I hope that there is such a thing as alternate reality, a reality where it makes sense to repeal Glass-Steagall, to cut the taxes for the richest, and to keep the minimum wage as low as possible because raising it might cut jobs. I hope that there is such a reality, because none of those things make sense in this one.

Much of what has passed for economic thought in the last twenty years is no more than magical thinking, based on the idea that if we make the rich very rich, some of it will trickle down to the poor people. And that if we remove regulation, the market will take care of itself.

However, our reality is that the invisible hand of the market just slapped us up side the head.

Take the Glass-Steagall act. It was created in 1933 by Carter Glass (Senator and founder of the US Federal Reserve System) and Henry Bascom Steagall (chairman of the House Banking and Currency Committee) and it made banks choose whether they would be commercial banks or investment banks. The idea was that highly speculative investments wouldn’t take the commercial banks down. FDIC was an amendment to this act.

In 1999, Congress repealed Glass-Steagall and passed the Gramm-Leach-Bliley Act, which knocked down the walls that Glass-Steagall had created.

In doing that, it separated the people who originated mortgages from those who owned them (and cared about whether the payments were made or not).

In 1965, when we bought our first house, we went to Decatur Federal and were grilled by a loan officer. He was very interested in whether we could make the payments. Forty years later, there were thousands of mortgage originators whose compensation was based on getting people to take out a mortgage whether they could make the payments or not. What followed should not have been a surprise.

Most businesspeople know that employees will do what they are paid to do. Pay them a salary if they show up, they show up. Pay them to generate the maximum number of mortgages, and they do that.

It would have been different if the companies who made the mortgages depended on the mortgage payments for their profits.

Or take the argument for lowering the top marginal tax rates, a staple in the Republican platform for years. But we already did that. Today’s top marginal tax rate is the lowest it’s been since the beginning of the great depression, and it’s only about a third of what it once was. Even the IRS knows that if the very rich pay that rate on all of their income, they need to fire their tax accountant. Some of the very rich, because of their friends in Congress, pay much less than the very middle class.

How does that effect our country’s economy? If you look at our modern history, for the top 20 years of our country’s GDP growth, the lowest top marginal rate was 60%. Of course, several of those years were during the depression when government spending accelerated the growth and several were during WWII. However, if you look at just the 1950s and 1960s, the growth was between 5.6% and 7.3%.

When Reagan was elected president in 1981, the top marginal rate was 70%. When he left in 1989, it was 28%. That was supposed to make the economy blossom. At the beginning of 1981, the GDP growth was 9.62. At the end of 1989, it was 6.48, and except for the Clinton years, it’s seldom been that good again. On the average growth was greater with a 90% top marginal rate than with the lower ones.

All of that really doesn’t prove that increasing the top marginal rate would make the economy grow, but it pretty well disproves that lowering it will.

And, finally, the minimum wage. Adjusted for inflation, a minimum wage worker today is making about 70% of what a minimum wage worker was making in 1968. And the current minimum wage ($7.25) isn’t really a living.

The people opposing the minimum wage increase have several arguments.

These are kids; they don’t need much money? They’re not; 88% are 20 or older, and the average age of the minimum wage worker is 35.

It’s just pocket money; they’re not living on it. Well, not very well, anyway. More than half work full time and on the average, they earn half of their family’s total income.

If they had more ambition, they could find a higher paying job. Probably not, at least since 2008. However, the depressed job market won’t last forever, and when it does improve significantly, the good employees will find higher paying jobs, and the law of adverse selection will kick in with a vengeance. Low-paying corporations will be left with low performing employees.

It’s said that Henry Ford didn’t really pay his employees twice the going wage so that they could afford his cars; he paid it to avoid the 300% turnover he was experiencing. He was smart enough to know that recruiting and training new employees was a lot more expensive than paying existing employees twice the market rate. That’s still true.

There are some things that I learned from being in business for more than 40 years. People tend to do what they’re paid to do. If you want really good people, you have to provide a better environment than their other options, and that means (but is not limited to) higher pay. Corporations are not job creators. They are employers. They only hire more people when the business demands it. Customers are job creators.

And there’s one thing that I simply believe, having been president, owner, and chief risk taker. No CEO is worth 1250 times as much as any employee.

Perhaps there is some alternate reality where giving more money to the rich makes sense. Unfortunately, that is not the reality we have to live in.