This is long, cliffs at the bottom.
Median income is down from what it used to be, and we can only continue to be debtor-consumers for so much longer (look at the trend in debtor/lender percentage....eventually the game stops when the debtors are no longer able to obtain credit, and the result then is stagnation as everybody spends their money paying off their debts instead of consuming.)
On the other hand, maybe that (the median income statistic) is because we have an oversupply of college educated people. Part of which is because you can't make much of a living with manual labor, which is because we have China and Mexico for cheap labor. Also because pell grants increased the number of students willing to attend college, beyond what the market was willing to accept and pay for.
So we need to be making it easier to create more things that we can consume that, in the process of consuming, distribute wealth to the middle class (so we can continue the cycle). Since the majority of Americans are employed in a service based job [right?] (and are no longer manufacturing things here which get consumed here), we need to find ways to spur spending on service based goods (as opposed to simply consuming products made from China more).
If we simply spend money on stuff built in China, that benefits the entrepreneur who found something the market was willing to buy, but does little for the rest of the middle class. On the micro level, the entrepreneur is making the right choice, but on the macro level if every other entrepreneur makes the same decision he made (having the goods he invented/sells be produced in China), then with each middle class person's purchase, a little bit more of their buying power is lost to create (just one more) millionaire. Now it's silly to expect the entrepreneur to forgo his own good, for the good of the economy, because someone will just take advantage of the opportunity he left.
The effect of the entrepreneur who was using Chinafacturing is that the wealth has "concentrated" in his pockets, and it being in his pockets does not increase the middle class's purchasing power (which is what we need if we want more millionaires like him).*
Maybe [temporary] wealth redistribution is necessary for the continued growth of our economy. America still has the purchasing power to make it the market of choice. So, similar to when we re-entered an inflationary phase after the strong dollar in the mid 80's (manufacturing was outsourced during the deflationary period, and as it became profitable to manufacture in America again, the manufacturers in other countries decided they were willing to simply take a smaller profit than completely lose their companies, result being manufacturing never really made a comeback in the states), the people at the top still want to make money, and if they don't have anywhere else to go, they won't just remove their money from the market, because if we do it right, they'll still make the most money over here. If we do nothing about it, eventually America will no longer be an enticing market ANYWAYS, because the middle class (perhaps lower-middle-class is who I'm referring to) will be busy paying off their mortgages, student loans, whatever; and won't have the purchasing power to make a new millionaire from the latest inventor.
*I believe the argument from here goes that this millionaire invests his money in stocks, but I fail to see how that either directly or indirectly, increases the wages of the workers in the company whose stock he bought. I would say that the only wages it increases are those who are already investing in the stock market. If his purchase of stock does nothing to increase the middle class worker's wages, then there will be no increased consumption, and fewer entrepreneurial millionaires. So from here, the thing to do would be to institute policies to encourage the middle class to save (invest) so that when the entrepreneurial millionaire buys stocks, the stock price rises, and the middle class worker sells his stocks for a profit and has more money to spend on new stuff.
It is worth mentioning that Paul Volker is Obama's economic adviser, however I think this redistribution plan of Obama's is more his/his party's idea than it is Volker's, although I'm certain Volker sees we need to be doing something to increase the middle class's purchasing power.
Outsourced manufacturing makes this whole equation much more complicated.
Cliffs/TLDR:
1). I don't think anyone contends middle class purchasing power is decreasing
2). We want to reverse this trend
3). Simply consuming more products is not the answer, because most of these products are produced in China, and come attached to a very small number of American service-based jobs. So the money concentrates in the pockets of the entrepreneur who found the market for his China built products, but (see #4)
4). When the entrepreneur invests his millions in the stock market, this does little to improve the middle class worker's purchasing power, because the MCW is too busy paying off his house and student loans to be investing a significant amount of money into the market yet. Result is he doesn't see the benefit of the entrepreneur investing in the stock market-- his purchasing power has not increased because he is busy paying off debt.
5). Because he now has less money than before, the MCW is less likely to consume again in the future. This indirectly increased the barrier to entry for a new inventor, the market for his good is smaller.
6). We need to find a way to either:
6a). Spur demand for products/services that will increase the wages of the middle class directly (because the middle class buying China products concentrates wealth in the few entrepreneurs at the top), or
6b). Spur and encourage personal investment among the middle class so that they benefit when the entrepreneurs invest the money they made [in selling Chinaproducts] into the stock market.
7). 6b seems much easier-- just eliminate the capital gains tax for good? and provide more tax breaks for people that invest/save. Also, allow the devaluation of the housing sector, to free the middle class to make more investments again; and cut Pell Grants, to bring down the cost of education, so that the people who do not receive Pell Grants, are not left with insane student loans to pay off. Disclaimer: I get lots of Pell Grants ($3000/year), and I'm still against them.
8). If you want to redistribute wealth, to gain benefits from doing this, you MUST stipulate/control how that redistributed monies gets spent. It must not be spent on chinaproducts, because that will just create a few millionaires who will promptly deposit the cash into an offshore account and invest in other markets with better returns (because the millionaires would be stupid to take the money they make from the redistribution of wealth and put it back into the very thing (stock market) by which it was taken from them (higher capital gains tax). No, they will invest it in another economy, like China's. Barack Obama, I'm looking at your economic policies right now).
