The wealth gap is an essential driver of entrepreneurial creativity, and there’s no way to...


The wealth gap is an essential driver of entrepreneurial creativity, and there’s no way to reduce it unless we want to strangle progress, John Tamny writes. "Wealth at the far end of the income curve [has] distracted us from realizing how much better we live thanks to wealth creation, and how much better off we are in relative terms owing to individuals pursuing innovative ideas."

Comments (66)
  • stevepoddy
    , contributor
    Comments (53) | Send Message
     
    Thanks for the lecture on Economic Theory.
    Read Schumpeter too,please.
    The middle class is the bulk of Democracy.
    Wall Street is destroying it.
    You are working for unemployment.
    Thanks again.
    20 Jul 2010, 05:56 PM Reply Like
  • Cincinnatus
    , contributor
    Comments (6187) | Send Message
     
    Try reading the article next time. The Wall Street you speak of is about corporate socialism and they're fully in bed with the Ruling Elite in Wash DC. Wall Street is not monolithic. To say that you can get rid of Wall Street, throwing out the essential functions that have led to entrepreneurial wealth creation, is mindless populism.
    20 Jul 2010, 06:10 PM Reply Like
  • MDLGTO
    , contributor
    Comments (213) | Send Message
     
    No problem with the article--it applies to the USA of a few years ago. First, there is a HUGE difference between financial engineering activities that have to be rescued by the govt (i.e. Goldman, AIG, etc), that is, no risk, and venture capital/risk capital that is free to fail.

     

    So the question is--If Mike Markkula, who became wealthy making stuff for Fairchild Semiconductor (From direct investment in real projects by the US gov) begot Apple. And Kleiner Perkins / Andy Bechtolsheim, et. al. begot Google, What do we get from the US gov. lending money to Goldman at virtually 0% to trade (not bring companies public) or buy treasuries, and reward the executives of said trading companies (since their I bank parts have gone to the back burner), what do does the world get from it?

     

    Perhaps in the future the vast inventory of houses created by the securitized mortgage debt industry will be the incunabulum of some socio-industrial turning point in the US--whole communities in the Inland Empire run by a parallel government of new, unemployed college graduate-squatters who, unfettered by conventional society will innovate beyond our wildest imaginations.
    20 Jul 2010, 09:42 PM Reply Like
  • D_Virginia
    , contributor
    Comments (2278) | Send Message
     
    Perhaps some of that is true, but much of the "creativity" and "progress" in recent years has been destructive -- financial innovation, for example.

     

    And much of the wealth has been generated not by being creative, but by being manipulative and by stifling the creativity of others.
    20 Jul 2010, 05:58 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Completely and utterly wrong, supported by zero fact and merely a talking point of the left.
    26 Jul 2010, 07:48 PM Reply Like
  • Hitbyatruck
    , contributor
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    Laffer-esque argument.
    20 Jul 2010, 06:01 PM Reply Like
  • vboring
    , contributor
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    That must be why Germany is so poor and uncreative.//sarcasm

     

    A wealth gap should exist, but that doesn't mean it has to be this big.
    20 Jul 2010, 06:03 PM Reply Like
  • a skeptic
    , contributor
    Comments (36) | Send Message
     
    how does one determine what wealth gap is just right?
    20 Jul 2010, 10:00 PM Reply Like
  • Umm, yeah
    , contributor
    Comments (148) | Send Message
     
    It should reasonably be within range of the rest of the developed world, not Zimbabwe.
    22 Jul 2010, 09:49 AM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    A wealth gap, whether large or small, is irrelevant. Since wealth is not static, there is no "pie" to divide. Bill Gates wealth was not taken from me, it was created. Only leftists who either 1- wrongly think that wealth is static, which is factually untrue, or 2- think there is something unfair about great wealth existing versus strong poverty, (which is wrongheaded IMO but not factually wrong), believe this. Great wealth has not one thing to do with the fact others are poor. But the more wealth does equal a wealthier society. We should do all we can to alleviate poverty, without stifling the the motivation and opportunity to amass wealth.
    20 Jul 2010, 06:12 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    You are right on every count except for one - many people are rich because of the grunts below them who make them the money on the strength of their minds and backs. Not fair, but that's life? Taxing the rich is unfair? That's life!
    20 Jul 2010, 07:54 PM Reply Like
  • Jeff Nielson
    , contributor
    Comments (2449) | Send Message
     
    This is not just a "myth", but it is an evil myth. It's known as the "trickle-down theory", and there has NEVER been any examples of economies in all of HISTORY which validate this nonsense. This is merely a pretext for robbing-from-the-poor to give-to-the-rich.

     

    Indeed, the TRUTH is the exact opposite. To Greek philosopher, Plutarch, it was "old news" 2,000 years ago that "an imbalance of wealth is the oldest and most fatal ailment of all Republics."

     

    For Americans, you've already seen what you got from the $10 TRILLION bail-out of the (RICH) banksters: squat. Not much "trickling" going on there!

     

    "Bernanke Fiddles While U.S. Burns"
    www.bullionbullscanada...

     

    The Fed alone has already stolen more than $5 trillion from the federal treasury. Meanwhile, the banker-servants in Washington have plundered roughly ANOTHER $5 trillion from (so-called) "government trust funds" - to hide the massive wealth-transfer to the rich of the "Bush tax cuts" (and the gigantic deficits they have caused).

     

    "U.S. Government Squanders “Trust Funds”"
    www.bullionbullscanada...

     

    The rich steal all the MONEY, while all the ordinary people are left holding is the BILLS.

     

    It's time to stop the stealing by the rich (and the lying by those who serve them).

