The Middle Class in America Is Radically Shrinking.

[Smoot Point Really]

No. That is certainly not the proposed solution for this by anyone that isn't creating a straw man.

Communism isn't about taxes it's about control and power. Like I said, US history at a time that most would consider far less "socialist" than today had tax brackets that went as high as 90%. Since Reagan enlightened us all with trickle down nonsense... there is no question who benefited and how salaries changed. Learn from history, don't ignore it.

Obviously you haven't read the communist manifesto... Section 2 on Proletariats and Communists is recommended reading on this topic. Again... You brought up communism... You were trying to make the point that I am ignorant on the subject (though I was talking more tongue in cheek about how socialism doesn't cure this problem we are debating). However, you are truly the ignorant one here.

[Duncan]

Since Reagan enlightened us all with trickle down nonsense...

According to President John F. Kennedy:

Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

[Destino]

Obviously you haven't read the communist manifesto... Section 2 on Proletariats and Communists is recommended reading on this topic. Again... You brought up communism... You were trying to make the point that I am ignorant on the subject (though I was talking more tongue in cheek about how socialism doesn't cure this problem we are debating). However, you are truly the ignorant one here.

Taxation is part of capitalism and communism. Are you saying that because communists believe in taxing the rich that it is exclusively communist to do so?

Binary thinking won't work on the above question. Good luck.

[NoCalMike]

In today's american economy, everything is based on people buying stuff. We don't make stuff anymore, we just sell all that stuff at retail stores. We are becoming a service & retail society, which by nature means that salaries/wages will go down for the workers, while the fruit of their labor will result in a huge profit margin for those in charge.

Credit is has it's good value which you might need in an emergency situation, like a car repair, or to help make a payment here and there when you fall behind, however in today's society, with wages falling credit has become a leech of people's backs.

When my father was growing up, Necessities and Luxuries could be afforded his father's on his lone salary.

The point of this is that productivity is rising, GDP is rising, all out the worker's output seems to be rising, yet what they are getting back seems to be decreasing. Yet the people at the top are finding a way to use the rising productivity to consolidate more wealth. This is a direct result of the top tax rates being decreased because once that happened, there was an incentive to keep that money and put it in a bank somewhere. When that money was being taxed at the high rates, the incentive was truly to put it back into the business and the workers.

Statistics are already showing that companies are profiting again, profits are up all over the place with a lot of these big corporations, but they are refusing to hire because they found they can just get by, with telling their workers to continue doing the job of two to three people, the same line they were given when the economy was falling, "oh just work with us guys, bad economic times and all *wink wink* "

[Destino]

According to President John F. Kennedy:

Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

Something said at a time of 94% tax rates. In that situation I'd agree with him.

[Smoot Point Really]

Repost... Ignore

[Smoot Point Really]

Taxation is part of capitalism and communism. Are you saying that because communists believe in taxing the rich that it is exclusively communist to do so?

Binary thinking won't work on the above question. Good luck.

Taxation of one specific group in order to create common services for all is specific to Communism of the two... It was not that difficult. Did you at least wiki the CM? You really shouldn't talk about other people being ignorant. Your statements are lacking here.

[Willy Wonka]

Taxation is part of capitalism

No it isn't.

[Hubbs]

The point of this is that productivity is rising, GDP is rising, all out the worker's output seems to be rising, yet what they are getting back seems to be decreasing. Yet the people at the top are finding a way to use the rising productivity to consolidate more wealth. This is a direct result of the top tax rates being decreased because once that happened, there was an incentive to keep that money and put it in a bank somewhere. When that money was being taxed at the high rates, the incentive was truly to put it back into the business and the workers.

I wouldn't say it's quite as cut and dry as you describe, but I do think that we've created some perverse incentives with the tax code. That's why, in Hubbs World, the first step of tax code simplification would be the elimination of loopholes that allow personal perks for executives to be labeled as "business" expenses, followed by the immediate implementation of significantly higher income taxes on the wealthy and the outright elimination of income taxes on businesses. Go ahead and find the shareholders who would vote for excessive executive compensation under that setup.

(I'm probably the only libertarian you'll ever find who would advocate higher income taxes on the wealthy. The argument is always that Richie Rich can create more jobs than Paulie Poor. Which is true. And under the tax structure I just outlined, Richie can protect every last nickel of his money if he pumps it into one of his many businesses. But if Richie simply wants to spend his money, then he's no longer allocating his resources any more efficiently than Paulie. In fact, it's quite likely that he's allocating them less efficiently, because wealthy people have the luxury of doing just that. Paulie has to stretch every dollar as far as possible. Richie can spend $100,000 on a toilet made out of solid gold. When it comes to simply spending money, lower income actually means greater efficiency.)

