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News Distribution of wealth

  1. Sep 25, 2009 #1
    This is somewhat of a spinoff from another thread about Fox News in which the discussion turned to policies that are perceived as “pro-rich” or “pro-working class and poor”.

    Now it is well known that in the U.S. a mere 5% of the population holds the majority of the wealth. The majority of Americans struggle to pay their bills. Much of the wealth that the top 5% receives comes from the ‘struggling masses’. I will use this story as a backdrop:http://www.ft.com/cms/s/0/43d18c68-851d-11de-9a64-00144feabdc0.html"

    This example is only in reference to overdraft fees, but lower income people are also continually hit with late fees, interest rate penalties, and they generally pay much higher interest rates for everything they buy on credit than do those who are better off financially. Often they must resort to check-cashing/payday-loan places in order to pay bills to avoid discontinued service or eviction and the charges at these places are insane.

    Pay and compensation is generally very lopsided with top execs making up to thousands of times more than lower level management as well.

    Given the uneven distribution of wealth, I believe that the re-distribution of wealth through mechanisms such as progressive tax codes, higher minimum wages, universal healthcare, tuition assistance, etc. (and the like) are not only warranted, but necessary for a better, more fair society in which everyone is better off, IMO.

    But what do I know, I’m just a “bleeding-heart liberal”. Flame on…:wink:
    Last edited by a moderator: Apr 24, 2017
  2. jcsd
  3. Sep 25, 2009 #2
    I made a somewhat similar spin-off thread while you posted yours, but I suppose they are enough different to exist on their own. So anyway:
    We could also reign in the money supply to increase the value of each dollar, and let the market adjust from there. Not being a "bleeding-heart liberal" or a "cutthroat conservative", I think a combination of the two would work best in the long run.
  4. Sep 25, 2009 #3
    It does sound like a simple solution, but it wont work anywhere but on paper. If you raise the tax on the rich and companies, they will just raise their prices and then when the struggling poor go to buy products, the pay raise you gave the poor just goes right back to the rich. If you took all the money from the rich and gave it to the poor, within a short amount of time the rich would have it all back. Why is this? Because being rich and being poor isnt caused by money, its caused by a difference in education regarding money. The rich understand how to use money to their advantage, the poor allow themselves to get used by money to their disadvantage.
    A fair society is one that allows some to steal from others in the society?
    Since most in this forum are from academia let me try this analogy: Do all people graduating in your class get the same grades? Why is that? Would you think it fair to have your A reduced to a C so that a classmate can move from an F to a C? Would you still work as hard for an A if you knew it could be stolen by the guy who spent all his free time wastefully, while you sacrificed and stayed home to study everynight?

    All the above statements by me are just my opinion, even if I choose to attach links that agree with me, it is still just my opinion.
    Last edited by a moderator: Apr 24, 2017
  5. Sep 25, 2009 #4
    That would give the not rich a better opportunity to offer other products which undercut those offered by the rich.
    A fair society would be one that doesn't allow the rich to steal from the rest of us under the guise of being "too big to fail".
  6. Sep 25, 2009 #5
    I support helping students and providing them more opportunities so that their skills are good and they are strong in global dynamic market.

    1) But, people who don't deserve wealth shouldn't get it.
    2) People who deserve, should get it

    Universal health care is neither simple nor easy to have.
    Higher minimum wage wouldn't help much and it might raise the unemployment.
  7. Sep 25, 2009 #6
    I am all for that, however good luck getting most people to agree. It seems to me for some reason people fight tooth and nail to keep the inflated dollars, it just happened before the bailout I heard "we have to do this thing to save us from deflation" on a few nescasts. IMO deflation is the best thing that could happen in an inflated market. If tommorrow the government said the dollar was worth 10x what it was today($1000000 becomes $100000), even though the dollar would be stronger and even though they still had the same buying power(in country and more buying power outside), since everyone elses dollars changed the same, I think you would hear very loud protests. $100000 just doesnt look as good as $1000000, even if they are worth the same. That being said it is a great idea IMHO.

    the preceeding was just my opinion.
  8. Sep 25, 2009 #7


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    Deflation is scary. If the value of the dollar tomorrow was worth 10 times what it is today, EVERYBODY who has invested money in anything would go bankrupt. People who socked away all their money in cash would gain a 10x monetary advantage on people who spent their money on, you know, things. And by things I don't mean 60" TVs and new cars, I mean investing in companies, spending money to improve a company you own, even local governments spending on infrastructure improvements. With deflation, it becomes more fiscally sensible to keep all your assets in cash rather than invest in things, and that means the economy stops.
  9. Sep 25, 2009 #8
  10. Sep 25, 2009 #9

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    True, but misleading. The people in percentiles 2-5 look a lot more like the people in percentiles 5-10 than in the top 1%. The people in the 5-10% range own 20% of the wealth, or 4x the average. The people in the 2-5% range own about 15% of the wealth, or about 5x the average. The people in the top 1% own about 35% of the wealth, or about 35x the average.