     

    "Trapped by Lies"
    www.bullionbullscanada...
    20 Jul 2010, 06:33 PM Reply Like
  • Truth-hurts
    , contributor
    Comments (147) | Send Message
     
    How can you say that trickle-down doesn't work??? I, for one, feel trickled upon!
    20 Jul 2010, 06:55 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    You analysis is entirely at odds with the facts of the U.S. economy for its entire history. Well written though.
    20 Jul 2010, 08:22 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    LOL!
    20 Jul 2010, 08:47 PM Reply Like
  • Paul Nelson
    , contributor
    Comments (225) | Send Message
     
    We need a bigger gap-more for the rich and less for everybody else-that's a great idea-this guy should be on Kudlow tonite!
    20 Jul 2010, 06:41 PM Reply Like
  • Tom Armistead
    , contributor
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    The two of them could bray together like the asses they are.
    20 Jul 2010, 08:06 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    You clearly are fool, as well as the epitome of an ass yourself. Anyone who has watched Kudlow even once knows whether or not one agrees with his economic views, he is unfailingly polite and respectful to those he has on his show that disagree with him. He may not be right on economic policy, but at least he has class. Try it.
    26 Jul 2010, 07:51 PM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    Monopoly capitalism is the enemy of free enterprise (and democracy). When market pricing power accumulates on the supply side as it clearly has done, inefficiencies occur. Prices are too high, so are corporate profits. At the same time wages are suppressed and purchasing power of the majority plummets (temporarily and artificially supported by handouts, tax holidays, but essentially from creating paper money). Innovation is stifled as R&D is viewed as an unneccesary expense to a monopoly or cartel. Progress halts. We remain in a state of suspended animation, enjoying the bread and circuses provided until even the dullest of the proletariat (called in America "middle class") realizes they've been duped.
    20 Jul 2010, 06:45 PM Reply Like
  • wolverine1987
    , contributor
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    Yes, they are too stupid. That's why sometimes they vote republican. They they become smart again when they cote Dem. What an ignorant, condescending, and low IQ opinion.
    20 Jul 2010, 08:28 PM Reply Like
  • Broxburnboy
    , contributor
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    huh? stupidity of the masses is not a partisan phenomena.. the dem/repub split is artificially promoted.. in reality they both represent the interest of the corporate oligarchy against the popular interest.
    21 Jul 2010, 03:00 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Ha Ha Ha
    21 Jul 2010, 03:55 PM Reply Like
  • gretel
    , contributor
    Comments (304) | Send Message
     
    WOLVERINE 1987 , there always will be a few who invent a incredible Medicine , a Rocket , a great Computer and more .
    Bill Gates is not hording or eating his MONEY , he is sharing !
    Yes, it is his money and nobody forces me to buy his Computers
    and make him richer .One of the PROBLEM we have too many CROOKED Lawyers turn Facts in to Fictions and we spent way more time in the Courts then on the Playground with Children . We have 85% of the Worlds Lawyers for what ? Why should Managers at GS and Co make hundred of Million MILLIONS by cheating the Public with there Senators in Tow ?
    You all need to go in to the Street's of Singapore , Austria, Australia , Germany , Switzerland and the Scandinavian Country's then you can learn what is a CLEAN and BALANCED Society .They all have free Education , Health care and learn DISCIPLINE in the Schools because there are few whining Parents who don't understand why Johny is still at Mamas Lap at age 25 ! Yes there is a cost to a Balanced Society where nobody is left out in the Street but most are happy to pay because they know they wont be lonely in a dark corner at old Age and the rich don't have to reinforce there Fences every year. You ever ask yourself where you are going to be at old age and no money left for a Doctor ? No, because Ignorance and Greed makes America in GENERAL Blind ! Lets not forget who took America to the Moon, the Boys from a Balanced Society . You all have a nice day .
    20 Jul 2010, 07:04 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    What happened to the people who invented things for the sheer joy of the creation? People used to love to create companies just for the sheer joy of it, luckily, I used to work for such a guy, until he sold the company to three of his workers. He still works for the company, as a "grunt", at 78, for the sheer joy of it.
    20 Jul 2010, 08:51 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3360) | Send Message
     
    Sounds to me like a Bankster trying to justify all that "Product" they create.
    20 Jul 2010, 08:12 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    BTW, this is a fact, it is not an opinion. Capitalism has risen more people from poverty and want than any other system, government or person in the entirety of human history. And second place is not even close, not even on the same graph. Deny that and you deny fact, to your detriment. I'm not against progressive taxation, the social safety net, or any other program e currently have. But to say that an income gap by itself is detrimental is ignorance. And that because there are crooks out there that are not caught that this invalidates the system is equally ignorant.
    20 Jul 2010, 08:27 PM Reply Like
  • Umm, yeah
    , contributor
    Comments (148) | Send Message
     
    How about we get back to a progressive tax system then? The top 1% is paying a much lower tax rate than all of us "average" workers.
    20 Jul 2010, 09:57 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    The top 1% pay 70% of all income taxes. The bottom 40% of earners pay zero income tax. Not progressive enough for you?
    21 Jul 2010, 09:16 AM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    The People's Republic of China has risen economically in the past 60 years precisely because it shook of the stifling feudal-like capitalist economy that existed until 1949. They refused to accept outside capital because they saw it correctly as the leading edge of subservience to the capitalist West. In the 60 years since, they have picked themselves up by the bootstraps even as the West declined into the corporate welfare states we see today.
    The answer: break up the cartels, restore pricing power to the demand side, allow too big to fail to do just that, else we will follow
    Japan into a vicious cycle of lower productivity and deflating asset values.
    21 Jul 2010, 03:09 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    The first part of your post is factually incorrect and entirely mistaken. China was an economic backwater, with rampant poverty, little industry and no growth as recently as 25 years ago. They have grown and prospered only when they began opening up to capitalism, freeing entrepreneurs, and allowing economic liberty--although still beholden to the State and regulated. That is an economic and political fact. Capitalism has saved their poor and raised their living standards, just as it has everywhere its been tried.