[Willy Wonka]

(I'm probably the only libertarian you'll ever find who would advocate higher income taxes on the wealthy. The argument is always that Richie Rich can create more jobs than Paulie Poor. Which is true. And under the tax structure I just outlined, Richie can protect every last nickel of his money if he pumps it into one of his many businesses. But if Richie simply wants to spend his money, then he's no longer allocating his resources any more efficiently than Paulie. In fact, it's quite likely that he's allocating them less efficiently, because wealthy people have the luxury of doing just that. Paulie has to stretch every dollar as far as possible. Richie can spend $100,000 on a toilet made out of solid gold. When it comes to simply spending money, lower income actually means greater efficiency.)

What difference does it make where Richie spends his money? No matter where he spends it, he is supporting the economy. Whether he spends it on a Ferrari or a years worth of lollipops, he's helping to keep someone in business.

Not to mention, if we are talking about a business owner, a lot of the profit will be reinvested right back into the company.

[Hubbs]

What difference does it make where Richie spends his money? No matter where he spends it, he is supporting the economy. Whether he spends it on a Ferrari or a years worth of lollipops, he's helping to keep someone in business.

Not to mention, if we are talking about a business owner, a lot of the profit will be reinvested right back into the company.

There's something politically ironic in what you just said, so I'll first add a disclaimer by stating that I'm not familiar enough with you to know your political persuasions, so I'm not speaking specifically about you when I point out the irony. That said, given the two dominant schools of political thought in this country, I think there's a benefit to noting that, if you believe that spending is spending is spending is spending, then you have to believe that there is no economic difference between the government paying someone $10,000 to dig a ditch and fill it back up and Richie Rich paying the world's only golden toilet maker $10,000 for one of his products. Spending is spending. Moreover, you also have to believe that there is no difference between either of those scenarios and Richie deciding to use that same $10,000 as part of the necessary start-up funding for a small business in a very lucrative industry. Spending is spending... is spending.

If any of that gave you pause, well, that's because it should.

To break this down you have to apply a concept called "opportunity cost," which is explained in detail here if you'd like to take a look. In layman's terms, opportunity cost is basically a comparison of the different ways any given amount of money can be used. The fundamental mistake made in advocating either government ditch-digging or Richie's golden toilet is the assumption that those types of spending exist in a vacuum. "Even if Richie buys his toilet, the toilet maker is still making money, which he'll eventually use to buy whatever it is that golden toilet makers buy," says the Spending Is Spending crowd, which can be abbreviated to SIS, allowing me to refer to the members of that crowd as "Sissies" from here on out for no particularly good reason other than the fact that it's stupidly amusing to me. Anyway, the thought process that allows the Sissies to reach their conclusion is admittedly obvious and not entirely incorrect, which is why I used to believe it myself. First, the Sissies imagine what happens when Richie buys his toilet. Then, the Sissies imagine what happens if Richie uses his cash in some way that can't be defined as "spending," like, I don't know, dumping it into a big hole in his backyard and setting it on fire. Finally, the Sissies imagine the difference between the results of those two actions, and, as anyone would do, conclude that even spending money on a golden toilet supports the economy. Spending Is Spending.

The very, very attractive part of that logic is that it's not actually wrong in a very technical sense. Richie buying a golden toilet really is better for the economy than Richie dumping his money into a hole and setting it on fire. The flaw lies in the second option. If Richie is somehow prevented from buying his toilet, the odds of him grabbing a matchbook and heading for the hole in his backyard are very slim. In fact, I'd be willing to bet $10,000 of my own dollars that he would do something with his money that didn't involve him turning into the Joker and dousing it in lighter fluid. This is where opportunity cost comes in. The choice is never between a golden toilet and absolutely nothing. It's between a golden toilet and something else.

So what's something else? Let's say Richie simply wanted to save his money. The Sissies would immediately yell "Aha!" and point out that if Richie saves his money, by definition, he's not spending it, and this is therefore awful news. But Richie, being good with numbers, is unlikely to save his money by simply putting it in his backyard hole and not setting it on fire. He'd be earning exactly 0% on his "deposit" by doing that. Even putting it into a savings account at today's incredibly low rates would make more sense, because earning 1% is infinitely more profitable than earning 0%. (Really, infinitely. Try dividing by zero if you don't believe me.) And contrary to the kind of bank depicted in most cartoons, money in a savings account doesn't actually sit in a vault until Richie decides to withdraw. The bank puts that money to use, lending it to someone who wants to buy a house, or to an entrepreneur, or to Big Company, Inc. by buying one of Big Company's bonds. Whatever the loan, here's the most important fact: Despite recent events, banks are generally not in the business of losing money. They loan it out with the expectation of getting more in return. This is inherently conducive to growth, and also holds true if Richie decides to be a little bit riskier with his money and put it into a mutual fund, or buy stocks, or even pay off some of his Double Secret Platinum American Express. The money goes someplace that will be investing it with the expectation of profitable returns. And since banks and other financial institutions lend out more than $10 for every $1 they actually have (which can cause its own problems, but that's a discussion for another thread), saving $10,000 allows for over $100,000 in spend-tastic loans to be given out. By saving, Richie actually facilitates someone else's spending.