Median income is down from what it used to be, and we can only continue to be debtor-consumers for so much longer (look at the trend in debtor/lender percentage....eventually the game stops when the debtors are no longer able to obtain credit, and the result then is stagnation as everybody spends their money paying off their debts instead of consuming.)
On the other hand, maybe that (the median income statistic) is because we have an oversupply of college educated people. Part of which is because you can't make much of a living with manual labor, which is because we have China and Mexico for cheap labor. Also because pell grants increased the number of students willing to attend college, beyond what the market was willing to accept and pay for.
So we need to be making it easier to create more things that we can consume that, in the process of consuming, distribute wealth to the middle class (so we can continue the cycle). Since the majority of Americans are employed in a service based job [right?] (and are no longer manufacturing things here which get consumed here), we need to find ways to spur spending on service based goods (as opposed to simply consuming products made from China more).
If we simply spend money on stuff built in China, that benefits the entrepreneur who found something the market was willing to buy, but does little for the rest of the middle class. On the micro level, the entrepreneur is making the right choice, but on the macro level if every other entrepreneur makes the same decision he made (having the goods he invented/sells be produced in China), then with each middle class person's purchase, a little bit more of their buying power is lost to create (just one more) millionaire. Now it's silly to expect the entrepreneur to forgo his own good, for the good of the economy, because someone will just take advantage of the opportunity he left.
The effect of the entrepreneur who was using Chinafacturing is that the wealth has "concentrated" in his pockets, and it being in his pockets does not increase the middle class's purchasing power (which is what we need if we want more millionaires like him).*
Maybe [temporary] wealth redistribution is necessary for the continued growth of our economy. America still has the purchasing power to make it the market of choice. So, similar to when we re-entered an inflationary phase after the strong dollar in the mid 80's (manufacturing was outsourced during the deflationary period, and as it became profitable to manufacture in America again, the manufacturers in other countries decided they were willing to simply take a smaller profit than completely lose their companies, result being manufacturing never really made a comeback in the states), the people at the top still want to make money, and if they don't have anywhere else to go, they won't just remove their money from the market, because if we do it right, they'll still make the most money over here. If we do nothing about it, eventually America will no longer be an enticing market ANYWAYS, because the middle class (perhaps lower-middle-class is who I'm referring to) will be busy paying off their mortgages, student loans, whatever; and won't have the purchasing power to make a new millionaire from the latest inventor.
*I believe the argument from here goes that this millionaire invests his money in stocks, but I fail to see how that either directly or indirectly, increases the wages of the workers in the company whose stock he bought. I would say that the only wages it increases are those who are already investing in the stock market. If his purchase of stock does nothing to increase the middle class worker's wages, then there will be no increased consumption, and fewer entrepreneurial millionaires. So from here, the thing to do would be to institute policies to encourage the middle class to save (invest) so that when the entrepreneurial millionaire buys stocks, the stock price rises, and the middle class worker sells his stocks for a profit and has more money to spend on new stuff.
It is worth mentioning that Paul Volker is Obama's economic adviser, however I think this redistribution plan of Obama's is more his/his party's idea than it is Volker's, although I'm certain Volker sees we need to be doing something to increase the middle class's purchasing power.
Outsourced manufacturing makes this whole equation much more complicated.
Cliffs/TLDR:
1). I don't think anyone contends middle class purchasing power is decreasing
2). We want to reverse this trend
3). Simply consuming more products is not the answer, because most of these products are produced in China, and come attached to a very small number of American service-based jobs. So the money concentrates in the pockets of the entrepreneur who found the market for his China built products, but (see #4)
4). When the entrepreneur invests his millions in the stock market, this does little to improve the middle class worker's purchasing power, because the MCW is too busy paying off his house and student loans to be investing a significant amount of money into the market yet. Result is he doesn't see the benefit of the entrepreneur investing in the stock market-- his purchasing power has not increased because he is busy paying off debt.
5). Because he now has less money than before, the MCW is less likely to consume again in the future. This indirectly increased the barrier to entry for a new inventor, the market for his good is smaller.
6). We need to find a way to either:
6a). Spur demand for products/services that will increase the wages of the middle class directly (because the middle class buying China products concentrates wealth in the few entrepreneurs at the top), or
6b). Spur and encourage personal investment among the middle class so that they benefit when the entrepreneurs invest the money they made [in selling Chinaproducts] into the stock market.
7). 6b seems much easier-- just eliminate the capital gains tax for good? and provide more tax breaks for people that invest/save. Also, allow the devaluation of the housing sector, to free the middle class to make more investments again; and cut Pell Grants, to bring down the cost of education, so that the people who do not receive Pell Grants, are not left with insane student loans to pay off. Disclaimer: I get lots of Pell Grants ($3000/year), and I'm still against them.
8). If you want to redistribute wealth, to gain benefits from doing this, you MUST stipulate/control how that redistributed monies gets spent. It must not be spent on chinaproducts, because that will just create a few millionaires who will promptly deposit the cash into an offshore account and invest in other markets with better returns (because the millionaires would be stupid to take the money they make from the redistribution of wealth and put it back into the very thing (stock market) by which it was taken from them (higher capital gains tax). No, they will invest it in another economy, like China's. Barack Obama, I'm looking at your economic policies right now).
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