     

    However, I do agree with the latter part of your statement regarding too big too fail and not becoming Japan.
    21 Jul 2010, 04:09 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    It amuses me that people have down-voted this post. It's like down-voting a post that reads "the sun rises every day and warms the Earth." It is a simple objective fact. It is not subject to opinion.

     

    What IS subject to opinion is what we do with our society and how we treat our wealth gap, and there reasonable people can disagree. But you cannot be a reasonable person and disagree with the statement that capitalism has created more wealth, raised more people from poverty, and fed more people than any other system.
    21 Jul 2010, 04:14 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    That may be true. But we don't have capitalism in the US now. We have crony capitalism, oligarchies, political nepotism, kleptocracy. We have rule by a tiny handful of corrupt politicans and bureaucrats that are paid fortunes by lobbyists and vested interests groups representing corporate america, the military industrial complex, the healthcare complex, federal and state bureaucracy unions, etc. And all supported by the largest and most unproductive bunch of lawyers in any country in the world, hiving off their share of the wealth.

     

    You always harp about the top 1% paying 70% of the income taxes. That may be close ... but you fail to mention that they also control 70% of the income, 70+% of the assets, and 70+% of the country's wealth. You also fail to mention that they do not pay 70% of the payroll taxes, or 70% of the sales taxes, or 70% of the property taxes, or 70% of the government user fees. Those regressive taxes all fall on the other 99% of the population who have a relatively small proportion of the income and wealth. You also fail to mention that the top 1% gets all the tax advantaged wealth breaks including: lower capital gains, tax-free munis, tax-sheltered investments, tax advantaged compensation such as stock options and golden parachutes, etc.

     

    You further fail to mention how the wealthiest 1% are constantly gaming the system and using their connnections and influence to further enrich themselves. Perhaps one of the best and latest examples is Hank Paulson's appointment to US Treasury Secretary by George Bush. Wherein Paulson got a $500 million tax free pass on his GS cashout in order to become Treasury Secretary. Meanwhile Mr. Paulson then turned around and enriched his other 1% buddies on Wall Street with taxpayer borrowed money to the tune of trillions of dollars, while the other 99% suffered trillions in losses on their houses, pensions, and employment incomes.

     

    But then if you want to call that capitalism, then be our guest. Most Americans call that political mafia type large scale theft and corruption by the top 1%.
    21 Jul 2010, 09:54 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Do you really believe that the top 1% "control" most of the wealth? There is no such thing as controlling wealth. Wealth is static, fluid, and shifting. It is an economic fact that the majority of wealthy families are not wealthy 2 generations later. There is not an inherited aristocracy here, despite examples to the contrary in the press that we all know about. The fact is that wealth grows, people become rich, some stay rich, but others lose everything in the next generation and revert to the mean.

     

    Regarding progressive taxation, I LIKE the fact that the rich pay most of the income tax, I don't advocate changing that. But I point that out to counter people who constantly write, wrongly, that we don't have a progressive tax system. The income tax receipts are by far, the major source of income for our government, which then provides financing for government programs that benefit the poor and middle class.

     

    Regarding the "wealth breaks," you are mistaken. Any person with $500-1,000 available to them can purchase shares in municipal bond mutual funds which are tax free. Now the poor may not afford that (arguably) but around 80% of all Americans can. The capital gains tax rate is the same for everyone, there is no lower rate for rich people. And millions of ordinary, non-rich Americans have tax sheltered investments--they are called 401k's and IRA's.

     

    Now, do I endorse crony capitalism? Nope. I didn't support the bailout, and would have been glad to let a few banks fail to suffer for their misjudgments. And a some CEO's should have their bonuses clawed back for their poor management. But none of that changes the fact that the system we have is flawed, and in need of many changes, but beneficial to the vast majority of our people.
    22 Jul 2010, 09:09 AM Reply Like
  • Umm, yeah
    , contributor
    Comments (148) | Send Message
     
    Nope, not when the top 5% own more than the bottom 95% combined.
    22 Jul 2010, 09:51 AM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    The problem of course is how you define capitalism... Capitalism, absent a mechanism for recycling wealth through the economic pyramid, evolves into a system of monopoly capitalism featuring large income gaps that bear no relationship to actual productivity gaps.
    Adam Smith observed that whenever two entrepreneurs get together they immediately plot to maximize market share and profitability by fixing prices and crushing competition. Monopolies and cartels have arisen that "games" the system to their benefit, and in fact have captured the banking system and all levels of government.
    When market power is dominated by the supply side, innovation ceases, wages are suppressed and society becomes more fragmented, with an increasingly rigid economic class system, which self perpetuates. In short ..end cycle capitalism returns societies to the feudal, hive like pre industrial society from whence it came.
    Karl Marx, who is thought by many to know something about unfettered capitalism, observed that the last capitalist standing will sell you the rope with which to hang himself.
    22 Jul 2010, 11:08 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    I was initially surprised that you used a quote from someone as entirely discredited by history as Marx, but maybe I shouldn't have been. But that aside, what is your definition of a monopoly and what is an example of one here?

