What Causes The Growing Wealth Gap In America?

[austrianecon]

A major issue in America today is the growing gap between the rich and the poor, and the popular narrative is that the disparity is caused by capitalism run wild and only the firm hand of government can fix the problem. But what if this narrative has it backwards? What if the growing wealth disparity in America is actually caused by the government?

Take Warren Buffet, a man often at the center of this debate, as not only is he a billionaire, but also a vocal advocate for higher income taxes on the rich. Mr. Buffet’s focus on taxes on income is curious, as he didn’t become a billionaire by earning a high income, but rather from owning assets, like shares in Berkshire Hathaway. Many are aware of his acumen in making investments that have a “margin of safety” – or minimal downside – but few are aware of the greatest source of such safety for Mr. Buffet in recent years, the US Government.

During the 2008 crisis Buffet’s investment portfolio was full of wobbly financial companies like GE and Wells Fargo. In the span of 2 months Berkshire stock – and Mr. Buffets net worth – lost half their value. In response, Buffet invested more in collapsing financial companies like Goldman Sachs, then went public demanding a bailout. The Treasury Department and Federal Reserve responded with program after program to keep troubled financial entities alive, some of them invented specifically for Buffet holdings like GE. Just two years later, thanks to the impact of the bailouts and the Fed’s programs, Berkshire stock rebounded sharply. Mr. Buffet’s investment in Goldman Sachs, which he himself admitted was a bet on the bailouts, made billions and continues to earn him a profit years later.

Mr. Buffet wasn’t the only person that benefited from the bailouts, but wealthy citizens like him, who tend to hold the majority of assets in America, benefited disproportionately. The untold narrative of how Warren Buffet and others like him “get richer” is how they managed to not get poorer, even when their bad investment choices dictated such.

You can continue reading here: Omid Malekan

 

[Quik]

I agree completely, I think the bailouts have done nothing but vastly increase the growing wealth inequality in this country. And it's all been concentrated in the financial sector too. That's the next bubble they've created. Don't even get me started with health care and education. Those are the big three, financials, health care, and education. When they pop, bye bye goes the US economy.

 

[Moot]

Yes, the government...but hedgefund managers and big banks skimming wealth off the financial markets is helping to widen the wealth gap, as well.

 

[JP Hochbaum]

The supply of money flows from banks. People with money and good credit get money at a cheaper value.

Capitalism isn't at fault, it is just a concept, but it certainly has flaws in that it is a system that allows wealth to be distributed to those to assets, and it distributes money away from labor and into capital.

 

[sookster]

The supply of money flows from banks. People with money and good credit get money at a cheaper value.

Capitalism isn't at fault, it is just a concept, but it certainly has flaws in that it is a system that allows wealth to be distributed to those to assets, and it distributes money away from labor and into capital.

I am quoting this not because I disagree with what you said. I thought you summed it up pretty well. But in my mind, that is the fault to the idea and system of capitalism. The system of capitalism creates conditions that are favorable to people who have money compared to people who have no money. And that is obviously a feedback process. For, once I have more money I can spend money to get even more money whereby I spend.

I personally think we have income inequality because of just that. There are individuals who makes hoards of money, only to be able to make hoards more. The money supply is shifting to the person(s) who have the capital to do so with various investments. You can't fault the person, you fault the system. If you want a system of maximized economic growth, you have capitalism. But there are evils too. From obtaining profits regardless of moral consequence to increasing poverty and the conditions that go along with it.

I guess my beef is to blame capitalism where it should be blamed. It is the intrinsic flaw of capitalism that we are seeing economic inequality.

 

[Catawba]

What Causes The Growing Wealth Gap In America?

30 years of trickle down economics policies.

 

[CaptinSarcastic]

I am quoting this not because I disagree with what you said. I thought you summed it up pretty well. But in my mind, that is the fault to the idea and system of capitalism. The system of capitalism creates conditions that are favorable to people who have money compared to people who have no money. And that is obviously a feedback process. For, once I have more money I can spend money to get even more money whereby I spend.