Well, the same holds true with the golden toilet maker, say the Sissies. Richie is facilitating someone else's spending. And again, this is technically true. However, if Richie is actually facilitating spending by saving, then we're back to deciding if it matters what $10,000 is spent on. To make this quick, we'll quickly turn to the government and pretend that it's debating between spending $10,000 on ditch-digging/ditch-filling and spending $10,000 on a highway. (This is obviously the world's cheapest highway, but that doesn't matter to illustrate the point.) What does it have at the end of either endeavor? At the end of the ditch project, the government has paid its workers $10,000... and has achieved nothing else. At the end of the highway project, the government has paid its workers $10,000 and it also has a highway, which has great economic value on its own. It's incredibly difficult to argue that a highway is no more valuable than nothing. If the Sissies would like to do that, I'll happily sell them every last bit of nothing I own at bargain-basement prices. This is the essence of opportunity cost. Much in the same way, when $10,000 goes into the golden toilet industry, what you get beyond the things that come from spending $10,000 anywhere - like paychecks for employees - is golden toilets. And never has the phrase been uttered, "Golden toilets are the key to a brighter economic future."

A savings account isn't a backyard hole. A highway isn't a short-lived ditch. A golden toilet isn't a factory. And spending is most certainly not spending.

Now go tell these people what they should be doing with their money:

JnX-D4kkPOQ

[Dan_Hater]

Honestly, I don't think anything caused this. If the middleclass is shrinking it's because the very same people living paycheck to paycheck don't know what a checkbook is and how to manage their money vs tempation/impulse spending.

Greed.

[Destino]

Taxation of one specific group in order to create common services for all is specific to Communism of the two... It was not that difficult. Did you at least wiki the CM? You really shouldn't talk about other people being ignorant. Your statements are lacking here.

And where does this point of yours happen to be true? In the US? Not historically unless you feel that the US from 1930-1980 was communist when tax rates were high and not TODAY where the tax rates are lower but they are higher than the rest. Certainly not in Europe where their tax rates are by our standards insane.

Did you want to turn a discussion on reality into an ideological debate? That's not happening.

No it isn't.

As practiced it absolutely has been. Regulation, another thing absent pure ideological capitalism, have also proven to be the only way for capitalism to work in a sustainable manner.

[gbear]

Hubbs,

Your arguement would work better if banks were giving anything remotely like a good rate of return these days. I think part of the problem is the banks aren't seeing investments which will make money on the 10k you so generously let them use for anywhere from 0.1% to 1% in your savings account.

Why aren't there things in which for them to invest? I've heard it said one of the best ways to imagine markets is a heard looking to graze. If somebody says "my grass is yummy" then the market moves that way. If the grass is yummy and nutriciuos, the populaiton of the herd grows. It all starts because some few decided the grass was yummier here than the old spot.

Now if too many starting eating at the same spot, the competition for each new blade of grass is intense. Soon, it's not really the best place any more, and the herd needs some body to go find new pastures.

What I think is happening is our herd now looks at every new pasture and imagines lions waiting to slaughter them on arrival after they cross croc river to get there. As we become risk averse, we are stuck eating the ever more strained fields in which we started.

The spending of money, even on the golden toilet, is sending some sap out there looking for the next market. I agree sending somebody out into the desert may not be the best place to send them, and surely the field across the bridge may be better (your roads example). The important thing is to s(p)end. The money must flow, and right now the banks are an impediment not an instrament to money moving. If one believes that, then one should look at savings rates and do what one can to put money where it will be spent again.

[PeterMP]

According to President John F. Kennedy:

Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

What was the tax rate when he said that?

Nobody (with a brain) would argue that is true at all tax rates?

Taking the tax rate to 0% is unlikely to produce more revenue.

EVEN people that talk about Reagan and cutting taxes are making stuff up. The fact of the matter is NOBODY knows what Reagan would think would be the proper course of action w/ this economy at the current tax rates.

[PeterMP]

For the people claiming that the middle class isn't really shrinking and that they are just spending more money on more stuff, I don't know what to say other than you're flat out wrong.

Measures of income show clear differences in expansion of INCOME, which is independent of how you spend money, with the rich getting richer and the middle class income essentially a flat line (and as there is reguallarly positive inflation that means every year they have less real money).

Much of the middle class might not be helping themselves with their spending habits, but there income is really shrinking.