     

    And the "mechanism for recycling wealth through the system" is the government. That is what the social safety is, by definition. I'm sure you are aware that billions of dollars are spent every year on programs that recycle wealth through the system, and that money comes, largely, from the well off. Or do you believe the money we spend on the less fortunate is inadequate? I suppose on could argue that, but is is another thing to rhetorically pretend that this mechanism doesn't exist.
    23 Jul 2010, 08:40 AM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    Whole societies have arisen based on different variations on Karl Marx's ideas (in truth Marx was a propagandist, the ideas mostly belonged to others). China is one, Vietnam another. Not all his dogma has been discredited.
    Meanwhile in the West the "voodoo economics" of the neocons has been thoroughly discredited in practise. Yet the idea that increasing income gaps are a good thing, that government revenues will increase if taxes are cut, that wars are a productive exercise, that government power should be mobilised to protect and enhance corporate monopolies still hold sway...ultimately to the detriment of all.
    23 Jul 2010, 09:46 AM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Which idea of Marx' do you believe has not been discredited?

     

    Regarding taxes/revenues, some tax cuts, Capital Gains for one, do in fact result in increased revenue. That is an economic fact. Both the Clinton and Bush cuts in capital gains tax rates resulted in greater revenue coming from that tax, and not by a little, by a lot, and far greater than the government estimates, and in every year, not just temporarily. That fact is easily researchable should you be so inclined. I do agree however, that some other tax rate reductions result in lost revenue.

     

    Regarding your other points, I don't believe in them so won't counter.
    24 Jul 2010, 11:08 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    Wolverine,

     

    These are the facts:

     

    1)US wealth distribution: 10% of US citizens own 70.9% of all US assets
    Submitted by wd4freedom on Sun, 10/18/2009 - 11:45
    in Daily Paul Liberty Forum (Ron Paul)
    Top 1% own 38.1%
    Top 96-99% own 21.3%
    Top 90-95% own 11.5%
    And it gets much uglier as you proceed downward. Bottom 40% of population has 0.2% of all wealth

     

    link is: www.dailypaul.com/node...

     

    2) Closing today's growing economic divide is UFE's main objective.

     

    From our perspective, the gap between the rich and the poor is a better measure of the health of our economy than the S&P 500 or the Dow. Today, the concentration of privately held wealth at the top is at its highest peak since 1929, the year the financial markets crashed and gave rise to the Great Depression of the 1930s. At that time, 25% of the population was out of work.

     

    Despite our economy being mired in the deepest recession since the 1930s, people in the top 1% continue to own as much wealth as those in the bottom 90%, and education is essential to reversing this trend and constructing a strategy for recovery

     

    Link is at: www.faireconomy.org/is...

     

    3) The Wealth Distribution
    In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010).

     

    Table 1: Distribution of net worth and financial wealth in the United States, 1983-2007
    Total Net Worth
    Top 1 percent Next 19 percent Bottom 80 percent
    1983 33.8% 47.5% 18.7%
    1989 37.4% 46.2% 16.5%
    1992 37.2% 46.6% 16.2%
    1995 38.5% 45.4% 16.1%
    1998 38.1% 45.3% 16.6%
    2001 33.4% 51.0% 15.6%
    2004 34.3% 50.3% 15.3%
    2007 34.6% 50.5% 15.0%

     

    Financial Wealth
    Top 1 percent Next 19 percent Bottom 80 percent
    1983 42.9% 48.4% 8.7%
    1989 46.9% 46.5% 6.6%
    1992 45.6% 46.7% 7.7%
    1995 47.2% 45.9% 7.0%
    1998 47.3% 43.6% 9.1%
    2001 39.7% 51.5% 8.7%
    2004 42.2% 50.3% 7.5%
    2007 42.7% 50.3% 7.0%

     

    Link at: sociology.ucsc.edu/who...

     

    And many more sources, that one could easily access by a simple internet search.

     

    So, you are correct in that wealth is not static, it is ever more rapidly shifting towards the top tiny minority and away from the vast majority. Now why would that be? It must be that 80-90% of Americans are lazy, shiftless, stupid, welfare bums, drug addicts, criminals, uneducated, etc. And likewise it must be that the top few percent are the smartest, hardest working, most innovative, most productive people in the entire world. Guess you can choose to believe and promote that explanation if you choose to, but the more likely rational explanation is crony capitalism where the tiny minority including politicans, lobbyists, and vested interest groups have successfully managed to capture the system and ensure that most advantages (legalized) have accrued to themselves. The US simply does not have capitalism nor free market competition now, but rather a captured oligarchist type economy and system whereby a tiny minority is able to make rules that rig the game in their favor.

     

    Further, you continue to only mention income tax. But as pointed out previously, income tax is but a relatively small part of the total taxation on Americans. Much more significant are payroll taxes, unemployment insurance, property taxes, sales taxes, use taxes, etc. Wealthy Americans pay a relatively small portion of these taxes in comparison to the amount that the other majority of Americans pay for these. Furthermore corporations now pay significantly less proportion of total income taxes than they did in decades past, a fact that is easily verifable by checking IRS statistics.

     

    The real truth is that a the concept such be " a buck is a buck is a buck" is what should be the operative income taxation principle in the US. It should make no difference what the source of income is whether it is captial gains, muni's, stock options, corporate paid benefits, interest, dividends, or any other source whatsoever. All should be subject to the exact same taxation rules that everyone else has to live by for wage and salary income. Now imagine the howls of protest (and frantic calls and threats to their politicans) when those making millions per year all of a sudden have to pay payroll taxes, unemployment taxes, social security taxes, etc on all of their entire income without the caps that now limit these taxes to a miniscule part of their income.

