"Study: The widening gap between the rich and the rest of us is ‘unsustainable’"

Y'all don't really believe in Capitalism, do you? It only takes money to make money; we have an official Mint at our disposal. That money being spent is what creates demand for those products and services.

 

That pie shows how productivity is split up. Productivity is after expenses, so operational expenses would be outside of that pie. Capital investments, it depends. Investments in the sense of buying materials or whatever to produce that revenue are expenses and so outside of the pie. Investments in expanding the business is just owner profit- they're choosing to increase the value of the business that they own rather than to take the cash now- so that would be something they do with the orange slice of the pie.

 

Then how come everyone else does better when their policies are in action? And why would Republican want everyone else to do badly, how does that serve their interest?

 

Then it is not a accurate picture, those are major expenses and cost on which that value is spent or invested.

 

No, no, you're not understanding. Productivity- the thing that graph depicts- is what is left over after you have already paid expenses. That's what the chart shows- how the money that is left after you've paid expenses gets split up.

 

But the employee cost and benefits and taxes ARE EXPENSES too. Just like the operational expenses, interest expenses, and again the tax percentage appears to be off. And no productivity is not what is left after you have paid your expenses and cost, what is left is your net profit. The graph may be trying to show some type of gross margin but it fails to accurately do so.

 

I agree. People should look out for themselves and manage their money well.

 

I believe we should solve simple poverty and be able to claim that Persons have only themselves to blame for staying poor on an at-will basis.

 

Aside from squandering the surplus he inherited, Bush's tax cut best year would have been Clinton's 7th best.

"Boomed" only in Bluesguy world. And thanks to the housing bubble, shortly before the house of cards fell down.

 

It wasn't Obama's policies that blocked tax increases on the rich and forced sequester and austerity on the economy.

 

Quick question: What exactly would the Democrats do to close that wealth gap if those evil obstructionist Republicans and Tea Partiers weren't in their way? What effects would their solution have on the rest of us and in the long term?

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So, this. More taxes on the rich, which would mean a short-term boost in revenues followed by a decrease in the longer term, coupled with more deficit spending.

 

They don't.

 

Quick answer: Reverse "trickle down" policies that have pampered the richest.

Didn't last time, though conservatives told us the tax increase would wreck the economy and kill jobs.

Last time we saw the longest sustained period of growth post WWII, a record 23 million additional jobs created, poverty levels dropping to all time lows, stock markets tripling even with the correction, the unemployment rate dropping to the lowest level in decades, real incomes rising for all classes, and the best average GDP growth since the 1960s. Oh yeah, and a then record deficit turning into a surplus.

So I reject your hypothesis.

 

The authors point out some of the long term problems associated with our economic system where the middle classes dwindle while more and more of the nation's income and assets go to the hands of the few. We can see the effects of the decimated middle class on our economy today.

The fundamental problem in our economy is that their is insufficient demand for goods and services to power the kind of strong recoveries we had in the past.
It is not just this recovery that has been slow and weak. Compare the recoveries in 1990, 2001, and the current one, with earlier recoveries:



As the (now somewhat outdated) chart shows, all the recoveries before the mid 1980s were sharper and faster.

IMO, this is not simply some gigantic coincidence. Consumer spending drives the economy and recoveries, but has been anemic. The great engine of spending, the middle class, is tapped out and overridden in debt. As a result, we are not seeing growth in personal consumption like we did in earlier recoveries:

A big reason why we aren't seeing spending from the middle classes is that since the early 1980s is because we've taken almost all the growth in income and wealth of this country over the past 30 years and diverted it to the richest 10%, and mostly to the richest 1%:

Today the 1% has double the share of the nation's income (20%) and nation's wealth (40%) than it did 30 years ago:



And the top 10% are getting about 65% of the nation's income, versus about 50% 30 years ago. That means that the bottom 90% are today only getting about 50% of the nation's income, compared to about 65% 30 years ago:



That is 15 percentage points of $14 trillion in gross national income now going to the top 10% instead of the bottom 90%. Which equates to, proportionately, $2.1 trillion dollars going to the richest 10% instead of the middle classes, every single year.

If the richest 10% spends even 75% of its income, that equates to about $500 billion less spending in the economy, every single year. That is about the equivalent of 2 Stimulus packages every single year!

As a result of this huge transfer or income and wealth, the middle class, the great engine of spending (and thus demand) doesn't have the additional resources to spend. So when we have a recession, is it any surprise that recovery is slower? We've taken the assets and purchasing power away from the middle class, who spend it, and transferred them to the richest, who (proportionately) do not spend it, and thus have gutted the engine of growth and recovery for our economy.

