ParticleGrl said:
So the top 3% of America's earners aren't rich? What counts as rich then? The top 0.3%? The top .00003%? I could live for more than a decade on 200k. If I made 200k a year, I could easily be a millionaire within a decade without even having to invest wisely.
Yes, I'd say the truly rich probably are something more like to top 0.3% or the top .003%.
Also, if 200k isn't rich, what number do you think counts as poor? 20k a year? 30k a year? 40k a year?
"Poor" is when you flat-out cannot afford the basic essentials, or only can afford them at a very bare minimum.
Reagan's cuts were early in his first term, and the deficit exploded. At no point in Reagan's administration was the deficit lower than under previous presidents. When Clinton raised taxes, he moved us into a budget a surplus.
The deficit exploded due to Reagan's tax cuts and the Federal Reserve fixing inflation. The deficit began shrinking some years later. It stopped when the stock market crashed in 1987. President George H. W. Bush also signed a large tax increase in the hopes of balancing the budget and it did no such thing (I think Congress had promised him they would reduce spending for every dollar of increased revenue, but did not do this).
Bill Clinton's signed a tax increase in 1993, and then in 1994 the control of the Congress moved to the Republicans, and Clinton basically said, "The era of big government is over" and pivoted. The surplus under Clinton I'd say was from a combination of a few things:
1) Remember George H. W. Bush had slashed defense spending because of the Soviet Union ending
2) Clinton's tax increase (with him then not being able to engage in big-government afterwards)
3) The Republicans pushed through welfare reform
4) Bill Clinton completed NAFTA
5) Clinton signed a capital gains tax rate cut, which increased revenues (cutting capital gains taxes will tend to increase revenues in the short-term)
6) There was a major stock market bubble, the Dot Com bubble. The deficit was shrinking big-time at the height of the real-estate bubble under President Bush to, and if it had lasted a few more years, and Bush had been able to remain president a few more years, the budget probably would have been balanced under Bush too.
No tax cut in the history of the United States has raised revenue. The Reagan cuts come closest, but revenue still did not return to trend. If the Laffer curve is valid, the turn around point is higher than tax rates in the US have ever been.
I think it depends. Taxes were slashed in the 1920s and revenues boomed, there was a bubble then too though. Also, the rates had been pretty high from WWI: http://www.cato.org/pub_display.php?pub_id=3015
I think it depends on the tax, how it's cut, and also the rate it was at.
When Clinton raised taxes, guess what- the deficit was reduced.
And when Reagan cut them, it also started reducing itself, just took a couple of years. The deficit was reduced under Clinton because he couldn't engage in big-government the way he had been initially attempting. He did not govern as a big-government Democrat. Also I am not arguing that raising taxes won't increase revenue. But it must be done with control on spending too.
Where are you getting your numbers? It might be true that inherited wealth accounts for only a small fraction of generated wealth, but it does seem to account for a tremendous amount of wealth in group you'd call the "super-rich." While small businesses might be generating lots of wealth, its mostly in the < 200k range Sam Walton's heirs alone fill out a non-trivial percentage of the richest thirty or so people on Earth.
http://blogs.wsj.com/wealth/2008/01/14/the-decline-of-inherited-money/
Sam Walton's heirs I think are an anomoly, because his fortune is fairly new still, and Wal-Mart keeps growing. Most inherited fortunes, over time, dissipate, due to the family growing so large, poor investment decisions, taxes, the family spending it, and inflation.
Most of the Forbes 400 are self-made: http://www.realclearpolitics.com/articles/2007/09/the_forbes_400_as_a_lesson_in.html
Starting a business is a long-shot- most people who start businesses never get to even the 200k mark- it takes both skill and a tremendous amount of luck. Sub-specializing in invasive cardiac surgery will consistently net you 500k-800k a year by your late career. It takes a lot of skill, but far less luck. Further, if you are making 200k-500k, you can invest your money in other people starting businesses, which dramatically increases your odds over those people starting only one business.
Starting a business is definitely a long shot, but it is the best way to get rich. Most of the super-rich folk did not get rich by being a corporate executive, sports athlete, rock star, movie star, or anything like that. It was by starting a business and being successful at it.
Investing in businesses is a very tricky business that, when successful, can be great, but also a major loss of money when they don't work out (as often happens).
Actually, something like 1.5 million, not many millions.
$1.5 million literally at the time or in inflation-adjusted dollars? Because $1.5 million a year in the 1950s would be something like $30 million a year today I'd imagine, or somewhere around that.
Regardless, my point was that looking at the revenue before and after a tax cut without paying attention to the trend in revenue/GDP is silly. The revenue rose consistently in the 1950s because the GDP was exploding. Look at something like this, and fit different growth rates to it:
http://www.multpl.com/us-gdp-inflation-adjusted/
Does it look like the growth trend changes substantially after the 1980 tax cuts? Is there any evidence of a dramatic change in growth from (say) the 70s after those cuts? Not that I can tell.
A booming GDP will definitely increase revenues. I think part of what you are saying has to do with the economy maturing. When an economy is young, it can grow at very high rates (for example the Chinese economy). I
think (but can't find any hard numbers) that the U.S. economy grew at soemthing like 5% a year during the Great Depression for example. 5% would be great right now. The U.S. economy in the 1950s, even though America had been around for over 100 years, was still very young. You had once rural areas now becoming vibrant booming economies, so GDP boomed.
You are correct that the overall rate of growth of the U.S. economy in the 1970s and the 1980s wasn't really different. I would imagine this just being that the U.S. economy in the 1970s was a bit younger than in the 1980s, so even though a time of high unemployment and high inflation, it still grew at a rate similar to that of the 1980s (although I don't know for sure if that's why). The 1980s was a time of low unemployment, low inflation, and a tremendous amount of wealth creation. Also remember that part of the 1980s included the Volcker Recession, created by Paul Volcker at the Federal Reserve from 1981 to 1982 by hiking interest rates. If you want to look at what could be called the "Reagan economy," it probably starts around 1983-ish, which was pretty positive from then on. If you calculate the average GDP growth rate during the 1980s, it gets a major denting when you include the first two to three years due to the recession.
BTW, I am not saying the economy of the 80s was solely due to Reagan. There were multiple factors: the start of the utilization of high-yield debt by Michael Milken (junk bonds) which was used to finance a lot of new companies, the invention of the leveraged buyout (which helped to streamline a lot of inefficient companies), Reagan's tax cuts which led to more money in the stock and bond markets, and deregulation in certain industries (part of which was also started under Carter and Ford). Also price controls on gasoline were ended.
Overall it seems we had a high-yield debt (or junk bond) bubble in the 1980s, then a Dot Com bubble in the 1990s, then a real-estate and credit bubble in the 2000s. I wonder if we will have another bubble between 2010 to 2020?