     

    Until we reach that point (which will never happen), the arguements about income tax are but a straw man arguement that totally ignores the whole tax picture and excludes far more significant areas in the tax burden picture.
    25 Jul 2010, 04:43 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Every single one of the non-income taxes you mentions as being more significant are not new taxes that suddenly have begun to hit the non-rich hard--they have been in place for decades. So how does that support your argument that things are worse?

     

    And again, the facts that you supply are proof that the rich are richer now than they have every been--but it is irrelevant to my argument, which is that the COMPOSITION of who is rich is fluid and not static. As long as we continue to see newly rich, along with those that were rich a generation ago but are not rich now, (which in fact we are), all that matters IMO is that people have the ability to become rich. Clearly they do. And nothing you supply contradicts my point that you have not even come close to disproving--that no one CONTROLS wealth. There is no such thing as a static supply of wealth where Warren Buffett earning another million means that a million less is now available to the poor. That mindset, which you subscribe to, is simply not an economic fact. You can complain about concentration of wealth all you like but until you prove that one extra dollar earned by a rich person means a dollar is taken away from the rest of us, your argument is simply based on "that's not fair!" Those that believe that are free to do so, but that is simply populist sentiment without facts to back it up.

     

    Regarding your tax solutions---I would LOVE a system where all income is subject to one flat tax rate with no exemptions or exceptions. That would make for a much more vibrant economy without tax distortions. But the rich would probably pay around 20-25% under that system, which I suspect wouldn't satisfy your need to make them pay their supposedly fair share
    26 Jul 2010, 10:22 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    Wolverine,
    Wealth = excess income. One cannot accumulate wealth unless they generate excess income. Over what one has to use for basic needs.

     

    Thus the vast majority (80-90)% cannot accumulate wealth if they cannot generate excess income. Which is exactly what has happened for at least the last 3 decades in the US.

     

    You claim that "non-income taxes" have always been there so why can that be different. Here is why:
    FICA taxes vs. Federal Income Tax
    (on median income) (highest tax bracket)
    1955 1.71% 91%
    1960 2.29% 91%
    1965 2.23% 70%
    1970 3.35% 70%
    1975 5.20% 70%
    1980 6.13% 70%
    1985 7.05% 50%
    1990 7.68% 28%
    1995 7.65% 39.6%
    2000 7.65% 39.6%
    2005 7.65% 35%

     

    The above are from tables in The Tax Policy Center and the Tax Foundation websites.

     

    It shoud be pretty clear, even to you, that FICA which is paid by the masses (80-90%) has increased from 1.71% to 7.65% or a 347% tax increase on the majority of Americans. That is just a fact that cannot be disputed. Whereas the federal income tax rate, on the highest tax bracket has decreased from 91% to 35%, or a decrease of about 62%. Again, that is just a fact that cannot be disputed.

     

    One can probably go and show about the same type of thing on the other so called non-income taxes such unemployment insurance, sales taxes, property taxes, etc. but it would take to much time to check and list each one.

     

    The point being, as you well know, that these other so called non-income taxes, which have increased dramatically, are the taxes paid on virtually all of the income of the masses whereas the rich pay these taxes on only a tiny amount of their income due to caps, exemptions, and other tax advantaged schemes they essentially pay off politicans to give them.

     

    The real comparison that needs to be made is what proportion (%) of the masses income goes to TOTAL TAXES vs what proportion of the rich's income goes to TOTAL TAXES. And you and I both know the answer to that. It will the masses hand's down and without question. And that is in part the reason why the rich keep getting richer and the poor keep getting poorer. Without excess income, one cannot accumulate wealth.
    26 Jul 2010, 06:01 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Damn, I thought we weren't insulting during this argument, oh well.

     

    I admire your tendency to back your words with facts or links, but until you counter my fundamental argument, which I repeat, and which in three attempts you are not able to answer, that no one "controls" wealth and that membership of the wealthy class changes from generation to generation. If no one controls wealth, then the wealth gap is significant not economically, but only as a fairness issue open to those who don't like seeing such gaps--but that is different from economic harm. Saying in effect "it's getting bigger" in response to my point is not answering the point.

     

    You fall victim to your own lack of ability to answer that question when you consider the fantastic idea of "excess" income. Who defines "excess?" Your admirable penchant for providing backup is completely absent when you make your most fantastic claim, that 80-90% of America "cannot generate excess income." I'll let that one lie unchallenged, since it assumes that no one outside the privileged class becomes wealthy--that is both flagrantly untrue and in fact a favorite claim of dissatisfied "everyone is against us" people everywhere--who also lack any evidence to make it beyond a few prosecutions in the media.

     

    Ok, onto payroll taxes. I don't dispute your facts at all, except for one point of context--literally no rich person ever paid anything even close to the higher pre-1980 rates you supply, because of the many exemptions present that have been rolled back as time has progressed and the rates have come lower. Now onto your point. I would LOVE to see a payroll tax cut. You are aware, are you not, that payroll taxes are also paid by small business owners, some of whom, distressingly, are successful and tend to "control" wealth? A payroll tax cut would be beneficial for both the working poor and business owners. As for the rest, lower them as well, I have no desire to continue their upward climb.

     

    Lastly, it is not fact that the wealthy pay less of their income in tax then the working poor. For some, yes, but broadly, no. Most are paying in the 20's (%) in income tax. You do realize the rich also pay HUGE amounts in property tax, far beyond what any other group pays, and that has accelerated much faster that the FICA tax over the last 30 years? Most of the rich in eastern states and California pay more than 50% of their total income in income and property tax. Don't cry for them, but don't also pretend we are in 1890.