The problem isn't an overall lack of money to spend. There are trillions and of trillions of dollars sitting in offshore bank accounts and in corporations and banks not being spent. The problem is that our "trickle down" policies over the past 30 years have not "trickled down" but instead have transferred those assets to people who don't spend them, and away from people who do.

As a result, the growth of real personal expenditures in the past four years has been roughly half what it was 30 years ago:

Year - % chng real personal expenditures
1982 1.4
1983 5.7
1984 5.3
1985 5.3
Average: 4.4

1992 3.7
1993 3.5
1994 3.9
1995 3.0
Average 3.5

2002 2.5
2003 3.1
2004 3.8
2005 3.5
Average 3.2

2010 2.0
2011 2.5
2012 2.2
2013 2.0
Average 2.2

Source data: http://bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1
Table 2.3.1. Percent Change From Preceding Period in Real Personal Consumption Expenditures by Major Type of Product

So should it be any surprise that when we look at the recoveries since the Reagan "trickle down" revolution took effect, including the current one, we see shallower, flatter recoveries than we did before?

Also, consider the following:

Reagan
Federal Spending increase, 1981-1985: +39.5%.
Total government employment, 1981-1985: +607,0000

Bush
Federal Spending increase, 2001-2005: +32.7%
Total government employment, 2001-2005: +603,000

Obama
Federal Spending increase, 2009-2013: -1.89%
Total government employment, 2009-2013: -667,000

We've aggregated the problem of a decimated middle class with Govt austerity and layoffs that have acerbated the problem.

What would be the situation if we'd seen spending increases over the past four years, and the Republican dominated states had not added over 600,000 people to the unemployment rolls, but had added 600,000 more paid jobs?

What would the situation be like if the middle classes had another $2 trillion in income to spend in the economy?

If we want a return to stronger economic growth, we need a return to the policies that built up the middle classes, and to turn away from the policies that help bring it down. We don't need to pander to the richest any more. We need to stop austerity and create jobs for the middle class. We need to reverse "trickle down" policies, not extend them.

 

How many of today's rich were yesterday's middle class or poor? That's the question liberals never consider: MOBILITY. Was Bill Gates always rich? No. Steve Jobs? No. People are always moving up into the "rich" category. And more people would be moving into the rich category if it were not for the destructive policies of the Democrats. Instead of complaining about the rich like liberals do, you should strive to BE rich, local normal people do.

 

Mobility's wonderful, though we now lag many European countries in that category and it ain't what it used to be.

But that doesn't solve the problem of a decimated middle class that has been left out of the nation's growth and prosperity over the past 30 years since "trickle down" economics.

 

Let me ask you a question. Is it possible in corporate capitalism for every person in the US to be rich? Has there ever been any economic system where all that worked in it was rich?

What you do not understand, and let us blame it upon your schooling, is that capitalism is a system grounded upon scarcity. That there was not enough to go around, and so capitalism is a devised system that distributes limited resources to those in the system. And so the end result is some that have a surplus, with more not having enough, a deficient. Capitalism can only generate the haves and the have nots, due to it being based upon scarcity.

But that was yesteryear. Today, with science and technology, there isn't a scarcity, yet capitalism is based upon scarcity. What happens then is that you still have the rich and the poor, but the rich are much richer, they can create, on the backs of the have nots, more wealth for themselves. And so the gap between the rich and the poor grows.

Capitalism has built into it the exploitation of some humans, so that a few humans might be billionaires. Capitalism is grounded in exploitation. You see this when MNCs moved to first mexico and then china, in order to increase their profits, their income, adding to their hoard of wealth, by exploiting communists for their labor. This is how corporate capitalism works.

But even the cheap exploitative labor practices will come to an end, as robotics, machines, automation replace slave labor. But that presents a huge problem in market, corporate capitalism. Does your schooling allow you to realize what the obvious problem is, or is your mental box so constricted as not to allow it? Yet automation and computers will not only replace low skilled work, but higher skilled work as well. And so capitalism is not sustainable. it will implode. For it will lack the consumer having income to buy what the machines will make and what services machines will supply.

This is nothing new. Intelligent men were thinking about this in the 1930s in England, and they said the masses, the consumers, must be paid for the work done on their behalf by machines. Of course that stinks of socialism. In America, during FDR, during the Great Depression, there was an idea that we should put a moratorium on automation, for these men also could see the obvious, with that being that replacing workers by machines would eventually take away the income people have to have in order to consume, to buy what the machines make. Of course, they decided you could not stop technological advance, and left it up to the future people to solve this problem.

