Example 2: Since in every economy in the world, the wealthy spend a lesser portion of their income, which is exactly the reason why they have the ability to invest some of their money, you can boost the economy by taking some of the money investors would have saved and give it to people who are really poor, and spend 100% of their money. So let’s say Johnny from the previous example earns $1 million per year and Jackie earns $10,000 per year. Jackie just barely getting by. She live in New York City, so rent in a shared apartment is $9,000 per year ($700 per month) and transportation is $1248 per year ($104 per month) and she receives food stamps for food. She’s is short $248. We know that if the government doesn’t find a way to support her, she will be homeless… or worse. If the government can balance its budget with 25% of Johnny’s income, which is $250,000, and Johnny only spends $500,000 this past year, he’ll save $250,000. But let’s increase Johnny’s tax by 1%. Johnny wasn’t going to spend it anyway. As a matter of fact, he was going to use that 1%, or $10,000, to invest in OTI, Old Technology Incorporated, a company that makes steam engines for cars, something that has almost no demand, so the company was going to use Johnny’s money to pay off its debt, which would then go into a bank and the bank would have to find some other company like OTI to lend to, in part because all of the good companies already have enough money. But with the tax increase, the 1% of Johnny’s money comes out to be $10,000 and if we gave it to Jackie, she now has enough money to pay for the rest of her transportation cost to get to her work, and it’ll give her over $9,000 to spend on electricity ($600) heat during the winter ($500), air conditioning during the summer ($500), an inexpensive cellphone with service ($400), a winter coat ($100), replace the shoes she’s had for the past year ($50), tooth brush and tooth paste ($50), soap ($50), toilet paper ($100), visit her mother for Christmas with ham, bread and fruit ($100), pay for the extra train ticket to New Jersey for a job interview ($4), a suit for the interview ($100), no more food stamps because of the extra $10,000 ($2,400)… so far Jackie has spent about $5,000 just on necessities. She still doesn’t have internet at home. She doesn’t have internet on her phone. She doesn’t have television services. She doesn’t have a radio. She doesn’t have a cool leather jacket. She hasn’t bought any alcohol. She hasn’t gone out to eat, actually. She hasn’t been out clubbing. She’s not spent any money on evening college courses. By giving poor people like Jackie some money that wasn’t going to be spent by wealthy people, we’ve already created 50% more economic activity from Jackie demographic… all without being extravagant. No presents, no toys or anything like that.
With this extra demand created, we companies will now have to make and deliver the products and services Jackie needs with that extra money. That’s how you create jobs.