U.S. Economy Is Increasingly Tied to the Rich

[ProfJohn]

You must be too young to remember the 90s. Taxes became more progressive, income distribution became more evened out, yet everyone prospered. It may run counter to your ideology, but giving 80 percent of the population more money to spend moves around money faster than constraining it to the top 5 percent. Moving money around faster helps the entire economy grow, giving the top 5 percent more than enough to offset their "losses".

Look over some economic data from the 90s.

Really?

Explain this graph to me please

Under Clinton the top 1% saw their income go through the roof.

So much for 'evened out' huh?

 

[HendrixFan]

Your point, initially, was that trickle down economics doesn't work because the poor fund the rich. After pointing out that is BS, now your argument is "We need more government regulation to avoid a 'Shock'". I would say that as well is BS. I might agree with you if the government was in a position to correct anything (IE not running trillion dollar deficits) however, that isn't the case. A government bailout/funding to the poor would just delay the inevitable collapse, but instead of being a small jolt, it creates a large one as the failure won't just be a business or two, but rather the entire federal government.

Increasing taxes on the rich just isn't going to cut it. Nor is saving the poor. The government needs to be putting out less stimulus and (in my opinion) raising taxes. We should run it in a surplus until the national debt is payed off, or close to payed of. Only then should the government think about intervening and saving the poor from the evil rich.

However, that is a bit off topic.

I agree with you on most of this post, this is from a post of mine above before you put this up:

There is another solution that can satisfy both of you. Lower spending considerably, cut taxes considerably, and work on real regulation to keep things going smoothly.

It doesn't have to jump from one bad extreme to another. There is a gray between black and white.

I'm sure there is plenty of off topic discussion we can have that is in one way or another tied back to the OP's post. Economy, taxation, government size, deficits are all tied together. My big point is that the consolidation of power in just a few powerful corporations prevents the economy from having a healthy distribution of income. Either break up the companies so that real buyer/seller curves can happen or shape the distribution through progressive taxation.

 

[spidey07]

Something with an 8% profit margin has 92% costs built into it. Something with a 40% profit margin has 60% costs built into it. Given comparable sales dollars, one leaves more money to a single party (owner) than the other.

Again, it isn't that yachts don't have a place in our economy. Yachts (and the like) being the majority of our economy are a problem.

I'm in the top 5%. I sure don't have a yacht and I sure as hell ain't rich. I think you need to think about "dual professional income families" when you toss out words like rich and yachts.

Although I do plan on buying a bass boat. A used one. For under 12K. Yeah, I'm rich alright. Guess what happens when the tax hikes hit me? Bet your ass I won't be spending nearly as much in fact I'm hunkering down now and not spending so I can save more money to weather the obama storm.

Top 5% is an AGI of 160K.
Top 10% is an AGI of 113.

How many posting here are in the top 10-15%? I would guess quite a few. Are you rich? You need to realize just what that top 5 percent is, it's not just the mega wealthy.

 

[hal2kilo]

Really?

Explain this graph to me please

Under Clinton the top 1% saw their income go through the roof.

So much for 'evened out' huh?

I hate repeating myself but Clinton was the best Republican president the Republicans ever had. The only thing liberal about Clinton was social policy. But, your idealogy, and partisanship refuses to see it.

 

[xj0hnx]

Something with an 8% profit margin has 92% costs built into it. Something with a 40% profit margin has 60% costs built into it. Given comparable sales dollars, one leaves more money to a single party (owner) than the other.

Again, it isn't that yachts don't have a place in our economy. Yachts (and the like) being the majority of our economy are a problem.

The end product of the yacht, or who gets the profits from it aren't the issue, all the people that work to make the yacht possible are. What do poor people need that rich people don't? Homes? electricity? Phones? Food? Clothes? Fuel?

 

[khon]

Really?

Explain this graph to me please

Under Clinton the top 1% saw their income go through the roof.

So much for 'evened out' huh?

The rich certainly got more out of it, but as you can see from the graph everyone else got something too. That's as it should be.

Now look at Reagan for comparison. The top doubled the income, the middle got nothing, and the bottom lost some. That's the problem.

