Author Archives: jjfitzgerald

A Modest Proposal: Step 3, Reform the Money System!

A Modest Proposal: Ten Steps to a Democratic Economy

In my initial installment of this series, I proposed, “Ten Steps to a Democratic Economy.” With this column, I would like to explain and defend my third proposal. I invite commentary and analysis.

3. Reform the Money System ““ The money supply system is directly under the control of the Federal Reserve. This agency has 14-year terms. They need to be placed under congressional control, not Presidential control. I recommend that their terms be limited to 4 years and they should be checked by Congressional fiscal policy. High interest rates currently only benefit banks and financial institutions.

The Federal Reserve, usually called, ”The Fed,” is the central banking system of the United States. The Federal Reserve System is composed of a central Board of Governors in Washington, D.C., and twelve regional Federal Reserve Banks located in major cities throughout the nation, and a number of member banks. The Federal Reserve Act created the Federal Reserve System in 1913. The board and its chairman are appointed by the President of the United States and approved by the Senate.

The money supply available at any given time in our economy is a product of the interest rates that are set by the Federal Reserve. As it raises or lowers the interest rate it charges to member banks, it increases or decreases the amount of money available to the economy. Higher interest rates slow the economy and lower interest rates speed it up. This means that the economy is producing goods and services and thereby creating jobs in a “slow” manner or in a “faster” manner.

I am not an expert in economics, but I know that high interest rates hurt low-income people and benefit wealthy people. Low interest rates help low-income people, but do not hurt wealthy people. The wealthy have a surplus and they profit from whatever the amount of the interest that it earns. Their complaint would be that they are not being rewarded “enough” for their thrift and/or miserly behavior. People who have surplus money can, of course, give it away, but most wealthy people prefer to “rent” it out. The money you pay in interest on a loan is in effect the rent for that loan. The wealthy are the creditors and the poor are the debtors. Those who lend are the creditors and those who borrow are the debtors. (One problem with this scenario is that truly destitute, impoverished people are hardly ever loaned money. They are considered poor risks.)

When a bank grants someone a loan, most people feel happy. This is understandable but they should not feel happier than the bank. The bank is now getting a 6% return on its money, when earlier it was only getting 2%. This is how banks make money for themselves. They take it in at one window and loan it out (part of it) at the other window.

Low interest rates stimulate purchasing of goods and services. With low interest rates it is easier to borrow money to buy a car, a refrigerator or a house. This means that more people will exercise that purchase option and the economy will move along. This tends to create a bit of inflation.

Wealthy people do not like inflation. It means that their wealth does not buy as much as it used to buy. Large financial institutions feel the same way. They like to have the Federal Reserve under the control of people who are not elected by the citizens, or at least at a distance from the people. The President appoints Federal Reserve Board members. Their terms in office are for 14 years and the Senate confirms them. The House plays no role. The Senate is the more conservative of the two legislative branches. Senators have 6-year terms. There are two per state regardless of population.

Recently, after Hurricane Katrina, hit the Gulf Coast, a number of people felt that the Federal Reserve should have lowered interest rates to make goods and services available to those afflicted. It did not do so. It was focused on the anti-inflationary policy that it had been following. This is an example of monetary policy interfering with fiscal policy. Tax cuts meant that the government would have to borrow to cover the costs of the hurricane and aftermath.

Fiscal policy refers to the ability to raise revenue by way of taxes and to spend money on needed projects. In a phrase, fiscal policy refers to revenue and expenditure policy. With a democratic fiscal policy, we could collect more money from the affluent and provide more services to the poor. Tax the rich and help the poor.

It is for this reason that conservatives fear and loathe democracy. Conservatives fear that a majority would probably want to spend more money on schools, health care and environmental protection, instead of prisons, police and the military. Since the wealthy people would see an increase in their federal income taxes, if this happened, they generally oppose giving Congress strong fiscal tools, and instead rely on monetary policy to adjust the economy.

