America’s Economic Tinderbox

Charles Payne
Posted: Aug 20, 2014 12:01 AM
America’s Economic Tinderbox

The stock market continues to take its cue from the military action (or inaction) between Russia and Ukraine, and to the lesser extent, from how we are dealing with ISIS (bombs away), and I love it! But, how long can Wall Street continue whistling past the graveyard when it comes to a potential explosion of violence across America? Scenes from Ferguson, Missouri are numbing for many reasons, still, in the back of everyone’s mind, it is the new reality. America has become a powder keg; all that is needed is a spark and fanning of flames. The most critical component of discontent is the lack of income and an inability for people to make life better. St. Louis is a prime example of how hard times have been for everyone since the start of the Great Recession… median incomes have collapsed.

While the employment picture has stabilized in the last couple of years, the quality of jobs has resulted in a 23% decline in wages and this year, unemployment among young black and Hispanics surged into the summer.

The US Conference of Mayors point out that income inequality has increased in two thirds of the nation’s 350 metropolitan areas. Yet, the solutions aren’t market-oriented, nor do they take into account where the growth of great jobs will be in the next decade. Instead here’s what politicians will propose:

  • Higher minimum wage
  • Increased earned income tax credit
  • Pre-K education

These are all artificial and make things worse, not better. They mask real crisis and put more pressure on government to do for individuals what capitalism normally forces them to do for themselves: adapt, gut it out, and evolve. Capitalism makes us get better, unlike unlimited unemployment benefits and other transfer payments from government.

Transfer Payment 2011

$1.800 trillion

$0.421 trillion

$2.221 trillion

Select Transfer Payment2007 to 2011Non-MetroMetro
Unemployment Compensation+163%+207%

On Sunday, Rev Al Sharpton said that if the government has millions of dollars to militarize Ferguson’s police force, then it has millions of dollars to create jobs for young people… The fact is simple: the government does not create jobs, it creates the backdrop where jobs can grow or decline. In fact, we’re living in the prime example of how the government can destroy prosperity. We need good jobs and people with the right skills to do those jobs. Any other solution offered would not only prolong the problem, but also make it larger in the future.