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Unbridled capitalism does play out like Monopoly with the majority of the players holding only a fraction of the money and property.
Because this is the Retirement forum and not the Economics forum, I hesitate to delve too deeply into this. If you would like a good discussion, you may wish to start a thread on this topic over in that forum. I'm sure the discussion would be both lively and interesting.
Having said that, there is nothing in the world that is "unbridled." Moreover, your assertion about a necessary consequence of capitalism being extreme inequality is not supported by General Equilibrium Theory.
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Originally Posted by ReachTheBeach
Since the government has backed of extreme taxation of the extremely wealthy, wages for the middle class have stagnated and their share of overall wealth has plummeted.
I assume you mean the tax cuts championed & enacted by President Kennedy in 1963:
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Declaring that the absence of recession is not tantamount to economic growth, the president proposed in 1963 to cut income taxes from a range of 20-91% to 14-65% He also proposed a cut in the corporate tax rate from 52% to 47%. Ironically, economic growth expanded in 1963, and Republicans and conservative Democrats in Congress insisted that reducing taxes without corresponding spending cuts was unacceptable. Kennedy disagreed, arguing that “a rising tide lifts all boats” and that strong economic growth would not continue without lower taxes... President Kennedy reiterated that lowering taxes was the surest path to full employment and lower deficits. Polls showed that over 60% of Americans favored the tax cuts.
You state a causal relationship between income tax reduction and wage stagnation. There is no economic theory to suggest that, nor is there any data to support it (remember correlation is not causation).
Let's look at recent history:
Clearly, wages are not stagnant. Wages do not automatically go up - there is no "economic helium." Wages are a reflection of the worker's value-add to society. Wages go up in response to increases in worker productivity - increases in quality-adjusted output divided by labor input.
The reason wages have not gone up as much as people would like is twofold:
1) In many industries, there has been a long-term stagnation in worker productivity. If productivity isn't going up, there isn't a source of funds from which to raise wages.
2) Don't forget employer-paid healthcare insurance: Wages are only slice of the Total Compensation pie. Healthcare insurance is another significant slice of the pie. Over the past 30+ years, a larger-and-larger fraction of raises has been funneled into employer-paid healthcare insurance. Indeed, a company may budget 8% for increases in total compensation only to discover that doesn't even cover the increase in employer-paid premiums.
Thus, the naive employee might say "I didn't get a raise" but the reality is (a) his productivity was flat, and (b) he did get a raise in the form of employer-paid health insurance premiums. But the naive employee only looks at his take-home pay.
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Originally Posted by ReachTheBeach
It did seem to work better with more equitability enforced. Giving the wealthy and businesses more money has not led to them paying workers more.
Workers have indeed been paid more, especially in healthcare insurance benefits. To the extent that employee productivity has stagnated, increases in total compensation have been lower than they otherwise would be.
The two fastest ways to get increases in the paycheck portion of total compensation are probably:
1) finding a way to get increases in worker productivity, and
2) finding a way to reduce the cost of health care insurance.
The inescapable conclusion is that Capitalism is the greatest source for good ever invented by mankind. Capitalism is the vehicle by which most of mankind has been lifted out of devastating bone-crushing poverty. Through capitalism -- especially as practiced in the USA -- just about anyone can launch a new business and have access to money to expand. The rest is competition to build a better mousetrap. Competition is unrelenting, of course. Not all businesses make it, and not all employees make it either. It is like salmon swimming upstream.
Yeah, as a country, we went for the quick crack high of a tax cut without thinking at all of the repercussions down the road.
Taxes in isolation are not the problem. The problem is tax revenue without a corresponding cut in expenditures, debt service, and the overall budget deficit.
I'll give most congressmen & congresswomen the benefit of the doubt and say they did, indeed, think of the repercussions -- and did it anyway.
Yes, yes and yes. Unfortunately that is a reality of modern economics. The role of capital and intellect has grown in the production process and for the most part wealth growth results in how much you can offer others...
Taxes in isolation are not the problem. The problem is tax revenue without a corresponding cut in expenditures, debt service, and the overall budget deficit.
I'll give most congressmen & congresswomen the benefit of the doubt and say they did, indeed, think of the repercussions -- and did it anyway.