I personally think we have income inequality because of just that. There are individuals who makes hoards of money, only to be able to make hoards more. The money supply is shifting to the person(s) who have the capital to do so with various investments. You can't fault the person, you fault the system. If you want a system of maximized economic growth, you have capitalism. But there are evils too. From obtaining profits regardless of moral consequence to increasing poverty and the conditions that go along with it.

I guess my beef is to blame capitalism where it should be blamed. It is the intrinsic flaw of capitalism that we are seeing economic inequality.

Yes, it is. But it is also the fatal flaw of any system in which power can be accumulated. It is also cultural, systemic, social, and changeable.

Not to you specifically, but generally, forget about politics and ideology for a moment and ask yourself, what really happens when you tax high incomes away?

Do the only people capable of growing an enterprise move to Galt's Gulch? Or do the people who can't abide that get out, to be replaced by other people who can grow enterprises who find the system acceptable?

I ask this because the history is there, we had massively high taxes, and yet people still excelled, more than excelled, they far outpaced current enterprises, but you'd think that in that system only the dumbest of the smart people would bother to try. Instead, they took low incomes, rarely sold anything, paid out profits as higher wages, and the nation prospered. Only when we decided greed is good and created an environment that encouraged people to take as much cash as they possibly old TODAY did we begin to crush the engine of our economy, the middle class consumers.

I am not talking fair, I am not talking rights, I am not talking politics, but consider what it would mean if that kind of policy is the right system for sustainable growth?

 

[Xerographica]

I am quoting this not because I disagree with what you said. I thought you summed it up pretty well. But in my mind, that is the fault to the idea and system of capitalism. The system of capitalism creates conditions that are favorable to people who have money compared to people who have no money. And that is obviously a feedback process. For, once I have more money I can spend money to get even more money whereby I spend.

I personally think we have income inequality because of just that. There are individuals who makes hoards of money, only to be able to make hoards more. The money supply is shifting to the person(s) who have the capital to do so with various investments. You can't fault the person, you fault the system. If you want a system of maximized economic growth, you have capitalism. But there are evils too. From obtaining profits regardless of moral consequence to increasing poverty and the conditions that go along with it.

I guess my beef is to blame capitalism where it should be blamed. It is the intrinsic flaw of capitalism that we are seeing economic inequality.

Did you not read the original post? Maybe this video will help... ...

 

[Xerographica]

Yes, it is. But it is also the fatal flaw of any system in which power can be accumulated. It is also cultural, systemic, social, and changeable.

Not to you specifically, but generally, forget about politics and ideology for a moment and ask yourself, what really happens when you tax high incomes away?

Do the only people capable of growing an enterprise move to Galt's Gulch? Or do the people who can't abide that get out, to be replaced by other people who can grow enterprises who find the system acceptable?

I ask this because the history is there, we had massively high taxes, and yet people still excelled, more than excelled, they far outpaced current enterprises, but you'd think that in that system only the dumbest of the smart people would bother to try. Instead, they took low incomes, rarely sold anything, paid out profits as higher wages, and the nation prospered. Only when we decided greed is good and created an environment that encouraged people to take as much cash as they possibly old TODAY did we begin to crush the engine of our economy, the middle class consumers.

I am not talking fair, I am not talking rights, I am not talking politics, but consider what it would mean if that kind of policy is the right system for sustainable growth?

What you're not talking about is economics. In case you missed it...this is the economics forum. Try again.

 

[Mach]

First, the people this "disparity" is between changes with each gathering of data. Most of us go from the bottom end of the income scale, to somewhere higher on the income scale. We ourselves, over the course of our life, create our own income gap.

We go from snot-nosed fools who barely have the work ethic required to push a broom, to developing real problem solving skills often in a specialized aspect of a particular industry, and we grow year over year in productivity and value to the market.