    If you look at the 30th (or so) to 98th percentile, you'll see a strong correlation of wealth with age. People work and save and thereby become wealthier over time.

    However, you might want to rethink your solution. I remember a time not long ago when people were making the same argument, only about mortgages. It was considered unfair that people who already had money could get mortgages, but that poor people were unable to get them, and thus couldn't benefit from owning a house - an asset that was practically guaranteed to appreciate. So, to solve this problem, there was an invention called "subprime lending" promoted by the Community Reinvestment Act. And while the intent was good, the outcome was not.
  11. Sep 25, 2009 #10
    Why would they go bankrupt, their money is the exact same porportion, just a smaller number? If your stock was worth 10 dollars before, it would be worth a dollar(that in reality has the same value as the 10 did yesterday). Instead of the dollar getting stronger everyday, you prefer it getting weaker with inflation? So the money you do put away constantly shrinks in value.

  12. Sep 26, 2009 #11
    I didn't suggest moving the decimal point, and that doesn't rightly change anything anyway.
    I'm sure I can, but I'd need you to clarify your dispute with my argument before I'd know were to start.
    Well that sure explains how mom and pop operations keep running corporations out of town.
    I do consider this a problem too.
    If you do it both ways, it balances out.
  13. Sep 26, 2009 #12
    Now here's something I agree with. Except it would be more accurate to say the corporations "received stolen goods", since it was the government that stole from the rest of us for them.
  14. Sep 26, 2009 #13


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    Define "stealing".
  15. Sep 26, 2009 #14


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    That would be true if the government literally took 90% of everyone's money and burned it. If the value of everything was just cut by a factor of 10, imagine I spent 100 bucks on stock. That stock is now worth 10 bucks. But I could have just held onto my money, and still have 100 dollars!

    To extend this to a more realistic scenario, I have two choices:

    1) Invest my money. I invest in something worth $100. The value of my investment now begins to decrease naturally. In a year maybe that thing is worth $95 or so.. By investing my money I lose money

    2) I hold onto my cash. I have $100 in the bank. After waiting a year, I can invest $95 in that same thing, and save myself 5 bucks. Alternatively, I would just never invest in anything because by definition of deflation, things tend to decrease in value

    By not investing I make more money than I do by investing. With inflation, investments will naturally grow at the rate of inflation on average, which means that holding on to your cash isn't the better default position. With deflation, unless the thing I invest in grows faster than the rate of deflation, I lose money by investing in it
  16. Sep 26, 2009 #15


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    Please elaborate on that claim and cite a source.
    Lower income people also buy more lottery tickets ( http://www.tucsoncitizen.com/daily/local/8477.php ). Are these self-destructive actionsn an effect or cause of their poverty?
    We have a progressive tax code.
    Well, could you discuss what effects these policies are typically known to have on economic growth? I'll give you a hint: forced redistribution doesn't help economic growth...
  17. Sep 26, 2009 #16


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    You're saying that "not rich" people could have enough money to start companies that are more efficient than the big companies? That makes no sense.
    Huh? Can you provide an example of that? One of the biggest complaints against big chain stores like WalMart and Home Depot is that they drive the mom-and-pop stores out of business via their larger inventories and lower prices.
    That is a separate issue entirely and I agree that a capitalist society should do a better job of allowing failure....hey wait, maybe it isn't a different topic: you're saying you don't want to allow failure in people, just in companies. Isn't that a contradiction? More to the point: doesn't the same psychology you are railing against in companies exist in people too? That psychology is the essence of what drives people to succeed in capitalism and why purer forms of socialism have led to economic collapse.
    Last edited: Sep 26, 2009
  18. Sep 26, 2009 #17


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    Perhaps an advocate of redistribution of wealth could provide an opinion on exactly how far this redistribution should go...? How progressive should our tax system be? For example, should everyone below the poverty line pay no taxes? How about having the top half pay 90% of the taxes?

    Otherwise, this is just a useless hand-waving exercise, as we already live in a system where wealth is redistributed via a progressive income tax and other methods.
    Last edited: Sep 26, 2009
  19. Sep 26, 2009 #18
    I'd like to expand the scope of this challenge.