     

    It's too bad you got annoyed there, but maybe if you think on these things it will help you.
    26 Jul 2010, 08:40 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
     
    The fundamental change that has occurred over the past thirty years or so is that individuals can capture more wealth due to the technology. And its created a new social problem where we see economic growth, but almost all the benefit of this growth goes to a few individuals. I believe that in the US, we have about 35,000 people with more than $30 million (liquid). But they own something like 40% of all assets. In a country of 375 or so million people almost half the country is owned by .009% of the people. Thats crazy - and I'm a fairly conservative guy who believes that its good for folks to be striving to better themselves.

     

    Yes, in a capitalist society there will always be differences in wealth, and I doubt that very few Americans are bothered by that. But we've entered an era where fewer people benefit as wealth is created. I always find it amazing when a CEO gets a bonus that is double or triple what he/she earned the previous year because the company hit a 12% growth target. Did the assistant production supervisor see their 45,000 income double also? Nope - they got the standard 3.1% raise.

     

    Look at Bill Weldon, CEO of J&J - 30 some million in compensation a year - and for what? His third major headcount reduction program in 5 years? For the 8 recalls that J&J experienced in children's tylenol? But the stock must have soared under his "leadership"! Right? Oops....... actually the stock is lower today than when he took over 8 years ago. The man has overseen the firing of probably 20,000+ workers in five years yet walked away with hundreds of millions in compensation. Thats fundamentally wrong.

     

    IMO - Men and Women that actually build businesses - men like Bill Gates or Warren Buffet should have whatever wealth they accumulate while building the business. They have "given" to a lot of folks while building the business. But corporate executives are merely running businesses that someone else built. Hedge Fund managers get rewarded merely for raising money - the game is rigged and they get paid whether or not investors see returns. IMO - these men and women have used the system to "take".

     

    I'm not sure how, but we have to tweak the system so that the second group of "takers" can take less while not negatively impacting those that "give" and actually build businesses.

     

    Getting rid of the carried interest tax laws would be a good start for those hedge fund guys.... not sure how to tackle the corporate chiefs robbing shareholders blind.

     

    20 Jul 2010, 08:28 PM Reply Like
  • jpau
    , contributor
    Comments (963) | Send Message
     
    I think you'll find that there is wealth disparity in any society. I like how the examples of those who become wealthy are always the innocuous ones like Gates or Henry Ford. You never see defenders of the wealthy mention the robber barons; the mine owners who had people beaten or killed for trying to unionize; the textile mills where people were paid minuscule wages while the owners wealth grew and grew.

     

    We have 40 percent of our people on food stamps. The poorest 50 percent of our population own less that 1 percent of all stocks and bonds, and have 2.5 percent of the wealth. The richest 1 percent own 50 percent of all stocks and bonds, and more than 33 percent of the wealth. Clearly the wealth creation that the rich are enjoying isn't helping everyone else.
    20 Jul 2010, 09:24 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Looking forward to the 20th century? Keep pimping the robber barons.
    21 Jul 2010, 09:19 AM Reply Like
  • Ohrama
    , contributor
    Comments (568) | Send Message
     
    I suppose no one would be against entrepreneurs (like Bill Gates, Steve Jobs) swimming in wealth. The question is about CEOs etc. who because of certain connections (political, ivy league degree, family, ethnicity etc.) have made it to the top raking millions while destroying the company and the community. While at NSF (a research funding organization) official, I used to joke that Thomas Alva Edison (who if I recall correctly did not finish high school) would not get a grant from us since he is not coming from one of those ivy league schools!
    20 Jul 2010, 11:27 PM Reply Like
  • gretel
    , contributor
    Comments (304) | Send Message
     
    WOLVERINE1987, your English is great and you like to write BS .
    The 1% of SUPER RICH pay 70% of the Taxes and make 999 000 % of the MONEY and have 67% of the WEALTH for which they hardly pay any Taxes ! Go to Singapore, Europe maybe you can learn if you have any open mind left ! Why GREED never learns from History ?
    Have a great day .
    21 Jul 2010, 06:26 PM Reply Like
  • Umm, yeah
    , contributor
    Comments (148) | Send Message
     
    I would say just close the loopholes that the top 1% are enjoying. The average actual tax rate paid by the top 400 earners is around 17%. Meanwhile, the middle class is paying around 40% once you include Medicare, Social Security, and State Tax.
    22 Jul 2010, 09:56 AM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    Agreed. My wife works part time and pays about four times the amount in SS and Medicare than fed taxes. If the powers in the 40's had pegged SS to longevity we would be in better shape, fiscally and healthwise.
    22 Jul 2010, 10:12 AM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    While I'm sure we have much to learn from Europe, particularly in the area of culture, I'm also sure that we have nothing to learn from them economically. They have what amounts to permanent 10% unemployment in most of their major countries--and this was static during even the 1990's. They don't create any new jobs, and that is taking the last two horrible economic years out of the equation. They have no growth, little innovation, little invention, and their standard of living has been declining for years. Europe is economically irrelevant. We can go down their taxation and economic path, which many posters here favor, or we can save our innovation economy and continue to grow like our historical norm.
    22 Jul 2010, 12:20 PM Reply Like
  • jpau
    , contributor
    Comments (963) | Send Message
     
    What innovation economy are you talking about? Offshoring? Meanwhile, we have 16 to 17 percent unemployment, U6 that is. What new jobs have we created since 2000? Construction? Mortgage industry. Oops, they're gone. Sure, we create fast food jobs I guess. Growth here in the last decade was a mirage, based on cheap credit and people using their homes as ATM's. That was hardly innovation.

     

    I think the problem we really have is that we have a consumption driven economy which requires an employed populace who make enough income to drive the consumption, while at the same time having a Corporate culture which constantly seeks to suppress wages.

