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Behind The Big Boom

Just about every state in the U.S. is discovering that unexpected riches are pouring into its treasury. As a consequence, they are quickly catching up with many neglected chores like bringing public roads up to date, doing the same for schools and other public buildings and even putting goodly sums away in savings accounts for a rainy day.

While the public media have given this joyous development a good bit of attention, they seem to have failed to raise and answer an obvious question: Namely, why, of a sudden, do the states suddenly find their pockets overstuffed with cash?

In fact, quite the opposite might have been expected. Congress has enacted recent legislation that reduced taxes for small business. That should have deprived the states of their usual income from this source.

This concession to small businesses was part of a much larger bit of legislation that was aimed at bringing the national minimum wage up to date. For a painful period of 10 years, the national minimum wage was unchanged. The freeze began early in the Clinton administration, when the Republicans won control of Congress. The GOP’s opposition to a federal minimum wage dates back to its origin in 1938.

When the Democrats regained control of Congress, bringing the minimum wage up to date was a top priority. This meant a wage increase for several million workers. In addition, more than a dozen states have enacted minimum wage laws paying more than the federal minimum.

The American economy is a market economy. The combined effect of the federal legislation plus that of the separate states has expanded the American market with multibillions of dollars.

In short, we now seem to be getting a maximum return for our “minimum” effort.

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