A more democratic society would give us better economic policies. Better economic policies would put people before profits.

A better world is possible.


Economic Report of the People. Boston: South End Press, 1986.
(Center for Popular Economics, Amherst, Massachusetts)

A Modest Proposal: Step 2, Raise the minimum wage!

A Modest Proposal: Ten Steps to a Democratic Economy

In my initial installment of this series, I proposed, “Ten Steps to a Democratic Economy.” With this column, I would like to explain and defend my second proposal. I invite commentary and analysis.

2. Raise the Minimum Wage ““ I think it would be a good idea to raise the minimum wage to $10.00 per hour. It is currently $5.85 per hour.($8.00 in Massachusetts.) I would also shorten the workweek to 35 hours to give people more free time for recreation and education.

Raising the minimum wage would put a lot more money into circulation and would stimulate the economy. Most of the people who would benefit from this new policy would spend their money on goods and services that they presently do without. For all of these people, it would mean more money above the subsistence wage that they are presently earning. These people are the working poor. They are for the most part the invisible poor. Visible or not they are a reality in the current American economy.
The economist Holly Sklar is a widely published op-ed columnist and author. She is co-author of “Raise The Floor: Wages and Policies That Work For All Of Us,” which Barbara Ehrenreich calls, “A commanding work and powerful tool for the living wage movement.” She is a contributor to numerous high school and college text anthologies and is a frequent guest on talk radio.
She tells us,

“The number of Americans in poverty is a group so large it would take the combined populations of Louisiana, Mississippi, Alabama and Texas, plus Arkansas to match it. That’s according to the Census Bureau’s latest count of 37 million people below the poverty line.
Millions more Americans can’t afford adequate health care, housing, child care, food, transportation and other basic expenses above the official poverty thresholds, which are set too low. The poverty threshold for a single person under age 65 was just $9,827 in 2004. For a two-adult, two-child family, it was just $19,157.
By contrast, the Economic Policy Institute’s Basic Family Budget Calculator says the national median basic needs budget (including taxes and tax credits) for a two-parent, two-child family was $39,984 in 2004. It was $38,136 in New Orleans and $33,636 in Biloxi, Mississippi.
America is becoming a downwardly mobile society instead of an upwardly mobile society. Median household income fell for the fifth year in a row to $44,389 in 2004 — down from $46,129 in 1999, adjusting for inflation.”

Under my proposal, if the principal wage-earner was paid $10.00 an hour for a 35 hour work week, their family income would be $17,500.00. This would not eliminate poverty, but would put a floor under it. With family assistance for the working poor, in the form of tax credits or income credits, we could effectively insure that no family lived in poverty.
A higher minimum wage also helps protect the wages of workers in the higher brackets. It also promotes a greater sense of community, in that it eliminates the resentment that gross inequality in income and wealth promotes. This resentment contributes to criminal and anti-social activity.
The minimum wage would have to be indexed to inflation to protect it. To promote skilled labor, a minimum wage policy would have to include free education. By making education available to all, with free tuition, room and board, etc. we would remove a number of people from the work force and at the same time invest in future job growth for highly skilled graduates. Over time these skilled workers would pay back the system by paying their just share of taxation.
The current system will not move toward this direction unless we build a social and political movement that works to bring it into being. The current economic elite is aware of how fragile their social position is. That is why they spend so much money for lobbyists and political bribes (aka “contributions) to keep the current unjust system in place. A disciplined political organization of working people and their allies could easily overcome this. It really is just a matter of, “keeping your eyes on the prize,” as they used to say in the civil rights movement.
One thing is certain, if we do not try to build a progressive movement, then we will not have a progressive movement. If we try, we might fail. But a rational and realistic effort, very probably would succeed.
The alternative is the misery and injustice that we see around us today. To maintain that outcome, we need to do nothing.

