then an'
Let the world look in
On this promised land --
We breathe free today.... almost.
--- Arshad M. Khan
We will be known forever by the tracks we leave.
--- Native American proverb
September 28, 2012
Mr. President: The economic news this week has been mixed: the new jobs report is
encouraging but durable goods orders plunged 13.9 percent -- economists had
expected 5 percent. The last time we suffered such a steep drop was in January
2009 in the depth of the recession. Boeing, now headquartered in your hometown of
Chicago, received one order in August compared to 260 a month earlier. Second
quarter (April-June) GDP was revised downwards by about a quarter from 1.7 to 1.3
percent annual growth. The Fed's response, to continue quantitative easing, has not
been viewed favorably by the markets. Mr. Bernanke continues trying to play pool
with a rope when our "job-creators" are already awash in money. In the absence of
sensible fiscal policy from the other side of town, it is the only game left.
One sensible and humane way to generate some demand is by raising the minimum
wage to what it was, inflation adjusted, in 1968. If we also allow for the fact that
worker productivity has more than doubled since then, the fair minimum wage should
be around $20 yielding an annual (50-week) income of $40,000 before tax, instead of
the current $14,500 from $7.25 per hour which places a family of four well below
Should this appear kooky and outlandish, here are two statistics: The Chicago
Federal Reserve reported in a study last year that a single dollar increase in minimum
wage results in a $2,800 increase in spending per recipient. One can imagine the
wind in the sails of an economy caught in the doldrums for a rise to $10, which allows
employers to retain all the gains from productivity increases in the last forty years.
Second, the average hourly wage for the top ten hedge fund managers in 2010 as
reported not so long ago was $84,000. Exactly, what do they produce? Put it this
way: China has become the world's second largest economy without their help.
If we needed any more reasons for an increase in minimum wage, the Census Bureau
released recently (Sept. 12, 2012) a report on annual income, poverty and
inequality. In 2012, 46.2 million people were living in poverty -- defined as an income
at or below $23,021 for a family of four. That is a good 15 percent or about 1 in 6 in
the richest country in the world. Income inequality rose another 1.6 percent to a Gini
coefficient of 0.477, where zero represents perfect equality. Consider this: the
numbers for Sweden (23), Finland (27) are what might be expected, but even India
(37), Pakistan (31), and Vietnam (38) beat us handily. Severe income inequality
leads to diminishment in educational opportunity and quality, and numerous other
subsequent social problems. It also hampers our ability to compete in a global
economy against the hard drivers of Asia.
Finally, another way to fight obesity as long practised by merchandisers: it turns out,
what used to be a size 8 in the 1950s had become a size 4 in the 1970s and by 2006
was a size 0 (zero). It has a parallel in the reported civilian casualties of drone
attacks. Who says the government cannot learn from the private sector.