How to reduce government, increase wealth for the lower 90%, and ‘still’ balance the budget
Yes

Yes, it’s true. There is a way, but it requires thinking outside the box.

So, what has been the primary driver of our national debt? Ask a Republican and you’ll hear it’s those damn ‘tax and spend’ Democrats. Ask a Democrat and you’ll hear it’s those damn ‘raise debt for tax cuts to the rich’ Republicans. Ask an Independent and you’ll hear it’s those damn Democrats AND Republicans.

What to do? What to do!

Let’s go back in time to the 1960’s. Sure we had the anti-war protests America’s involvement in Vietnam. We had social unrest from integration in our schools and voting rights by Blacks. We had the failed Bay of Pigs disaster, the Cuban Missile Crisis, and Major environmental damage from the Santa Barbara Spill and the Cuyahoga River Fire. We had national tragedies with the assassinations of Medgar Evers, President John F. Kennedy, Malcom X, Martin Luther King and Robert F Kennedy.

But we also had the passage of the Civil Rights Act and the appointment of Thurgood Marshall to the Supreme Court, a booming economy with low unemployment, tax cutsand growth, and advancements in technology and culture, such as the first communication satellites and the pioneering Woodstock festival, which became a symbol of peace and freedom. Additionally, President Johnson launched his “Great Society” program aimed at reducing poverty and improving social conditions.

It was a turbulent time.

But a little know event happened that too few people know about.

Minimum wage was raised from $1.00/hr. to $1.60/hr.

It doesn’t seem like much but a person working 40 hours a week at minimum wage would earn $3,328. Not much but it would be ABOVE the poverty level in 1968 for a single person up to a family of three but not a family of four.

Today, a single person working at $7.25/hr. minimum wage would earn $15,080. But that would be $80 below the poverty level for a single person but it would be $11,570 BELOW the poverty level for a family of three.

Minimum wage is below poverty wage for most poor families.

The solution? Index the minimum wage for inflation from 1968 when the minimum was above the poverty level for a family of 3 from $1.68 to $15.65/hr. Honestly $20/hr. would be better but let’s just stick to inflation.

At $15.65/hr. a single person would make $32,552 a year. That is more than double the poverty rate for a single person and would be $5,902 above the poverty rate for a family of 3. It would be only $402 above the poverty rate for a family of four. That’s why I feel the minimum wage should be $20/hr. The U.S. needs 2.1 children per woman to maintain population growth. When finance restricts families, it results in less babies.

I can just hear corporate executives, business owners, and organizations scream internally at the thought of $20/hr. After all, only California has come close with a $16.50 per hour rate among states. A few cities have set a minimum wage of $20 or higher.

Corporations and businesses would say that this would make them uncompetitive not just in the U.S. and around the world. Well, they are wrong about the U.S. Corporations and businesses are required to pay minimum wage so that point is mute.

However, I do agree it would create competition issues with other countries who pay bare wages. But we’ve had this issue for decades. I hate to say the word ‘tariff’ but this competitive edge could be weakened using tariffs but that would lead to some inflation. The higher wages would soften that problem.

But let’s look at the bright side of raising the minimum wage.

An increase in individuals’ incomes would make them ineligible for welfare, SNAP food assistance, and housing assistance as well as several other federal programs. When minimum wage is substantially better than what an individual can get from social assistance, a large percentage would work. In 2025, there are over 37 million people receiving assistance from welfare programs, and over 15 million people receiving SNAP food assistance. Over 10 million people receive housing assistance.

In 2024, assistance programs cost the government over $1.048 trillion dollars from the federal budget alone. Overall, it costs all levels of government $1.182 trillion dollars for assistance programs.

Now how much of this would be reduced if people could get a living wage? Studies have already indicated that most people on assistance would work if the pay was substantially above poverty level. But there is no definitive research that can give us a ‘firm’ figure.

I’ll do my own projection that 2/3 of those on welfare will be returned to the workforce at a raised minimum wage of at least $15.65/hr. So, the federal government should save around $700 billion dollars a year. Very nice.

But there is also the matter of taxes.

A single person making $32,552 would end up with about $3,600 a year in income taxes. A married couple of four (let’s encourage baby making) would owe nothing but probably a refund. I could go into details but that’s another 4-5 paragraphs of tax goobly goop. After all, I owned an accounting firm for 20 years.

Let’s do some calculations.

With 37 million people of working age on welfare and using my 2/3’s would return to work estimate, that is about 25 million off government assistance and earning their own way. Currently 43% of those in the lower 90% are single, which is regrettable, that would give us 10.75 million, round it off to 11 million paying about $3,600 a year in taxes. That’s another $40 billion into the tax coffers.

However, there is that other tax FICA, otherwise known as Social Security. On $32,552, that is $4,980 paid in FICA taxes. For 25 million people, that is another $125 billion in tax revenues.

In total, that’s about $865 billion more in savings to the federal government.

On a side note, the country would experience a reduction in crime. How much is debatable but studies have show that a 10% increase in wages for non-college educated men was linked to a 5.4% decrease in property crime and a 10.8% decrease in violent crime. That makes sense. I digress.

If the minimum wage was raised to $20/hr., more people would be off assistance, more tax revenue would be received, and the savings would be more than $$1.1trillion. I won’t bore you with the details as it made my eyes water.

I did leave out one other tidbit. With the increased income, there would be a significant increase in our economy. Currently, over $30 trillion in GDP is estimated for 2025. This should go up about 15% from raises in minimum wage so that’s another $4.5 trillion in GDP. With an estimate of 17% in federal revenue from GDP growth that would be another $765 billion in revenue.

So far, we’re at $1.63 trillion in revenue and savings for the U.S. government. Not quite enough to wipe out our estimated $1.9 trillion deficit. Now if the 2017 tax cuts had not been extended for those over $400K, that would reduce the deficit by about $650 billion. Now we are at a $380 billion dollar surplus.

It would take bipartisan compromise, which is a big ask, but this minor surplus would be a start to reduce our $37 trillion dollar debt.