“Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!” This is part of “The New Colossus” a sonnet by Emma Lazarus on a bronze plaque in the Statue of Liberty. Though it really doesn’t represent the historical or present-day attitudes of immigration throughout American history it does represent the dreams, aspirations, and success stories of countless immigrants coming to our shores who truly helped build this nation into what it is today.
Without the affluent masses this nation would be a nation of the very wealth and the very poor. Henry Ford really had the right idea when he came up with the brilliant idea of paying his employees enough of a living wage that they could afford to buy one of his cars. He clearly understood the concept that you needed the masses of people to become affluent enough to buy more than just the essentials in life in order to have a thriving mass production industry. Customers have always been the lifeblood of businesses. The more customers the better. What better customer base can you have than the vast majority of the population. This can only happen if the huddled masses have enough money to spend.
Unlike the very rich who invest the vast bulk of their fortunes, the masses do not have enough wealth to invest, so they spend. This makes them the perfect customer only if they have enough wealth to spend. It is in everyone’s interest to keep the masses feeling rich enough that they continue to spend. Once they feel their economic stability threatened they stop spending and the manufacturing sector collapses. No time in recent history was this more apparent than during the 2008 economic collapse. As they perceived economic collapse and the loss of jobs they stopped spending. Manufacturing facilities stared closing down due to the lack of orders resulting in the loss of even more jobs and the fulfillment of its own self-fulfilling prophesy. Not only were the masses greatly impacted but also the rich since many of their investments were in the very business that the masses used to worked and purchased goods and services from.
Keeping the masses happy and in a spending mood makes for an affluent society and a thriving economy. The middle-class in America represents the masses here. President Obama is right when he stresses keeping the middle-class vibrant and thriving. The vast majority of goods and services are paid out of the pockets of the middle-class, not the one or two or even five percent of the wealthiest. It’s the quantity of widgets manufactured and sold that matters and only the masses of hundreds of millions of middle-class Americans can purchase enough widgets to make the manufacturer and the investments of the very rich thrive. Thus it is the masses, the common people, that contribute most to the overall health of economies. The more the masses spend the more the economy grows. The more the masses earn or can keep after taxes the more they will ultimately spend. It really doesn’t take a genius to realize this simple truth.
Taxing the rich will not stop them from investing the bulk of their money because they are opportunist and want to make more money regardless of how much they are taxed. But taxing the masses will impact the amount they can spend on goods and services beyond their necessaries. Apple could not be successful without middle-class customers. The very rich only need one or two iPhones each year. But the masses buy tens of millions of them annually. It is the same for computers, TVs, appliances, cars, gas, homes, hamburgers, and all the other products, consumables, and services that are essential to a thriving economic engine. Without fuel an engine is just a chunk of metal. The fuel of the economy is the money spent on goods and services by the masses because they are the spenders.
So the key to the economic growth and prosperity of this or any nation is an affluent middle-class, the masses. The more affluent they are the more likely they are to spend and the more likely the economy will thrive. Keeping taxes low for the middle-class and high for the very rich is one way to keep the country prosperous. The middle-class will end up paying proportionately more in taxes as their earnings increase anyway and the rich will keep on netting more money from their thriving investments. It’s really an overall win-win scenario. Another way to enhance the spending of the masses is to reduce their cost on essentials such a health care, insurance, energy, utilities, education, etc. which to an extent the government can help out. The Affordable Care Act will hopefully address some of the very high health care expenses borne by the middle-class.
Anything that leaves more money in the pockets of the masses means more at the cash-register and more blood pumped into the economic engine. We are talking about approximately 200,000,000 Americans. Each dollar they spend is about $200,000,000 dollars going back into the economy and each person spends many more than one dollars each day. The reverse is also true. How much do you spend daily on all your expenses? Multiply that by 200,000,000 and that is about the amount that is spend daily in the US by the masses assuming you are not one of the very rich. Every extra dollar that the masses has to spend it $200,000,000 more going into the economy. So giving the middle-class a tax break can have tremendous payback.
For example Walmart is the largest private employer in the United States (1.4 million employees). It pays its average sales associate (cash-register clerk) $8.81 per hour and the overall average salary is $12.67 per hour while CEO Michael Duke made $20.7 million in 2012. $8.81 per hour is not enough money for an employee to shop at their own store. Even $12.67 per hour is barely enough for an employee to shop there. Paying an average salary of $15 per hour or more and increasing the salaries of the lowest paid the most will enable employees to not only shop at Walmart but buy other things not sold in Walmart elsewhere. This was Henry Ford’s strategy for success.
Related Article: The Economic Power of the Middle Class