Yet you and others are incapable of seeing this problem. But that 800 ape in the corner will not just go away. Putting fingers in the ear canals and screaming na, na, na, na, will not make this monumental problem go away. I suggest you and others start to think about it. For you cannot wish this away, and there is no political ideology, left or right that will solve this. The solution lies in rational beings, science and technology, and relegating your beloved capitalism to the dustbin of world history. But you don't of course have to like it. I don't like many things, but reality cannot be wished away.

 

Very thoughtful post.

I agree that greater and rapid automation has been a factor in the great transfer of income and wealth from the middle classes to the richest that we've seen over the past 30 years. Though I don't see it as the only factor involved in this phenomenon -- things like tax policy, labor policy, decline of unions, stagnant minimum wage, outsourcing, and tax policy have had effects too.

This is, of course, not the first time in history that technological advances has threatened the livelihoods of working people. In the 1800s, the Luddites rioted and destroyed the looms that had displaced their livelihoods of weaving that had been previously done by hand. You pointed to the example of 1930s England. In this cases, the economies eventually evolved and created new jobs with opportunities that the same technology helped to create. I think that will probably happen again. However, that does not diminish the hardships and negative effects on those who have lost out on a lifetime of skill suddenly being displaced.

The aging of the work force will eventually address some of the problem. As more people retire and the labor force (proportionally) declines, that will soak up some of the excess labor, and "weed out" those most likely to have outdated skills. But until we see a tighter labor market, we will continue to exacerbate the problem of excess labor that is contributing to the low wages and incomes of the middle class, that great engine of spending -- which in turn reduces demand and greater production of goods and services.

The private sector is unlikely to pick up the slack. IMO we should have the government providing more middle class jobs to soak up some of the excess. But over the past 5 years, we've done exactly the opposite. The Republican austerity policies have resulted in over 600,000 government jobs being eliminated -- at precisely the same time we've had a growing excess surplus in the labor force because of the Recession, and the growth of automation you've mentioned.

 

Yet there is also the tremendous problem of infinite growth with a finite earth. Capitalism is based upon infinite growth. Yet logically this is not sustainable. And the world population continues to grow, and they say it will reach at least 9 billion by 2050. Granted, science and technology will extend what the earth can support, but there is still the problem of finite resources and infinite growth under capitalism.

Capitalism, treats the earth and humanity as commodities. That in itself is a tremendous unsustainable paradigm. What is the future of humanity, when it comes to economics? There is only one way forward, which we must take, sooner or later. And that is a resourced based economic model, that gets rid of profit. The future will not have the rich, nor the poor. For that is impossible. But I am not silly enough to think we are capable of getting there without implosion of existing systems. So, we also have more human suffering in our future than humanity has ever known

. From this will arise, by intelligence, an economic model that is sustainable, in fact, it will be based upon sustainability. And that means we will no longer as a species have the luxury of a rich elite class who hoards tremendous wealth. The age of sociopathy as found in the elites will be finally over.

So sad to say, but the years of conservatism as an ideology will be relegated to the dustbin of history. The years of all forms of capitalism will be only of historical significance, as an illustration of the power of human selfishness and greed, which is in itself a form of violence.

 

I don't go that far. Technology has always allowed mankind to develop more produce from different resources and do so more efficiently. I don't see any thing to suggest this will slow in the future. I also don't see the basis for a communistic kind of economy in the future. IMO we will always need to reward those who are willing to take risks, innovate, and work hard to provide products and services people want.

 

This isn't post-WWII. A lot is different now.

 

I disagree, it is post WWII by definition, but do you have some point you're trying to make?

 

Yes. Our financial system is considerably different from how it was, as are our demographics, the size and scope of government, the condition of our industrial capacity, our level of national debt, our current tax rates, etc., etc. Plus, we're a LOT more globalised now than we were in those early post-war years.

You can't just go back to 1940s-50s tricks and expect the same results now.

 

How are the different from the 1990s, and why would that matter in terms of the effect of tax policy?

No? Can you go back to the 1980s?

I went back to the 1990s.

 

The graph isn't "trying to show" some type of anything. That is the productivity stat. It is published regularly by BLS, not something that site came up with.

Productivity is the the value of the output per worker minus the value of the inputs. So, that means revenue per worker minus non-labor expenses (what you're calling operational expenses I think).

Wages and benefits are on the graph. The employer's taxes come out of his slice, the employee's taxes are on the graph.