 

[Cogman]

I agree with you on most of this post, this is from a post of mine above before you put this up:



I'm sure there is plenty of off topic discussion we can have that is in one way or another tied back to the OP's post. Economy, taxation, government size, deficits are all tied together. My big point is that the consolidation of power in just a few powerful corporations prevents the economy from having a healthy distribution of income. Either break up the companies so that real buyer/seller curves can happen or shape the distribution through progressive taxation.

Well, to some extent I agree with the sentiment that monopolies aren't the best thing. I would rather see the government reduce its economic interference then increase it, but can understand a need for it to be able to come in and make people "play fair."

However, if economic diversity is needed, then I would say removing or reducing patents/copyrights (At very least in the tech industry) would be the best way to encourage new innovation and diversity. The government is essentially creating monopolies by making it impossible to start up a new business that has any sort of resemblance to a current one. (it is pretty much impossible to start up a microprocessor business as literally every technique out there is patented by big companies like AMD and Intel).

 

[hal2kilo]

Well, to some extent I agree with the sentiment that monopolies aren't the best thing. I would rather see the government reduce its economic interference then increase it, but can understand a need for it to be able to come in and make people "play fair."

However, if economic diversity is needed, then I would say removing or reducing patents/copyrights (At very least in the tech industry) would be the best way to encourage new innovation and diversity. The government is essentially creating monopolies by making it impossible to start up a new business that has any sort of resemblance to a current one. (it is pretty much impossible to start up a microprocessor business as literally every technique out there is patented by big companies like AMD and Intel).

Reagan also stopped enforcing the anti-trust laws, but for some reason, no president since him has either. Did I miss something and congress changed the law?

A little research shows that Microsoft was slapped on the wrist sometimes in the 90's but once again the big problem is more Chicago school of economics koolaid that pervaids the mindset of people making enconomic policy.

 

[WhipperSnapper]

We are just exiting a recession.

We're not exiting anything. There is not and will not be a "recovery" because we are undergoing a structural transformation into an impoverished third world country.

By merging our nation's economy and labor markets with those of third world countries, the U.S. standard of living must necessarily decrease and average out with the standard of living in those countries. We won't have a "recovery" because we've sent millions of jobs overseas and imported tens of millions of people as immigrants or H-1B and L-1 visa holders to work American jobs domestically.

The job market and the economy might improve for a couple months or a year here and there, but the overall trend will be that of a downward death spiral.

 

[WhipperSnapper]

What the hell? What do you mean "giving money to the rich"?

They EARNED that money. Any money does flow from the rich to the poor - who signs your paycheck?

Can you please elaborate on how the rich "earned" the money they have? What makes you think that they earned all the money they have and didn't receive higher profits than they should receive as a result of not paying the workers higher wages? What if the workers earned more money than they received in wages?

 

[WhipperSnapper]

From every class of person there is. This article is nothing more than the class warfare bullshit being thrown around in here. It's all an attempt to rabble the idiots of "yeah! tax those evil rich, look at how much they spend!"

And you marxists are all too happy to lap it up. Spread it around you say, redistribute it you say. This is AMERICA! We The People don't want that shit in our country.

Is it possible that the wealthy initiated the class war? If there's a war, they sure do seem to be winning it. Can Global Labor Arbitrage be regarded as an act of class warfare?

 

[spidey07]

Can you please elaborate on how the rich "earned" the money they have? What makes you think that they earned all the money they have and didn't receive higher profits than they should receive as a result of not paying the workers higher wages? What if the workers earned more money than they received in wages?

I'm thinking they went to work, performed work, and were compensated in accordance with the supply and demand for their experience and knowledge or special skill set.

aka - a white collar professional

 

[WhipperSnapper]

In other words. "Blah blah blah... I want to complain about how much the rich spend and simultaneously complain that they don't do any good for the economy."

Yachts don't just appear out of thin air. And everyone involved in the building of a yacht isn't a millionaire. I know this is astounding to think about, but just about every product out there is produced by someone with a low to mid range pay scale. If a rich guy buys a $300,000 car, that car wasn't produced exclusively by another rich guy.

Yes, but if that money that had been used to buy the yacht had instead been given to the lower classes in the form of higher wages, then instead of having a yacht we might instead have more health care and better housing for the lower classes. In other words, the same amount of human effort that built the yacht could have been used to build housing for the poor or provide health care, etc.

