Fern, that video addresses the financial mobility and freedom that you assume are present. The second video hits on it as well. You might want to watch before making such assertions. It is a little more complex than just a personal choice to be rich or poor.
Re: Financial mobility.
I watched all I could stand (I'm impatient, I prefer reading to listening, listening is too slow), I made it through the 3 graphs and bit more (about 20 minutes).
I stopped there because he was well into the whole 'lack of financial mobility' thingy, but he did so without ever reconciling how that data (3 charts) translated into 'mobility'.
That's a big problem (lack of explanation) because those charts don't address that, nor provide any evidence of any lack of mobility. What those charts do is demonstrate that if you're in a low wealth or income strata, you're wealth or income is going to grow more slowly,
(as long as remain in that strata) than those in the highest strata. I.e., if you manage to be in the lower strata, but move to the highest THEN you will enjoy higher growth. (That's axiomatic/obvious.) But those charts demonstrate nothing about mobility.
Some examples:
1. Football/basketball/baseball players and celebs like Lindsey Lohan and Britany Spears or MMA fighters etc. before becoming famous and getting big fat contracts, they were in the bottom and, therefore, could only expect their income/wealth to grow slowly. Then they got rich, now they're in the top strata and can expect their income/wealth to grow more rapidly. So tell me how the data in those charts captures their big 'leap' from one strata to another? I bet the data's not there.
2. I've seen a bunch of people go from multi-millionaire to the bottom (e.g., many of Madoff's former clients who atre now bankrupt). OK, their earning/wealth growth will now be much slower because it falls within a lower strata, but how do those chart's data capture that (negative) mobility?
I think it quite obvious that the people with the wealth can aggregate faster (until they fall out of that category and aggregate slower). People with that much wealth simply can't consume it (as a percenatge). "Buying" a mansion doesn't mean that money/wealth is spent - it is just converted into another form of wealth. OTOH, buying clothes, food, taking vacations, getting big screen TV's and expensive cars etc is money gone forever. The top people have so much money it can't possibly be frittered away, instead it's invested.
I don't know where he was ultimately going with this, but if it's about taxes I have a few comments:
1. You raise the income rate and 'taxable income' will disappear from the wealthy; they have the ability to defer income by letting investment ride (not selling). Those less welathy do not have this ability; kids education, vacations, home purchases, and retirement needs mandate that they liquidate and that's when 'income' shows up on your tax return. I.e., you can more easily manipulate the data on the charts than you can change the reality (I bet they're using tax return data, there's no other way to get it.)
2. Estate tax. It's damn hard to get to the top, it's much easier to inherent a bunch of money from someone who did. The estate tax has been gutted and we're building an aristocratic class as a result.
But as a CPA, I have seen an awful lot of people go from one extreme to the other on the charts; both ways - up & down.
Cliffs: Those charts, which he advertises as speaking to income/wealth mobility to do not actually do so. They do NOT have that data and he is misinterpreting them.
Fern
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