A Modest Proposal: Ten Steps to a Democratic Economy, Step 1

A Modest Proposal: Ten Steps to a Democratic Economy

by John J. Fitzgerald

I propose Ten Steps to a Democratic Economy. Starting with this column, I would like to explain and defend my proposals. I invite commentary and analysis.

1. The Right to a Job ““ Every person should be guaranteed a job. If the private sector cannot help them, then a public sector job should be available. This could include working on a mass transit system to replace the interstate highway system. Maintenance of public parks, fully staffing public schools and public hospitals could be other areas of employment. We should also publicly fund an alternative energy policy to end our dependence on foreign oil. The model to follow here would be Sweden.
– – – – –
Every person who is not significantly handicapped should be able to work for a living. I define a decent job as one that pays at least $10.00 per hour, for a 7 hour day, 5 days a week, with decent working conditions, health care and Social Security coverage. If the current market can not supply those jobs, then the government should. This program would be similar to what Franklin Roosevelt’s New Deal meant in the 1930’s, except it would not wait for an economic depression to get it started. I would like to see this expand and contract as the situation required. For example, maintenance of public parks and recreation areas would be an ongoing effort. Maintenance of public buildings, schools and hospitals which are historically neglected because of budget concerns would be fully funded, thereby creating a supply job market that will always be present to match demand. Creating a mass transit system would require a huge workforce just as the interstate highway system of the 1950’s and 1960’s did. Converting from an automobile based transportation system would ease global warming and end our dependence on oil from the Middle East. Converting from petroleum and natural gas to wind power, solar and increased hydro would also require new construction and manufacturing jobs.
Shortening the work week to 35 hours will also create more jobs. It would increase leisure time and thus would promote jobs in that sector. We would also have to make over-time illegal. One should be able to survive and flourish on the income generated by one job. The goal is to create more jobs. The whole idea is to get away from a profit making system to an economy that puts people first. Another name for this is democratic socialism.
To attain this goal we need to start discussing it as a goal. Some people are already close to doing this. This past month, [December, 2006] AFL-CIO President John Sweeney outlined his federation’s vision for stopping what he called, “the senseless slaughter” of good American jobs.
In a speech to the National Press Club, Sweeney described how America’s workers have struggled over the past 25 years as “a perfect storm of outsourcing, off shoring, tax evasion, layoffs, work speedups, wage cuts, health care cuts, pension cuts, shifting risks, bashing unions and short-changing communities”
has swept across the economic landscape.
Sweeney talked about some of the immediate actions Congress and President George W. Bush can take to stop the erosion of good jobs in
America, including:
“¢ Guaranteeing America’s workers the freedom to form unions and
bargain for a better life.
“¢ Giving workers the same protections as corporate interests in
our trade policy.
“¢ Making it illegal for companies to buy or sell products made
in sweatshop conditions.
“¢ Repealing tax laws that encourage companies to send jobs
“¢ Passing universal health care coverage.
“¢ Telling corporate America to rejoin our national community by
investing more in workers and less in their executives.
“¢ Doubling the money we spend on education and job training.
“¢ Raising the minimum wage.

Sweeney is making proposals within the context of a corporate-capitalist-labor union system. I think we need to move beyond this approach and for that we will need to get involved with political parties and political campaigns. A good start might be found in a progressive movement within the Democratic Party.

I am supporting Obama

I am supporting Barack Obama in the Massachusetts Democratic Primary on 5 February 2008. I am going to vote for Barack Obama for the following reasons:

My previous candidates have dropped out after low levels of popular support. I thought Kucinich had an excellent platform. I thought that Richardson had the maturity and skills to be President.

It is now looking to be a two-person race in Massachusetts.

I think that Barack Obama and Hillary Clinton have really no discernible differences in their voting records or their platforms. Clinton did vote for the Iraq War and Obama opposed it, but there is not much difference between them.

I think Barack Obama is a break with the dead centered politics of the past. He represents a younger generation and is bringing young people into the Democratic Party. His speeches inspire and bring people together.

Barack Obama is not married to Bill Clinton!

