Trickle Down? Pew Center on Wealth Gap and Ethnicity

Discussion in 'Business & Economics' started by Tiassa, Jul 26, 2011.

  1. Tiassa Let us not launch the boat ... Valued Senior Member

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    The Pew Research Center on the wealth gap:

    The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of newly available government data from 2009.

    These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009.


    (Kochhar et al.)

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    Some would suggest this is the predictable outcome of trickle down economic theory. So ... what went wrong?
    ____________________

    Notes:

    Kochhar, Rakesh, Richard Fry and Paul Taylor. "Wealth Gaps Rise to Record Highs Between Whites, Blacks, Hispanics". Pew Research Center. July 26, 2011. PewSocialTrends.org. July 26, 2011. http://pewsocialtrends.org/2011/07/...record-highs-between-whites-blacks-hispanics/
     
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  3. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    One factor has always been wrong: The minorities you name typically grew up in poor neighborhoods where the US's local funding of school assured them poor educational opportunities. (They needed the best to even come out even as typically their parents were not able to supplement learning at home as in most middle class kids enjoy - often not even a single book in the home.)

    Once they left school (note I did not say graduated, as many don't) they found an economy in which they were "the last hired and the first fired." That too is not a recent development or due solely to trickle down, but became worse under GWB as it did for the middle class too, with the decrease in real purchasing power of salaries and the increase of "trickle down."

    Yes, an increase of trickle down. Trickle down refers mainly to the fund in excess of needs society gives to it more wealthy members. (Those that barely can meet the basic needs have nothing left over to "trickle down" and their percent of the population increased under GWB.) GWB's tax cuts for the already wealthy is why trickle down increased during his administration. They already had funds far in excess of their needs so 100% of the funds returned to them in reduced taxation were available for trickle down.

    The trouble with the "trickle down" idea is no one is specifying WHERE the trickling down funds go / are productively applied. When there is a little left over funds in the middle class, typically they are applied / invested in the local economy. For example someone unhappy in his job with a few year of saving may open his own business, etc.

    When the very wealthy have funds to trickle down, they have a global reach - they can and do apply / invest globally. They have consultants, lawyers and investment advisers. For example, Warren Buffett's advisers told him that Chinese were growing wealthier, would soon be trading in their bicycles for cars. His lawyers showed how he could best assure that any investment he made in China would be legally protected and welcomed by the government, etc. So Warren's tax reductions trickled down to China - he helped BYD motors expand and now owns 10+% of it. He, and many others benefited by GWB's tax reductions made a lot of new jobs in China (and other Asian countries with GDP growth rates more than twice those of the US).

    This tax policy of GWB is a large part of why China is growing so much faster and IMHO the main cause of the current economic problems: (1) you can reduce Joe American's real salaries in an economy where it is 2/3 based on his buying. (2) You cannot fund off budget two wars and used their production demands to replace Joe's buying and thus hide economic the effects of decreasing salaries. (3)You cannot build more modern factories in foreign lands that also have much lower wages with trickle down funds as that makes it impossible for older US factories to compete - closes them or at least forces the export of jobs with import of the sub components the factory needs. (During GWB's 8 years the US need to produce 22 million new jobs, just to stay even with the growing labor supply - GWB made 4 million and handed Obama an 18 million job deficit to try to climb out of (as well as GWB's second recession, which is still ongoing). (4) You cannot reduce the tax rates of the already wealthy without either increasing the taxes on the middle class OR borrowing a lot of money - the second was path chosen as the first cost votes.

    For these four main reasons and several lesser ones, especially lack of enforcement of existing SEC regulations, etc., I was able to confidently forecast that a run on the dollar would come by, or before, Halloween 2014 while GWB still had about two years left as POTUS. That run will, I also noted, convert into the world's worst and longest lasting depression in less than one year after the run destroys the value of the dollar; however, China foresees this too and is converting fast as it can to a domestic based economy with exports mainly to other Asian nations so they will escape the worst of the depression, as will some of their suppliers like Brazil and Australia, but they will become "economic colonies" of Asia, especially China, in the process.

    GWB's trickle down ideas (with no control on where the funds trickled down) had a major role, as outlined above, in causing this coming disaster. This combined with the "last to be hired, first to be fired" / poor "educational opportunities” long existing in the US society, made the dramatic changes reflected in your graphs, but unfortunately, the worst is yet to come. - It takes more than a decade to completely destroy a strong economy with balanced budget like the one GWB inherited from Clinton.
     
    Last edited by a moderator: Jul 26, 2011
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  5. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Part of the wealth gap is government generated, by Tea Party / Republican view that the top 2% of income earners (income > $250,000 /year) should not return to the tax rates that under Clinton balanced the budget BECAUSE "trickle down creates jobs." (It does, but in China, etc. where the the expected rate of return on investments is about five times higher - The very rich are not stupid, just their voting supporters who think "tickle down" makes US jobs.)

    As discussed in post 2, Tax relief for the very rich GWB gave has made more modern factories in Asia, and with their cheaper labor has closed older factories in the US, reduced US jobs, via outsourcing also for factories that did not close.

    However, from TV I just learned Ferrari had its best US sales quarter EVER -1.5 billion in sales of cars at average price of ~$250,000 each. These "toys for the very rich" helped send 1.5 billion dollars out of the US - The very rich should be taxed when ever they send funds out of the US, to build new efficient factories or the buy "toys" like these Ferraris.

    Too many US factories have been closed, Too many US jobs have been exported, Too many Americans are un-employed (and without jobs paying no taxes, but collecting government aid). How much more pain must the US endure before even stupid Republicans and Tea Party types understand that "trickle down" of GWB's tax relief is killing the US economy? (More details and examples in post 2.)

    Return to the Clinton tax rates that balanced the budget - understanding that is not "rocket science." Denying it is pure ideological nonsense (Common in many Republicans and nearly all Tea Party types)
     
    Last edited by a moderator: Aug 3, 2011
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  7. Pinwheel Banned Banned

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    Problem is how many people are going to vote for a politician that says he will raise taxes.
     
  8. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    The 2% earning more than $250,000 who would see a tax increase were not going to vote for Obama anyway. At least 20% of the tax payers making less than that will be happy to see part of the debt being paid by those who can easily afford too.

    Perhaps Ferrari will not sell record setting number of $250,000 cars, exporting 1.5 billion dollars out of the US in one quarter, but last time I looked, Ferrari does not vote.

    I think those wanting to return to Clinton's tax rates should say: "NO NEW TAXES - We want to restore the OLD TAXES."
     
    Last edited by a moderator: Aug 3, 2011
  9. Pinwheel Banned Banned

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    So the rich are outnumbered. And yet the lower earners consistently vote against thier own interests.....why? Because they think they too will be rich one day?
     
  10. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I think some vote against their own interest because they have been brainwashed into believing "trickle down" will make US jobs and ignore the the fact, well demonstrated, that it does not. It makes Chinese jobs and closes US factories / reduces US jobs.

    For example, now that all the major car companies have built large, new, efficient, car factories in China, Detroit no longer can sell cars even to China's rich. GM makes money in China, more than enough to offset it loses in the US, but it is obvious where they will continue to expand production most.

    Detroit is an early case example of the US's future. - Detroit can not afford to pick up the garbage so is trying to UN-incorporate large parts of the city to reduce costs. Houses are being bulldozed down or at least boarded up. Read here:

    http://news.yahoo.com/bulldoze-way-foreclose-102000063.html

    High wages and old inefficient factories (a few exceptions, like "Government Motors," Volt plant) can not compete against those trickle down has built in Asia.
     
    Last edited by a moderator: Aug 3, 2011

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