     

    I enjoyed Andrew Grove's article www.bloomberg.com/news..., he makes some excellent points
    22 Jul 2010, 01:15 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    Yeah, as the number of workers per widget goes down, we have to invent new and different widgets to consume to keep more people employed. Sometimes we concoct widgets that need counteracting widgets, like fast food/fad diets. Can't wait to read that article.
    22 Jul 2010, 01:21 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    What innovation economy am I talking about? Hmm, let me think deeply on that. Never mind, no need, since it is so obvious to most people. Let's see... Google, Amazon, Twitter/Facebook, Millions of Apps, almost every major drug advance in the last 20 years, shall I go on? Most of those did not exist 20 years ago--that is the very definition of innovation. And none of those things came from Europe. Very few innovations of any kind come from Europe. Your flippant response about off-shoring is pretty lacking in knowledge on its face. You would think that someone that comes to an investing site would understand the economy a little better.
    23 Jul 2010, 08:48 AM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    Monopoly capitalism crushes innovation and exports innovation along with jobs. General Motors is a great case in point, after the big 3 acheived market dominance in the 1960s, innovation ceased as profits maximized by jacking prices up. Foreign upstarts like Toyota have overthrown GM based on innovation and efficiency. The next generation of automotive innovation is coming from India, Brazil etc.
    Ever wonder why new drugs are flooding the market, yet the general health of the American population is declining?
    23 Jul 2010, 10:00 AM Reply Like
  • jpau
    , contributor
    Comments (963) | Send Message
     
    I see Wolverine, if I disagree with you, I don't understand the economy...
    Almost every major drug advance you say? I'll let AstraZeneca know that Crestor (Shionogi), Nexium, Seroquel, Symbicort and Arimidex were just minor blips in medicine; but since I'm kind of busy, could you take care of telling Novartis, Orion or Roche that they haven't accomplished anything in 2 decades?
    You say that very few innovations of any kind come from Europe. Hmm, I'll inform Simon Cowell. Not to mention the creators of all the other ideas for movies and tv that we borrow on a yearly basis. What innovative ideas do Americans have for tv or movies? Cop shows and vampires?
    Some other innovations from Europe: mass transit, universal health care, high speed rail (granted, the Japanese have these things too)
    Oh, and you can tell Torvalds (Helsinki) that the whole Linux thing was a giant waste, maybe stop by and let Tim Berners Lee (CERN) that the world wide web thing pales compared to Twitter
    23 Jul 2010, 10:08 AM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    I love disagreement, particularly on opinion, but as President Obama says, "you are entitled to your own opinion, but not to your own facts." I'll gladly debate with anyone about what we should do about our society, and what the facts mean for how we move forward, but if the counter argument is based on an understanding of the economy that is not based in reality, such as your point that basically we have no innovation economy other than "off-shoring" its fair to say that that reflects a lack of understanding of our economy.

     

    Regarding innovations from Europe, you make a strawman argument--I never said no innovations come from there, I said few, and that is in comparison with ours. Again, it is a simple objective fact, not an opinion, that the U.S. economy is far more dynamic and innovative than the European, and most business people in Europe would agree with that. Now, if one wants to argue that Europe has a superior system despite that fact, and that they would rather sacrifice some dynamism and innovation in exchange for more social stability and equitable distribution in wealth, then that is perfectly legitimate and knowledgeable. But don't pretend that there isn't a sacrifice involved.
    24 Jul 2010, 11:21 AM Reply Like
  • gretel
    , contributor
    Comments (304) | Send Message
     
    WOLVERINE1987 , let me help you with some real FACT'S with my humble English . The USA is the most BEAUTIFUL COUNTRY in the World with NATURAL RESOURCES which can rival the Resources of the World . We have great University's which in GENERAL only the Rich can afford . We have some Hospitals where the Haves folk to do extend there Greedy Life for a few more month. Soon we will have cars where one can do it's "thing" without going to the Bathroom but producing much of real QUALITY, with exceptions , is not in the works for the USA because we have the worst BASIC EDUCATION SYSTEM in the World with very little discipline . 200 Millions have more Fat then we need to Power the USA for a year, many have no idea where the live on the World map , 85 % have nothing except Bill's to pay, Lawyer's eat us alive , 35% of young people have no Job and many are not looking hard but have a big MOUTH , GS and Co is sucking the last penny out of Americans and there are very few Safety Net's , we have very few good Roads and Bridges and all around there is very little good Balance left in the USA . We have REAL 17% unemployment and rising if you count the REAL population of the USA which is around 360 Millions , 40% of America lives in Shelters which the used in Europe for Animals . So, 1987 I think you live in a expensive Hotel where there are only Windows to the Beach . Europe had to take in Eastern Europe which was a enormous Burden , they have great safety nets and good and clean Street's . Europe is not perfect but People there have a good Balance in there Life's which we lost a long time ago with always asking "Me and more Me and it is not my job " !
    22 Jul 2010, 01:33 PM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    I don't have anything bad to say about Europe--I love visiting there. I just don't want their economic policies which in my opinion have made them economically irrelevant. They themselves are now in the process of cutting back on their social spending because they realize its unsustainable ala Greece. If you disagree and believe that "40% live in shelters" here you are free to hold that opinion.
    23 Jul 2010, 08:56 AM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    Yes, in Europe, if you have a heart attack, they will treat you for free. In this country, if you visit, we will give you a big bill.
    24 Jul 2010, 04:39 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
     
    In Europe they have already given you a big bill every year..... and in Europe after your heart attack, a bureaucrat will have determined what post-operative care you should be receiving. You might also mention that for many medical things you will wait 4-6-8 months before seeing a doctor so that heart attack might have been preventable.

