Tuesday, December 31, 2013

All things being equal





All things being equal income in the U.S. is not one of them. That being said things are never exactly as they seem. Take the chart above that I quickly put together as a visual aid. As a matter of clarity the green line actually goes far higher, but the point is made. Clearly there is something behind this 1% thing the Occupy Wall Street movement rallies against.

The actual number of one percenters is a tiny fraction, there just aren't that many of them. In that number along with Wall Street, corporate and industrial chieftains are your athletes, actors and rockstars. They get paid so much as a percentage of what the rest of us are paid because they presumably deliver commiserate value to their organizations. There are a few sports fans who might dispute that notion. The value of a good CEO, however, is undeniable and the value they bring potentially enriches thousands, even millions. For the sake of this article I don't want to focus on the rarefied air of the one percenters, they are an outlier to this argument.

For the rest of us who bring in less than $300,000 a year (most of us far, far less) the traditional way income is calculated is misleading at best. When Census Bureau data is used to define income which excludes transfer payments like Medicaid, Medicare, nutrition assistance, the Earned Income Tax Credit, and even employee benefits such as health insurance the real picture is skewed. When someone who brings in $100,000 a year is taxed and deducted his real spendable income is far less. On the the other hand someone earning $20,000 and takes advantage of all the "aid" available (and no Federal taxes deducted) the gap in real spendable income narrows considerably.

The higher earner may have advantages like the ability to obtain credit and leverage future earnings to improve his lot. But he also pays more taxes, interest and fees on those obligations further eroding his spendable monthly income. While he might get a health plan from his work, he still pays a considerable premium with co-pays and deductibles. The person with public assistance pays no property taxes, little in maintenance and fees and a pittance for his premiums and co-pays on public health assistance. The fact of the matter is the data commonly used to measure income inequality routinely ignores our highly progressive income tax system and the plethora of benefits and transfer payments. When the effect of taxes and transfer payments is taken into account, according to recent studies at Columbia University inequality actually declined 1.8% during the 16-year period between 1993 and 2009.

When the President and the hard core liberals complain about this raw number inequality there are not only dishonest with the numbers they are dishonest about the remedy. They want pay caps on corporate executive income and corporate income (actors and athletes not so much) and also wealth transfers which, of course, would be filtered through the government. The data they choose to ignore is that economic growth is the best remedy for all - particularly the middle class. This has been demonstrated time and time again. The problem the liberals have with that is two-fold. One, the wealthy will get wealthier, and two the poor will need less government - both unacceptable.

Nearly all of what the current government has tried is either a lie or misguided. The 800 billion dollar stimulus package (pure debt) signed in 2009 saw 7/8 of it go to transfer payments like food stamps, Medicaid expanded unemployment and of course to bogus "green" initiatives. None of it generated any tax revenue or stimulus. Worse, these transfer payments "steal" money from real investments and real research that would actually improve economic prospects. Add in the fiasco and unfunded liability of the Affordable Care Act and the nation is poised to take another economic hit. Private companies that have a cumulative trillion or more to invest sit on the sidelines because of the track record of the current government and the tax implications of repatriating overseas earnings. It can only be one of two things - total incompetence or it is a plan.

It seems so obvious to me and many others that government policy (pushed by huge corporate interests) have conspired to ruin the most exceptional thing about America - a powerful middle class. When the industrial revolution brought people in from the countryside an entirely new phenomenon, unseen in world history emerged to dominate the western world. The middle class was fostered by people like Henry Ford and even some of the so-called robber barons at the turn of the 20th century. Obviously inequality existed - as if ever didn't exist - but more people were pulled out of poverty than ever could have been imagined.

Today it seems that mega-corporate and government interests are not so secretly conspiring to create a two tiered society - namely the serfs and the elites - which is precisely where we started centuries before. In this scenario the middle class is the problem.

With high tech innovation and automation deleting good paying middle class jobs there is, of course, the continued globalization of manufacturing in low wage nations. Aided by government policy to support the transfer of labor from middle class nations to Asia it is clearly is a prime strategy of corporate and government elites. Using income disparity an it's transfer payments from the earners and producers to the lower class is another. Neither of these hurt the elites and the politicians who benefit from them. Both political parties in the U.S. regardless of what the pretend to claim for themselves practice this most destructive form of crony capitalism. The rest of the people can see this and hate both parties for it. The individual politicians are powerless to resist either through the seduction of power and money or palpable fear.

I am sensing thoughtful people are sick of it. The people on the center/right are completely disgusted with the Republican party. Not because they aren't conservative enough, but because they offer nothing to the middle class that we can cling to and seemingly stand for nothing - in the very least they have a major communication problem. The people on the center/left can see the train coming off the tracks and can't or won't believe it's their guys that are steering us wrong, but they are sick of it as well. The Democrats at least use their rhetoric to pretend the care, even if it is all bullshit.

The right wingers, morons though they might be, have got to be better at slowing the destruction the left wingers are currently foisting on us, am I right?




Ugh

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