    The concept of private property and ownership seem to be left out of the debate. Who do the "redistributors" think owns the "big corporations"? The shareholders need to determine compensation levels of executives - not Government.

    Anyone that owns a 401K should understand they are the "owners" of the "big corporations" the investment managers choose. The same is true of many insurance policies - look up the types/classifications of insurance companies.

    Last, (unless you are a degenerate gambler) the incentive to take risk is profit. If you eliminate the potential for profit, there is no incentive to create jobs and invest capital.

    The only reason to open a business is to earn sustained profits. Nobody (except politicians and charities) risks capital to create employment.
  20. Sep 26, 2009 #19


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    People here like anecdotes so much, so I'll post a relevant one: My last job was working for a small engineering company. When I joined the company, it (meaning the sole proprietor owner) was just emerging from bankrupcy and I was employee #3 (working in his spare bedroom), down from around 20. Over the next 6 years, the company grew to 9, got a real office, and the boss made $250k-$300k a year which made him "rich" (the lower limit of the top 5% is $180k). But being unable to plan financially for a downturn and being in a particularly volatile industry when a downturn happens, now he's now back down to 2 employees and sub-letting that office space.

    Point being? The personal risk a small business owner takes in starting a business is enormous. If the potential to make significantly more money as a small business owner than as an employee of another company didn't exist, people wouldn't do it.
  21. Sep 26, 2009 #20
    any one working is paying a 15% SS tax plus any income tax
    but a so called investor earning capital gains pays only a flat 15% total tax
    and also gets a big break on dividends and can use tax credits and other write offs
    few of those at the very top pay progressive tax rates as that is only for EARNED INCOME
    quote W Buffet '' I pay less tax then my office help''

    unEARNED income is where the real money is made and that tax is regressive not progressive

    the BIG LIE the neo-conned love to tell is the rich are over taxed
    BS only a few foolish rich really pay the top rates mostly sports movie or rock stars
    who have big earned income that they can't hide
    most biz CEO types get options far bigger then their base earned income
    and use the many credits deductions and loop holes to avoid much of their taxes
    and have the CORPs pay for the jets sky boxes travel costs limos ect that are untaxed to them and a write off to the CORP for double tax avoidance both to their personal taxes
    and the CORPs taxes
  22. Sep 26, 2009 #21
    Again, the shareholders (owners) of the corporation must believe these CEO's have EARNED their compensation packages. Otherwise, they would voice their disapproval or sell their shares.

    As for the sky boxes, jet travel, hotels, limos, etc., how many people make their livings from these activities? Don't those companies employ people and also pay taxes?

    Corporate earnings (cash flow in excess of expenses and debt service) are typically either re-invested, paid in dividends to shareholders, paid in bonus/incentives, retained in the form of cash reserves or liquid investments, or paid to the Government in the form of taxes.

    As for Warren Buffet, do you have ANY idea as to how many companies he owns or the size of his annual payroll? The list is too long to post. Here is a good starting point to do your investigation.
  23. Sep 26, 2009 #22


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    That's the point Buffet was making. He makes oodles of cash but pays very little in taxes because of all the loopholes available to him

    Here's an article about it
  24. Sep 26, 2009 #23
    As do I.

    I agree with this as well, but hard working people also deserve a living wage.

    No it is not, but necessary nonetheless. It will not be long before healthcare costs result in lost jobs and reduced salaries....it's already to the point where getting a raise is a rarity for many.

    I bet anyone making at or close to minimum would disagree that it wouldn't help much.
  25. Sep 26, 2009 #24
    Of course not, but I believe that people that work hard and do their homework should at least get a C. :smile:
  26. Sep 26, 2009 #25
    It makes sense in the context of "If you raise the tax on the rich and companies, they will just raise their prices" which I was responding to, and you don't have such a broad definition of "rich" as to include with anyone the money or credit to start a company with.
    I was making that exact point with sarcasm, in response to the claim "As I see it the not rich can already undercut the wealthy easily, since they dont have near the overhead the rich do."
    I'm saying "If you do it both ways, it balances out." In other words, I'd have preferred to not to do either, but I notice one being done more than the other, and hence am looking for balance though proposing the contrary.
    I didn't intend to suggest anything psychological here, so I'm at a loss as to what you are referring to.
    Exactly, I'm in this boat too, though not nearly to the extent Buffet is. Regardless, I don't see anything fair about working people being required to pay a higher percentage of their income in taxes than me, and am at a loss as to why so many working people defend it.
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