 

[spidey07]

Yes, but if that money that had been used to buy the yacht had instead been given to the lower classes in the form of higher wages, then instead of having a yacht we might instead have more health care and better housing for the lower classes. In other words, the same amount of human effort that built the yacht could have been used to build housing for the poor or provide health care, etc.

That's called communism. We don't want that here.

 

[WhipperSnapper]

a PBF (poor broke fusk) never gave any of you's guys a job. If it wasn't for the rich, most of you guys would be PBF's.

...Or small business owners.

What if the rich could remain rich but instead received smaller amounts of compensation while the people who actually do the work received larger amounts of compensation?

 

[ProfJohn]

Yes, but if that money that had been used to buy the yacht had instead been given to the lower classes in the form of higher wages, then instead of having a yacht we might instead have more health care and better housing for the lower classes. In other words, the same amount of human effort that built the yacht could have been used to build housing for the poor or provide health care, etc.

How exactly do you get that money to the lower class people though??

Give them higher wagers for what reason? Just because it makes us feel good?

Great idea, and when you go to Walmart or McDonalds and notice that the price of basic every day items has gone up 10% are you still going to be feeling good?

Keep in mind that giving them higher wages means that you will pay more for everything you buy and in the long run your buying power will be reduced and your standard of living will decrease.

Of course we could just GIVE the poor people money, but we have been doing that for 40 years and look at what it has done to the this country. The Great Society decreased poverty, but destroyed inner city America. A good trade off? I doubt it.

Of course the best way to help the poor is to create jobs and increase economic activity, but that leads to the rich earning even MORE money which we all know is not acceptable.

 

[ProfJohn]

...Or small business owners.

What if the rich could remain rich but instead received smaller amounts of compensation while the people who actually do the work received larger amounts of compensation?

How do you accomplish that??

The 'rich' own the business and therefore set the prices and wages. If one or the other is to high or too low the business will fail, but when both are set right the own will make lots and lots of money.

How do you overcome this basic economic rule?

Sam Walton ran a business with a tiny profit margin, but he did it so well that he would be one of the richest men in the world if alive today.

Again, how do you change this basic economic rule that has existed since the creation of money and ownership?

 

[WhipperSnapper]

I'm thinking they went to work, performed work, and were compensated in accordance with the supply and demand for their experience and knowledge or special skill set.

aka - a white collar professional

However, you're assuming that the market is efficient and rational. What if it is irrational?

For example, let's suppose that a CEO drives his company into the ground and is compensated with a $50 million golden parachute. He obtained the CEO job because he knew people on the Board of Directors. In contrast, what if an MBA who also had a science PhD and was brilliant but had poor social skills could have and would have happily done a far, far better job for a mere $500,000/year?

I suspect that much of the income white collar professionals earn may be tainted by that kind of market irrationality and inefficiency. There is no shortage of people with professional degrees who would happily work those high-paying jobs for less money and do just as good of a job. However, employers like to discriminate against people who end up unemployed or underemployed-and-out-of-field and don't like to create lower-paying entry-level jobs for people.

I don't buy the dogma that highly-paid white collar professionals are really all that amazing or hard-working or unique or irreplaceable, at least not today when we have huge oversupplies of people with advanced degrees and professional degrees.

Part of the problem is employers and businesses collective refusal to train new people so that they can acquire experience in these fields resulting in a small supply of people who are experienced. I'm not convinced that the shortage of experienced people and the value placed on experience is a result of the free market at work and not some sort of irrational breakdown in market forces (akin to the problem of information asymmetry). Fix that problem and the supply of qualified employees would be such that high white collar wages would drop. God knows--Americans will fall all over themselves to train for high-paying positions, which is why far more people apply to medical school than there are spots.

 

[Kappo]

Yes really. If you only make $20k per year, you are most likely going to spend almost all of it on food/shelter/clothing/etc.

If you make $10 mil a year, you are, on average, not going to spend as much of a proportion of your money.

My comment was more about the extreme wealth distributions between the rich and poor.

If you are making $20/yr you better either be in college/working part time or a fucking retard who needs soft edges on a spork.

 

[IndyColtsFan]

However, you're assuming that the market is efficient and rational. What if it is irrational?