I suspect that he would say yes a corresponding cut in expenditures wasn't going to address the problem presented by the OP with solutions as offered by some of the posters. Your point doesn't dent his point at all but only supports the notion that some including you prioritize small government and limtied government spending over services benefiting the more needy in our population.
Not challenging your perspective just noting it in many ways supports his.
Would you not agree that the cuts in expenditures you are suggesting would have resulted in changes to Medicare, Medicaid, Social Security, Food Stamps, Section 8 housing etc etc. I suspect he would say his position is to expand not cut those programs and your response supports the notion that the tax cuts are just exacerbating the inability to address issues in the manner he and others ( not you and others) woud like to see happen.
Yes it is a great thing for those of us with the wealth to be able to grow. It doesn't negate my ability to understand that the changes in our economy have and our leaving traditional wage earners behind and they are increasingly angry. Whether or not I emphasize with their positon ( I do ) isn't to me as important and salient to our future as is the following:
We are pissing off a lot of angry people with AR 15's who live and operate amongst us.
I suspect that he would say yes a corresponding cut in expenditures wasn't going to address the problem presented by the OP with solutions as offered by some of the posters. Your point doesn't dent his point at all but only supports the notion that some including you prioritize small government and limtied government spending over services benefiting the more needy in our population.
Not challenging your perspective just noting it in many ways supports his.
Would you not agree that the cuts in expenditures you are suggesting would have resulted in changes to Medicare, Medicaid, Social Security, Food Stamps, Section 8 housing etc etc. I suspect he would say his position is to expand not cut those programs and your response supports the notion that the tax cuts are just exacerbating the inability to address issues in the manner he and others ( not you and others) woud like to see happen.
My point wasn't about small government and limited government spending. My point was about the dangers of the federal deficit which is a result of a massive mismatch between revenue and spending.
At the local level, incorrectly funded public sector pensions are now crowding out social spending, and will continue for the foreseeable future. At the federal level we are on the brink of seeing such crowding-out as well.
Neither of those crowding-out scenarios bodes well for the neediest among us.
And the COL will be 4 times what it costs to live in Mid America.
The trick which is as much luck as anything is to get in on the ground floor and move and to work in a soon to be emerging area that roars and becomes part of the high COLA area. Get in when housing is cheap and watch your equity soar over the years and while salaries might not yet be the greatest they take off and eventually drawf the cost of your first home. Hey you can even keep moving up in housing and accelerate your equity growth but don't over do it. Then great pension and benefits and head out to a lower COLA area that is starting to take off and BADA BOOM retirement Nirvana!
This can also be the result of dumb luck with some wisdom but whatever the reason BADA BOOM! Save and invest along the way and even greater BADA to go with your BOOM!
My point wasn't about small government and limited government spending. My point was about the dangers of the federal deficit which is a result of a massive mismatch between revenue and spending.
At the local level, incorrectly funded public sector pensions are now crowding out social spending, and will continue for the foreseeable future. At the federal level we are on the brink of seeing such crowding-out as well.
Neither of those crowding-out scenarios bodes well for the neediest among us.
Sure so the tax cut was a problem and not just current expenditure because it accelerated and exacerbated the exisitng debt and created greater threat to existing social net programs much less allow the creation of new ones. I got your point.
...The role of capital and intellect has grown in the production process and for the most part wealth growth results in how much you can offer others...
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Originally Posted by SportyandMisty
...Which is a great thing.
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Originally Posted by TuborgP
Yes it is a great thing for those of us with the wealth to be able to grow...
It isn't limited in the way you describe. Wealth grows as a result of actual voluntary transactions in the marketplace. Yes, the guy who invents a better mousetrap may become wealthy (if and only if there are lots of customers buying the product), but every single customer is better off as well; after all, they traded their hard-earned money for that better mousetrap because it solved a real-world need.
In economics there is a concept of the "consumer surplus" and the "producer surplus." These can be significant as well -- the buyer would have been willing to pay, say, $10 for that better mousetrap but it was available for a mere $2; the buyer in this case accrues $8 of value "for free." A similar analysis holds for producers.
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