So what causes wealth disparity?

Such incredible wealth disparity is a direct result of two things:
1. Growing at your job/career
2. Our Market in the U.S. being so incredibly ****ing awesome that there is almost no limit to how much value you can bring to the rest of the nation, and even to global markets.

The idea that it's somehow bad or that it's evil corporations, or trickle down policy, that's 100% absurd bull**** that doesn't even approach the sober, boring reality. The low end of the income scale will always be fairly close to zero, the upward end is ever-increasing as our economy, production know-how, technology, etc., grows. Having an increasing gap means in our case that we have growth. This is good.

 

[What if...?]

You can continue reading here: Omid Malekan

Well those at the top DO pay for elections and lobbyists, so its no surprise the govt does what its sponsors want.

Blaming the "govt" is disingenuous.

Its not "our" govt.

Its THEIR govt.

 

[mbig]

The OP is great if you think wealth disparity started in 2008 and not (modern age), in 1980.

 

[JP Hochbaum]

First, the people this "disparity" is between changes with each gathering of data. Most of us go from the bottom end of the income scale, to somewhere higher on the income scale. We ourselves, over the course of our life, create our own income gap.

We go from snot-nosed fools who barely have the work ethic required to push a broom, to developing real problem solving skills often in a specialized aspect of a particular industry, and we grow year over year in productivity and value to the market.

So what causes wealth disparity?

Such incredible wealth disparity is a direct result of two things:
1. Growing at your job/career
2. Our Market in the U.S. being so incredibly ****ing awesome that there is almost no limit to how much value you can bring to the rest of the nation, and even to global markets.

The idea that it's somehow bad or that it's evil corporations, or trickle down policy, that's 100% absurd bull**** that doesn't even approach the sober, boring reality. The low end of the income scale will always be fairly close to zero, the upward end is ever-increasing as our economy, production know-how, technology, etc., grows. Having an increasing gap means in our case that we have growth. This is good.

Sorry to be so forthright but none of this is true. Yes our incomes grow as we grow, but that has always been the case in US history. It is not a difference in income levels as we grow that is the problem, since that has always existed, but it is labor getting less and less the fruits of their labor. almost all the fruits of our labor are going towards the owners of capital.

 

[CaptinSarcastic]

What you're not talking about is economics. In case you missed it...this is the economics forum. Try again.

Actually it is nothing but economics

 

[Xerographica]

Actually it is nothing but economics

Where was the economics? Where's the utility maximization, scarcity, opportunity cost? Where's the willingness to pay and comparative advantage? Where's the preference revelation problem? Where's the efficient allocation of resources?

 

[Xerographica]

The OP is great if you think wealth disparity started in 2008 and not (modern age), in 1980.

When did globalization really start?

 

[Mach]

Sorry to be so forthright but none of this is true. Yes our incomes grow as we grow, but that has always been the case in US history. It is not a difference in income levels as we grow that is the problem, since that has always existed, but it is labor getting less and less the fruits of their labor. almost all the fruits of our labor are going towards the owners of capital.

Wait, two different things. Let's address the first one. Why is this a "problem"? Please give me some bullet points to back that up. Currently, its simply a statistics. Like the temperature is X, or the net sales is Y. There is no good/bad to draw from it by itself.Additionally, walk me through why labor should be getting more and more expensive on the bottom end.I worked as a retail cashier 20 year ago, a common min wage, entry-level job. I sat up front and rang up purchases.Today, the labor is almost identical in an entry-level cashier job. You sit up front and ring people up. Now why would this need to be a lot more expensive? It hasn't really changed, right? I mean, look at cell phones today vs 20 years ago, they are orders of magnitude better, AND cost less (Wow, market in action!). But this labor you're selling, not the case. What possible reason would there be for that labor to do anything other than remain flat? Better yet, with billions on this planet earning FAR less than even the lowest paid American workers, why should that rate not be DECREASING as a result of globalization?And let's not forget that 20 years ago I would have paid $X for that ****ty cell phone, and paying a similarly scaled amount today I get a LOT more value. That's an INCREASE in what I am getting from this economy. No, it did not come in the form of income, it comes in the form of the standard of living. I -bought slow ass dial-up 20 years ago...today it's 5mb or more for a similar cost. Huge increase in value, are you including that? Add up all of those and you have to wonder why you're implying that this is a problem, or that their "missing out" on an increase in value.