For example, let's suppose that a CEO drives his company into the ground and is compensated with a $50 million golden parachute. He obtained the CEO job because he knew people on the Board of Directors. In contrast, what if an MBA who also had a science PhD and was brilliant but had poor social skills could have and would have happily done a far, far better job for a mere $500,000/year?

You hit the nail on the head WS. The assumption that American CEOs have some other-worldly skills is an absurd notion. You could get competent people who would work for far less money both in the US AND in these other countries that these CEOs love to send our jobs. Funny how many here think it is OK to outsource the average Joe jobs because it is "cheaper" overseas but none advocate outsourcing the CEO positions.

 

[WhipperSnapper]

How exactly do you get that money to the lower class people though??

Give them higher wagers for what reason? Just because it makes us feel good?

No, because they probably deserve higher wages than what they are receiving. Not because "it makes us feel good".

Great idea, and when you go to Walmart or McDonalds and notice that the price of basic every day items has gone up 10% are you still going to be feeling good?

Keep in mind that giving them higher wages means that you will pay more for everything you buy and in the long run your buying power will be reduced and your standard of living will decrease.

Assume that the amount of wealth production remains the same and that we're merely distributing the wealth. Who benefits depends on who you are. It would be good for the workers. It wouldn't be as good for the upper middle class and upper classes.

Of course we could just GIVE the poor people money, but we have been doing that for 40 years and look at what it has done to the this country. The Great Society decreased poverty, but destroyed inner city America. A good trade off? I doubt it.

Of course the best way to help the poor is to create jobs and increase economic activity, but that leads to the rich earning even MORE money which we all know is not acceptable.

I agree that the ultimate solution is to increase the amount of wealth production, and part of our nation's challenge is to figure out how to do this. I don't have a problem with the rich receiving more money as long as they are earning it. (Isn't that what we should strive for--that people receive the compensation they truly deserve?)

I'm also an advocate of increasing our nation's "rationality factor" (don't have babies out of wedlock, don't have more kids than you can afford, lower rates of crime, less drug use, etc.).

 

[khon]

How do you accomplish that??

The 'rich' own the business and therefore set the prices and wages. If one or the other is to high or too low the business will fail, but when both are set right the own will make lots and lots of money.

How do you overcome this basic economic rule?

Sam Walton ran a business with a tiny profit margin, but he did it so well that he would be one of the richest men in the world if alive today.

Again, how do you change this basic economic rule that has existed since the creation of money and ownership?

One way to accomplish that is to change the tax code so all income is treated the same, whether from salary or capital gains.

Another way would be to pass the shareholders bill of rights so owners could have a say on executive pay and limit risk taking.

You could also ban many of the abusive financial practices that caused the current crisis.

Furthermore you could actually start to enforce some of the many financial and safety regulations that exist, but are largely ignored.

 

[spidey07]

You hit the nail on the head WS. The assumption that American CEOs have some other-worldly skills is an absurd notion. You could get competent people who would work for far less money both in the US AND in these other countries that these CEOs love to send our jobs. Funny how many here think it is OK to outsource the average Joe jobs because it is "cheaper" overseas but none advocate outsourcing the CEO positions.

Except this thread about 'top 5%' and 'the rich' aren't all CEOs or board members, those are the minority in the group. I was just googling/reading that most of 'the rich' are dual income families of professionals with post collegiate or professional degrees.

 

[WhipperSnapper]

How do you accomplish that??

The 'rich' own the business and therefore set the prices and wages. If one or the other is to high or too low the business will fail, but when both are set right the own will make lots and lots of money.

We accomplish it by correcting problems in the market. A real free market will always have numerous inefficiencies because perfect competition is an ideal that cannot be actualized. A progressive income tax is one way to try to correct for that. Another way is to discourage the formation of monopolies, oligopolies, and cartels.

 

[drebo]

And who pays those who sign paychecks? Even running your own business you have to answer to someone, the customer.

Where does Walmart get their money?

This is the biggest problem with isolationist policies.

Yes, it is true that business owners keep the profits within a society. However, those profits usually manifest themselves, at least fractionally, as WAGES for the workers.

The problem comes in when there is no external capital entering the system. If there is a finite amount of money in a system and the business owners end up with some of the profit, then of course they will end up with the bulk of the wealth within the system.

This is why it is important that we focus on producing exportable products and services. Foreign money means, generally, more domestic wealth to go around.