Lecture 18. WEALTH vs POVERTY

Lecture 18. WEALTH vs POVERTY
Wealth is created by the efficient use of available 
resources. A nation has three resources: time, nature, and
productive capacity, including the nation’s 
infrastructure and its people. If resources are idle over
a period of time, the result is a lost opportunity to 
create wealth. This is an “opportunity cost”.
Poverty is the result of an excessive opportunity cost.
 
When the public demands certain goods or services and 
entrepreneurs are able to convince banks that they can 
employ available resources to satisfy the public’s 
demand, they are granted a loan. When their business
succeeds, they repay the loan with interest. That is how 
capital creates wealth.
 
Absent the public demand, entrepreneurs do not apply for 
loans. Or such applications are denied. Or, if accepted, 
not enough of the entrepreneur’s goods or services 
are sold and loans are not repaid and banks hesitate to 
grant loans and available resources are not used and 
opportunity costs rise and poverty is the result.
 
In that case, the absent public demand for goods or 
services must be replaced by the federal 
government’s demand for goods and services to 
develope, build, and maintain infrastructure related to 
transportation, communication, administration, education,
health, science, technology, culture, tourism, military,
international assistance, and so forth.
VAST WEALTH HIDDEN IN PLAIN SIGHT
The deficit hawks want to balance the budget by cutting 
services for the needy while reducing taxes for the rich.
But, if they would look, they would see enormous riches 
hidden in plain sight.
 
The deficit hawks can’t see the forest because the
trees get in their way. They can see the interest expense 
- $189B in year 2009, less that 1.5% of GDP. But they
don't see the $600B in annual tax revenue at all levels of 
government - more than thrice the annual debt interest 
expense - which 20 million unemployed workers are not 
paying. Nor do they see an equal budget gain in reduced 
relief benefits.
 
And they do not see more than ten times that amount in 
national wealth - about $2T annually, over 15% of GDP - 
which twenty million jobless workers are not producing.
 
Nor do they see the cars and homes and appliances that the
unemployed are not buying.

With full employment, there would be no need to cut 
programs. At the same time, our crumbling infrastructure 
would get a sorely needed $2T annual makeover.

There is a need to restore a thriving middle class. There
is a vital need to redistribute national income back to
its spread in the pre-Reagan era.
 
The deficit hawks will tell you that full employment is a
wild fantasy, that it has never happened, that five 
percent unemployment plus ten percent underemployment is 
the best we can expect, that we must accept what the 
market ordains.
 
False!  During WW II, less than one percent of workers 
were unemployed.  One-eyed men were drafted into the army
to work in administration because there was much work to 
be done and there was more than enough political will to 
do the work.

Today, there is no shortage of work to be done.  There is
only a shortage of political will to do the work based 
upon a false belief that nothing can be done unless 
someone finds it profitable and that only during a world 
war and extreme emergency should we, as a nation, strive 
together for our future.
 
In fact, we are at war now. Against time. For our 
posterity.  And we are losing the battle!
 
Now is the time to establish a Department of 
Infrastructure with a Secretary of Infrastructure 
reporting directly to the President. The Secretary would 
have the responsibility to keep a register of all of the 
nation’s infrastructure, including their condition,
and to administer the maintenance, repair, renewal, and 
building of federal infrastructure and, through the state
governors, all other infrastructure.
 
The Secretary would also, for each item in the 
register, maintain a list of required work, hours of work,
and contractors certified to do the required work. The 
Department would have a sufficient budget to do the 
required work. The Secretary would be resposible to 
guarantee full employment of all idle human and material 
resources to accomplish the required work.

Thus, the federal government is the entrepreneur of last 
resort. Who grants a loan to the federal government? The 
public is the lender of last resort by way of Congress. We
lend it to ourselves.
 
Our wars have all been successfully financed by such 
loans. No creditor has ever complained.
 
Why do we not finance peace and prosperity the same way?
 
For only one reason: because not enough voters understand 
Keynesian/Lernerian Economics 101. See below!
Proceed to: Lecture 19. LIVING WITH DEBT
Thanks for your interest.
  Marvin Sussman, retired engineer

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