 

[ocean515]

When did globalization really start?

One must remember how much has been invested to teach the gullible the ills of the world started with Reagan.

 

[JP Hochbaum]

Wait, two different things. Let's address the first one. Why is this a "problem"? Please give me some bullet points to back that up. Currently, its simply a statistics. Like the temperature is X, or the net sales is Y. There is no good/bad to draw from it by itself.

MBIG's post right before mine and after your supplied the bullet points you need.

 

[What if...?]

Where was the economics? Where's the utility maximization, scarcity, opportunity cost? Where's the willingness to pay and comparative advantage? Where's the preference revelation problem? Where's the efficient allocation of resources?

You sound like you think economics is a "hard" science.

Hell, the economics "Nobel prize" isn't even a real Nobel.

Its not worth considering, but philosophy and sociology are valid facets as well.

 

[Mach]

MBIG's post right before mine and after your supplied the bullet points you need.

No JP, you will need to make the claim in your own words, lest I debate a picture from MBIG and wonder why I can't pin you on anything in particular. Well, either that or you don't reply...

 

[mbig]

One must remember how much has been invested to teach the gullible the ills of the world started with Reagan.

It's true, Reagan had nothng? to do with it!

But I hope we can Reverse somewhat the Class Warfare Viciously Waged and won by Ronald Reagan-omics.
Who lowered top marginal income tax rates from 70% in 1980 to 28% in 1988.

Including
Tax Reform Act of 1986 - Wikipedia, the free encyclopedia

The top tax rate was lowered from 50% to 28% while the bottom rate was raised from 11% to 15%. Many lower level tax brackets were consolidated, and the upper income level of the bottom rate (married filing jointly) was increased from $5,720/year to $29,750/year. This package ultimately consolidated tax brackets from fifteen levels of income to four levels of income.[1] This would be the Only time in the history of the U.S. income tax (which dates back to the passage of the Revenue Act of 1862) that the top rate was reduced and the bottom rate increased concomitantly. In addition, capital gains faced the same tax rate as ordinary income.
[......]

 

[What if...?]

When did globalization really start?

Not just globalization but technologies like the computer and global telecom that supercharged it.

And from the charts, the "Great Divergence" began in the mid-seventies.

 

[Xerographica]

You sound like you think economics is a "hard" science.

Hell, the economics "Nobel prize" isn't even a real Nobel.

Its not worth considering, but philosophy and sociology are valid facets as well.

You sound like you have no idea what it means for resources to be efficiently allocated.

 

[ocean515]

It's true, Reagan had nothng? to do with it!

But I hope we can Reverse somewhat the Class Warfare Viciously Waged and won by Ronald Reagan-omics.
Who lowered top marginal income tax rates from 70% in 1980 to 28% in 1988.

Including
Tax Reform Act of 1986 - Wikipedia, the free encyclopedia

The top tax rate was lowered from 50% to 28% while the bottom rate was raised from 11% to 15%. Many lower level tax brackets were consolidated, and the upper income level of the bottom rate (married filing jointly) was increased from $5,720/year to $29,750/year. This package ultimately consolidated tax brackets from fifteen levels of income to four levels of income.[1] This would be the Only time in the history of the U.S. income tax (which dates back to the passage of the Revenue Act of 1862) that the top rate was reduced and the bottom rate increased concomitantly. In addition, capital gains faced the same tax rate as ordinary income.
[......]

As you have proven, one must remember how much has been invested to teach the gullible the ills of the world started with Reagan.