     

    There are several things that Europe does well in regards to keeping costs down. They basically ration care and they don't allow every medical procedure under the sun to be performed..... when that is discussed in the USA its called rationing.

     

    There is no free lunch, tough choices have to be made and while things can always be more efficient if you really want to hold down medical costs at the end of the day you have to consume less of it - which means denying treatments based on cost or age.
    25 Jul 2010, 04:52 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    Wolverine,
    Interesting that you should say that.

     

    Per the following analysis, the per capita GDP in quite a few European countries is actually higher than the US.

     

    en.wikipedia.org/wiki/...

     

    And with the US falling off a cliff for the last decade, it is likely that US per capita GDP will continue to detoriate in comparison to many countries around the world for a considerable period of time into the future.

     

    But it is true, that if one happens to be in the tiny minority of elite Americans (top 1-10%), then you are probably better off being in the US than most European countries. However, the reverse would likely be true for the vast majority of other Americans (other 90%).

     

    But hey, we could probably fix the American debt and economy problems with out too much trouble. For example:
    1) let all poor people and poor children starve to death.
    2) deny anyone over 65 any medical care.
    3) shoot all prison inmates in the country.
    4) test all Americans for IQ and execute those with less than 100 IQ
    5) summarily execute all illegal immigrants.
    6) renege on all social security and medicare promises and cut them all by 50% starting tomorrow.
    7) abolish all federal government except for a tiny administration, a tiny judical system, and the military (wasn't that Freidman's solution).
    8) return to a feudal society of nobles and serfs or plantation owners and slaves - at least that way the 10% who own everything can be responsible for feeding and maintaining the other 90%. Heck even in those days the odd superstar or slave managed to break free and move into the priviledged class.

     

    See if we just think about innovative solutions, we can get a pretty quick fix for the American economy and what ails it. We might even get overwhelming support from the top 10% including politicans to immediately proceed with some of the possibilities above. Besides if they own 100% of everything, then not much incentive for them to steal anything else is there? Then they can turn their focus on to trying to steal something the remaining 10% already own and leave the peasants and serfs alone.

     

    Just a friendly barb from the other side of the fence.
    25 Jul 2010, 05:33 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    And not in this country. Self-employed neighbor was told by his insurance company that his bum knee was pre-existing (he is almost 60, so of course it is!!). He ended up shelling the $30,000 out of his own pocket. He was able to afford it - so many can't. Another neighbor's daughter turned 24 - dropped from dad's insurance. Can't get coverage because of a pre-existing, not even from the school she is attending. Med's are over $1000 month. Too bad they live in "you're on your own" USA.
    25 Jul 2010, 08:26 PM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    Bulls**t

     

    The problem with American health care is that it is too expensive. It is administered by for profit insurance companies which add a 25% overhead right off the bat. Said insurance companies have departments whose mandate is to reduce payouts by any means necessary, like finding ways to deny legitimate client claims Health care expenses are still the leading cause of personal bankruptcy. It is actually cheaper to fly abroad to have your operations. It is illegal for Americans to purchase drugs from outside the country... the pharmaceutical monopolies won't put up with it.
    The purpose of health care providers is to drive up the cost of any procedure, not to deliver quality health care at an efficient price. The income gap between doctors and patients continues to grow..I guess that's a good thing, which will lead to cheaper and better health care. Not.
    25 Jul 2010, 10:05 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3498) | Send Message
     
    Agree with all you said. Biggest problem is that we need portable insurance. If you can't trust a company you work for with your pension, why would you trust them with your health insurance.
    26 Jul 2010, 10:54 AM Reply Like
  • wolverine1987
    , contributor
    Comments (197) | Send Message
     
    Dude, this is getting ridiculous. Throw all the strawman cliche barbs all you want since you can't prove your argument. Have you lived in Europe? Ever been there? Our middle class pays less taxes and has more disposable income. Theirs pay income tax rates as high or higher, plus VAT taxes that average 20%. And in exchange they get free health care (careful to not be dying soon or you may have to wait) and earlier social security--except that in the next few years all of that will be rolling back, as already begun in France. England and Greece. And permanent unemployment averaging 10% year after year. Without exception, every European I've known that has come here to work has stayed. I have nothing bad to say about Europe, I love it there. But your lame cliches about heartlessness are the fallback of a man without an argument.

     

    Let me summarize ours: You: the rich are getting richer. Me: how does that hurt our economy? You: look, here are some stats that prove the rich are getting richer! Me: wealth isn't controlled, people become rich and poor many times over. How does that hurt the economy? You: the rich are richer and they and their rich friends control most of the wealth! See, things are bad right now! Me: That doesn't answer the question. Our society has created more middle class wealth than any other You: you and your republican buddies are heartless bastards that don't know anything!

     

    You win.
    26 Jul 2010, 09:05 PM Reply Like
  • Broxburnboy
    , contributor
    Comments (108) | Send Message
     
    An wealth gap that does not reflect a productivity gap (eg. bankers bonuses, tax breaks), is not a driver of productivity or social ambition.
    Low taxes that have been replaced by state borrowing or federal reserve printing, is simply deferred taxation for all and direct subsidy (unearned income) for those affected.
    To speak of Europe as if it were one country is ludicrous. Germany is socially democratic and incredibly productive. Greece is corrupt and capitalist. Norway has the best balance sheet of any country in the world, the highest standard of living and again, full of social programs.
    The United States over the last ten years faces an increasing income gap, declining standard of public health, declining literacy rates, increase in infant mortality (generally thought to be an indicator of increasing poverty and declining public health).
    27 Jul 2010, 11:15 AM Reply Like
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