Hillary represents a continuation and a vindication of the Clinton administration. I did not see any reason to carry on with “Clintonism” in 2000, and I do not see any now. Bill Clinton spent six of his eight years in the White House hanging on to power and doing little for the country. No health care program, no reduction of wasteful military spending, no real reduction of poverty, no serious federal aid to education, etc. Global warming got worse under Clinton.

The Clintons have consistently supported the interests of their wealthy campaign contributors. They are not New Deal Democrats. The Clintons are active supporters of the Democratic Leadership Conference, which is, at best, a moderate to conservative group, which caters to the interests of corporate America. Jesse Jackson called them the Democrats of the Leisure Class.

Barack Obama’s life story is compelling. He is a product of the civil rights movement and represents the coming of age of that movement. He will literally offer a new face for America to the world. I think this is a positive and necessary change for the good.

I do not know how the politics of 2008 will play out. We might see a Romney/McCain ticket with the GOP. We might even see a Clinton/Obama ticket on the Democratic side. Nonetheless, I think it is important to give Obama a boost in Massachusetts. This will encourage Hillary to reconsider some of her positions and might even change the entire dynamic of the Democratic contest.

If Hillary wins big on Super Tuesday that will be good news for her and Bill, but it will not be good news for the Democratic Party.

Yours truly,
25 January 2008 John J. Fitzgerald

Forecast for 2008

We are living in a period of unprecedented corporate wealth. This is similar to the 1890s and the 1920s, but the extreme disparity is far worse today. We have a growing number of billionaires in our society and the numbers of the poor and homeless are growing. Most people are in debt with credit cards and mortgages and car loans. There are few people with substantial savings. Labor unions are weak and most Americans like to ignore the realities of class in our society.

Consumerism is the engine that keeps the cornucopia flowing and consumerism is having a head on collision with the environment. Global warming is a real phenomena and that is why the oil and energy companies are denying it. They know that it is real, but their business depends on selling oil. Their main partners the automobile companies are trying to get the public to ignore the global warming activity that is caused by carbon burning vehicles, aircraft and ships.

I think we will need to break out of the old ways of doing things. Corporate capitalism is the main problem and governmental intervention is the only way to rein it in. I don’t see Hillary doing this. Edwards and Obama have the potential to change things. I think a major economic shock will be necessary to reorient the economic system. Cf. The 1930s.

We still have a number of New Deal era reforms in place to cushion the shock, but the Reagan/Bush era has waged an outright war on the New Deal and the usefulness of government in peoples’ lives. The Reagan/Goldwater ideology opposes the welfare state in the name of liberty. But in the name of security it asks the federal government to support a bloated military machine. This military machine is the main reason we have international trade with cheap goods from abroad. It requires massive amounts of oil to run on and that is why we are in the Middle East with guns blazing away. Our oil based war machine is designed to protect oil and to continue using massive amounts of it in ships, planes, tanks, etc.

2008 will be a turning point because of the mortgage crisis, decline of housing starts, decline of housing market values. The price of oil will continue to rise.

I think we are headed for a serious recession and the Federal Reserve will not pull us out of it. A change in fiscal policy, not monetary policy, is required. Fiscal policy involves raising or lowering taxes and initiating expenditures. The right wing fears fiscal policy because it is a threat to their privileged inequality.

I see the Democrats building a larger majority in both houses this Fall. The Democrats will win the Presidency. Getting out of Iraq will be a consensus position, if it is not already. (The military is having serious problems recruiting soldiers and retaining existing ones.) The future health of the economy will be the main concern and this will require a greater role for the federal government.

To conclude, there are similarities with the 1890s and the 1920s and both of those boom eras ended in serious recession/depression. We are headed for a serious accounting for the past 8 reckless years of Bush and Company. Not exactly a rendezvous with destiny, but very similar. My main worry is whether we will remain a democracy as we go through the crisis.

I see this as a realistic, not a pessimistic, analysis of our current situation.