[PeterMP]

Middle class Americans, before the explosive rise in student loans, which led to college costs going up, could afford to pay for college.

30 years ago, you would work three jobs just to put yourself through college (that's how I did it).

Today, students take out student loans and try to live off of them too - with no job(s). After graduation, some wonder why they have so much debt and hope it will magically disappear.

As somebody that has been on more than one committee to look at this I just want to say that REAL non-personal related costs to universities have increased over the last 50 years.

Three big issues have been the rise in the need for insurance, as related to the rise in law suits, the increase in the need of campus security with increases in campus/college age crime, and staying current with technology.

Other than through casual associations it is hard to actually look at the data and say that the cost of tuition is caused by increase avalibility of student loans and not real costs to universities.

(Though admittedly there has been some expansion of the university buracracy, but even much of that is about creating processes related to legal protection related to law suits, dealing with campus crime and increasing technology needs.)

[pointyfootball]

All of those stats might be true, but would the same have been said 10 years ago? We've essentially went/are going through the biggest financial disaster since I've been alive, so of course #s are going to be grim.

I struggle with a lot of those stats, especially regarding saving for retirement and living paycheck-to-paycheck. There is NO excuse, IMHO, for the majority of Americans to not be putting something away for retirement, even if only $50/month. It's a matter of choice and willpower for most Americans. Yes there are people who really can not save anything , but I believe those to be a minority rather than the majority.

[Forehead]

61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.

Serious question. My wife and I put 10% of our income into retirement plans, but after that...we don't save much money at the present time, after bills and the occasional night out. Does this count as living paycheck to paycheck, or is that only applicable if you don't save any money at all, retirement or otherwise?

[techboy]

All of those stats might be true

For what it's worth, they're not. I've been suspicious of this rather strident and poorly (not at all, really) sourced rant from the beginning.

I happened to come across Wealth, Income, and Power, which has the same themes, but actually bothers to use real data, and it would appear that the blog post in the original post is unreliable.

The number that stood out to me as being ridiculous on my first read, for instance, was the very first claim that:

83 percent of all U.S. stocks are in the hands of 1 percent of the people.

which seemed impossible given the rise of 401(k)s (often in replacement of traditional pensions, which could actually been seen as another blow to the "middle class").

The more reliable data in the article I linked shows that this number is not 83%, but 38.3%. I suppose that could just be a typo, where he rounded to 38%, then reversed the numbers.

Even if this is so, no sourcing plus bad editing makes for a lousy article (even in the best of cases), and hardly a reliable springboard for discussion.

[Henry]

Perhaps we start with getting people back to work?...aside from for the govt:silly:

http://money.cnn.com/2010/07/23/news/economy/white_house_budget_review/

White House: Unemployment at 9% until 2012

Refresh my memory. What was the unemployment rate in the 70s?

[Kilmer17]

For what it's worth, they're not. I've been suspicious of this rather strident and poorly (not at all, really) sourced rant from the beginning.

I happened to come across Wealth, Income, and Power, which has the same themes, but actually bothers to use real data, and it would appear that the blog post in the original post is unreliable.

The number that stood out to me as being ridiculous on my first read, for instance, was the very first claim that:

which seemed impossible given the rise of 401(k)s (often in replacement of traditional pensions, which could actually been seen as another blow to the "middle class").

The more reliable data in the article I linked shows that this number is not 83%, but 38.3%. I suppose that could just be a typo, where he rounded to 38%, then reversed the numbers.

Even if this is so, no sourcing plus bad editing makes for a lousy article (even in the best of cases), and hardly a reliable springboard for discussion.

It's a classic logic fallacy.

Im sure that 83 percent of stock issued through a broker (ie not through your company 401k or mutual funds) are owned by 1 percent.

Im also sure that that the percent of TOTAL stocks owned in those sort of accounts is less than 10 percent of the total stocks owned.

[techboy]

It's a classic logic fallacy.

Im sure that 83 percent of stock issued through a broker (ie not through your company 401k or mutual funds) are owned by 1 percent.

Im also sure that that the percent of TOTAL stocks owned in those sort of accounts is less than 10 percent of the total stocks owned.

Maybe, but I think it's also plausible that he meant to write "38%" (though that doesn't sound nearly as devastating), and had a typo,

Either way, I can't trust that article.

[Henry]

Maybe, but I think it's also plausible that he meant to write "38%" (though that doesn't sound nearly as devastating), and had a typo,

Either way, I can't trust that article.

Yeah. My guess is someone didn't fact-check properly.

In any case the result is the same in that the article is not reliable.

Though the thread has been interesting.

[twa]

Refresh my memory. What was the unemployment rate in the 70s?

http://www.tableausoftware.com/blog/60-years-unemployment

60 Years of Unemployment