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As we celebrate the Martin Luther King holiday, millions of Americans are reflecting on Dr. King's commitment to social equality and the lasting impact that his dream has had on society for the past 50 years. But with the recent debate over economic fairness in areas like taxation and entitlements having brought financial inequality back into the limelight, today's a good day to look at the economic and financial aspects of Dr. King's dream.
As NAACP Senior Economic Programs Director Dedrick Muhammad observed in an article from over the weekend, Martin Luther King Jr. understood that poverty was a central cause of social inequality, and he strove to further the cause of financially disadvantaged Americans regardless of race. As a signatory to the Freedom Budget, an action plan published by the A. Philip Randolph Institute in 1966 to declare war on poverty, Dr. King sought to eliminate poverty and help everyone achieve financial independence.
Understanding the Freedom Budget
The Freedom Budget set forth some simple principles to further economic change for impoverished Americans. Calling on President Franklin D. Roosevelt's terminology, the document insisted on "freedom from want" and required it not just for the vast majority of people but for every American. Pointing out the positive economic results of the expansion that had carried America so far forward in the post-World War II era, the Freedom Budget insisted on focusing on lifting up those at the bottom end of the economic spectrum, regardless of objections that "personal deficiencies" among some of those in poverty were at least partly to blame for their difficulties.
Moreover, the Freedom Budget saw its mission as color-blind. It acknowledged that minorities would benefit, but it correctly pointed out that poverty knows no color, and it called for a response from the federal government that would go beyond token programs to instead create measurable and concrete goals by which to measure success.
Unfortunately, we still haven't achieved all of the objectives of the Freedom Budget. The document called for full employment, defining it as an unemployment rate of 2% to 3%. With unemployment just having come below 8% in recent months, today's economy clearly reflects the same socioeconomic pressures that plagued America in Dr. King's time.
Similarly, the document's call for adequate incomes both for workers and for those who can't work has met with only partial solutions. Minimum wages have risen in nominal terms, but when you adjust them for inflation, they've fallen from the purchasing power in 1968 of more than $10 per hour in 2012 dollars to less than $8 per hour today. Huge pay disparities between corporate leaders and rank-and-file employees show the stratification of economic culture. Unemployment insurance extensions have been available recently, but the political pressure to rein in spending on those who haven't found work continues to grow stronger.
The Freedom Budget also called for other basic human rights, pointing to shelter, medical care, clean air and water, and educational opportunity as essential components of creating sustained productivity and economic growth. Those goals were instrumental in attempts to encourage homeownership, create the enhancements to Medicare prescription drug coverage and the Affordable Care Act, and various federal laws promoting environmental protection and educational opportunity.
Yet the housing bust reveals all too well the continued existence of disadvantaged areas that match up to the "slum ghettos" of the 1960s. Moreover, the tension between business and environment continues to exist and shows no signs of dissipating.
Choosing the dream
Just as in the 1960s with the escalating war in Vietnam imposing concerns about the fiscal impact of the programs that the Freedom Budget called for, the federal government today faces huge budget deficits that make it almost impossible politically to consider spending of the magnitude necessary to achieve Dr. King's dream of economic justice.
Yet as countless economists have argued in favor of stimulus measures, what the Freedom Budget called the "economic growth dividend" from ending poverty would have a beneficial impact on the entire U.S. economy. As we struggle for ways to keep up with fast-growing emerging-market economies -- which, by the way, have succeeded largely by lifting up formerly impoverished populations to become productive members of the middle class -- reconsidering the economic legacy that Dr. King left behind in the form of the Freedom Budget is an appropriate way to spend this day.
Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance. You can follow him on Twitter: @DanCaplinger.