Friday, June 2, 2017

Fight Wealth Inequality - Stop Giving Money to the Rich!

If you really want to do something about those evil 1%'ers, stop sending them your money!

Wealth inequality today is just assumed to be a bad thing and moreover that we need to overthrow existing social and government structures to "fix" it.   But few people bother to ask the question, how did wealth inequality happen, and how can the trend be reversed?

To be sure, there are a host of factors.  The Bush-era tax cuts are cited as one cause, but I am not totally convinced (Note:  This is NOT the same as saying I agree with those tax cuts!).   But going from a 38% bracket to 35% isn't making anyone a Billionaire overnight.  Moreover, the really, really rich people in this world don't pay marginal rates but pay 15% in capital gains, as Warren Buffet, Mitt Romney, and Donald Trump do.

In other words, the Bush tax cuts helped the upper middle-class but didn't affect the 1%'ers at all.

Another explanation is the demise of unionism.   Back in the 1970's, when I worked at GM, we had 50% of the car market and union members made $18 an hour or more, while the minimum wage was like four bucks.  A forklift driver could and did make over $40,000 a year at our factory - which is now closed.  The narrative goes that these unskilled workers (and no, driving a forklift is not a skill - anything that can be learned in an afternoon is not a skill) made up the bulk of the middle-class, and as the union plants closed, jobs went overseas, and non-union plants opened up in the South, the great American Middle Class started to shrink.

This may be a better explanation than the Bush tax cuts thing, as indeed, for a brief period in our country's history, from about 1945 until 1985, a "working man" if he was lucky enough to get a job at a union plant, could make good money, buy a house, and retire on a pension in Pompano Beach, Florida - and have full health coverage.  All of that right out of high school.

The problem was, of course, that these artificially high wages lead to the stag-flation of the 1970's, and the flood of cheaper imported cars of that era.   Our foreign competitors had lower labor rates (back then, anyway) and could afford to invest in technology and design.  The US makers struggled to meet emissions and crash test standards, and thus offered dated and look-alike cars.   One by one, union plants closed, as the companies needed to slash costs - even as car prices continued to climb.

Promises of pensions and retiree health benefits were underfunded.  GM and Chrysler went bankrupt.  For Chrysler it was the second time!  Ford held on, by a thin margin.

Like I said, this is a better explanation, but not the best explanation.  The number of union members, while once a huge part of the blue-collar population, is not a majority of all workers.  And more and more white-collar workers found their jobs going away and their salaries being squeezed as well - all without the intervention of unions.   International competition is the third explanation offered.

And maybe this is more of a nugget of truth than the first two.  After all, it was inexpensive imports that drove down wages and drove out unionism over the last four decades.   But the alternative - protectionism - would have been equally as ruinous as the stagflation of the 1970's economy (which really, really sucked) illustrated.   International trade is inevitable, as is international competition.  The country that attempts isolationism, fails.

I think there is another explanation, and that is that people in the middle and lower classes willingly handed over a ton of their money to the very rich over the last few decades.   Part of this was the increased legalization of odious financial instruments.   Sub-prime lending was just not done back in the 1960's.   Payday loans and check-cashing stores didn't exist because of usury laws.  Gambling was illegal in 49 States.   And the stock market wasn't looked at obsessively by the average middle-class schmuck, because he had little or nothing invested in it.

Since those "glory days" we've let loose the hounds, and now people are capable of signing up for some really shitty deals, starting at age 18 with student loans, and continuing on in life with 7-year car loans or low-mileage lease deals.   Overpriced mini-mansions on sketchy loans caused a huge meltdown in the economy - but believe it or not, are now making a comeback!  We never learn, it seems.

Meanwhile, we think nothing of spending hundreds a month on a smart phone, dollars a day on designer coffees, and spend countless hours online spreading rumors and urban legends, deluding ourselves into an alternate reality where having intractable credit card debt is "normal" and a lifetime of indebtedness is an acceptable thing.  We pissed away what little we managed to save by buying IPO stocks, gold, or bitcoin - convinced that these oddball bets were the ticket to the big time.

The 1%'ers didn't take our money away, we got down on our knees and begged them to take it from us - and they laughed all the way to the bank.

The average American family makes over $60,000 a year these days.  That's a lot of money.  Over a 30-year working life, that's 1.8 million dollars.   Few manage to save even 10% of this amount, most save far less.  And most work more than 30 years in their lifetime.   But "everyone" has a new car, a new smartphone, all the cable channels, and stops at a fast-food franchise or a starbucks once a day.  That's normal, right?

It depends on your point of view.  From my perspective, I see a massive wealth-transfer taking place in this country, where poor and middle-class people are handing over money to rich people, in order to have status items and in order to "treat" themselves.   People are literally selling their future so they can have a Camaro today.  They are making bad choices, and yes, these choices are aided and abetted by a government that is less and less inclined to regulate choices in the marketplace.

It is funny, but many on the Right want to return to the "good old days" when we were unfettered by regulation.  But those same "good old days" were rife with regulation - these are unregulated days, my friend.   Hell, back in the 1960's, you couldn't drive a truck or fly a commercial plane without getting routing permission from the CAB or the ICC.  Today, these industries are deregulated, and not surprisingly, salaries for pilots and truck drivers have plummeted.

So we live in a new era and new reality of deregulation - including deregulation of personal finance.   You have your legal marijuana and your gay marriage, but you also have your payday loans and buy-here, pay here used cars.   If you are a Libertarian, this is heaven (and again, I still wonder exactly what is their beef with the USA - we are already a go fuck yourself economy as it is!).

We have more rights today, less regulation, business is unfettered, taxes are lowered.   But with rights comes responsibilities, and in this instance, the "right" to get a payday loan should be balanced by the financial acumen to realize it is a shitty deal.   Ditto for the lease agreement, 7-year car loan, 20-year RV or boat loan, "liar's loan" home mortgage, IPO stock sale, gold hyped by Glen Beck, and sketchy things like Bitcoin.   In a free-for-all economy, you have to look out for your own interests.

But here's where it gets weird.   In this blog, I say revolutionary and offensive things, such as, "a lease agreement is a shitty deal" or "only losers do odious things like get their grandma to co-sign a car loan for them" and so forth and so on.   In other words, rational financial thinking.   And this is shouted down, not by the banks or the 1%'ers who profit from these shitty deals, but by the average consumer who is convinced these are great deals - after all, they were advertised on television, right?

Again, this is how the middle-class is slipping down the economic ladder.  They are abused financially by the upper classes, and in an apparent case of Stockholm Syndrome, they identify with their abusers!   Cut the taxes of the very wealthy!   Eliminate what few regulations we have left!  It will all trickle down on us, eventually, just as an S&M slave gets "trickled down" upon in his master's dungeon.

This is something we've done willingly, too.   And maybe it is because most people have low-self-esteem and can't understand why they have what little wealth they already have, and maybe have a nagging feeling in the back of their head they don't deserve better, but instead need to be punished.  Maybe.  It's a theory.   The human mind is weird.

Long story short, though, none of this is likely to change anytime soon, particularly given the current administration.   What little relief we get from the consumer protection agency will be wiped out in a matter of a year or so.   We will be back to an "I've got mine, Jack, you get yours" economy and more than ever before, we have to look out for ourselves.

And the easiest way to do this is to stop giving your money to rich people and then wondering why they have all the money and you have none.