Ted Rall for August 31, 2009

If you invest to make money, the economy is picking up. If you work for your money, oh well. That’s the American Way since 1/81.

Remember, approximately 10% of the people in this country own approximately 90% of the assets. They’re doing just fine.

I do both. I go to work every day but I also have been frugal and putting aside 18% of my income for years. By living beneath my means I’ve been able to slowly work my way into that 10% about which Mattro53 speaks.

It makes me sad to hear people complain about the fairness of it all. I’m sure if he had his way he would take that money away from me and redistribute it to the more deserving (in his opinion).

It seems American industriousness and ingenuity has been replaced with American resentment and redistribution.

Kevin, I’m not sure that is true.

I think the bankers that receive huge bonuses while the bank they run is sinking into bankruptcy is a problem. The money for those bonuses came out out of the pockets of people that worked hard to earn it and are having a hard time making ends meet.

Working hard to earn a living is typical and being able to save some of it is nearly impossible for most people. The cost of living is high as is the cost of health care.

Kevin,

I, nor anyone else, has a problem with you saving 18% of your yearly income and investing it wisely. I have a problem with those that invest NOTHING of their own, gamble with the funds of others and if the gamble is successful, take a piece of the profits and act as though they are the cream of society. Or live off of the wealth generated by earlier generations of their family and act as though they are the cream of society. There is a difference between making a fortune through hard work and bribing the elected leaders of society into changing the structure of society (how taxes are calculated and collected, government oversight to ensure that the other 90% of society are not stepped on, etc) to ensure that they ARE treated as the cream of society. THOSE individuals are part of the infamous 10% that have gotten under the skin of the rest of society.Where does a Steven Forbes get the nerve to demand that taxes on his segment of the population get lowered to entice investment? Past giants of industry made hugh fortunes within a framework of what now are considered suffocating tax structures.

With all due respect to Ted, I’m an executive-level management consultant, and the economy is by no means doing well from our perspective, and we’re usually a leading indicator (since companies are often willing to spend money on their top people early on). We’re assuming a “slow recovery” here, meaning we have bottomed out and are going to grow back the business over the next two years. My view, and many of my colleagues agree with me, is that some confidence has come that the economy has stabilized enough to spend some existing budget money again. Prior to this, people spent nothing, because they weren’t sure whether they would need it for something more important – kind of like paying your credit cards late to buy food.

Many people did as Kevin did, saved their money and invested “wisely.” I know I did. But my investments in trusted mutual funds are now worth 30 percent less than they were in 2007, and less than they were worth in 1999.

Our economy is not doing well and will not do well until we fix this whole “free trade” thing. Why do you think the term “outsourcing” came from? It first started with materials, then companies, and then jobs. So long as we continue this practice our economy will never be the same. Besides this stock market bleeep is about 30% of our GDP. We create money, not wealth.

One wonders how many of the suckers living in the United States know that 85% of the stock market is owned by 10% of the population?

And furthermore, since very few companies pay out dividends anymore, the only way you make money from stock is to buy and sell it. That means you have to (1) have a lot of shares, (2) keep close track of the market to buy and sell on time. Most Americans don’t have money to have a lot of shares, nor do they have the wealth or time to keep track of the market or (more realistically) have a high-powered broker to do it for you. It used to be that if you owned stock in blue-chip companies, you could make steady money off the dividends. No more. That means ownership is really much less valuable except to the rich (who can buy and sell in large quantities without being hit up by fees as much). And of course the ups-and-downs of the stock market make it great for those who want to buy and sell – including brokers, who are the real winners – and lousy for those who just wanted to buy stock and get dividends. Explains a lot of the economy the past couple of decades, no?

Well said. Wall Street basically is a casino. Gotta pay to play.

Good for you Kevin. You are “lucky”. But strangely luck seems to follow the prepared, industrious and intelligent. I literally worked a 108/hour week one full year. I saved and didn’t spend on frivolities like alcohol, tobacco and recreational drugs and joined that upper 10%. For that I am an evil person. The ARods, Oprahs, Eminems are also in that 10%. Strangely the only ones being crucified by the liberals are the people who put their own money at risk, invest, make jobs and contribute to modern America.

GNW: My family had no money – single mom, four sibs – and all five of us went to college. I have two degrees from Harvard and a Ph.D, work in business, and make plenty of money – I think I’m in the top 2-5%. I don’t smoke, drink, or take drugs. (Having an alcoholic dad will do that for you.) I am liberal. Why? I believe that to those who are given much, much is expected (see St. Paul), and I know that I was fortunate in that even without money, my mother thought like someone rich (my grandfather was roommates in college with a Bush and other parts of the family had money), so we were never afraid to aim for the top or challenge the powers that be. You have it all backwards about liberals. What we as liberals want to do is unleash the potential of all Americans by providing a level playing field for those who have gifts and the willingness to work, but lack the opportunities given to others who have neither. I see too many people (mostly with little money) who are afraid to apply to an Ivy League school, for no good reason. And yet 70% of Harvard was on financial aid when I was there. But most people don’t know! I see Americans who simply don’t have the contacts, knowledge, or influence that someone from a rich family has, and miss out on opportunities where they would shine. It doesn’t strike me as controversial to help people see their possibilities, and enable them to make the most of their preparation, industriousness, and intelligence. I don’t crucify those who earn their success. I don’t crucify those who inherit something and then do more with it, like Bill Gates (who gave most of his money to his foundation and only a limited amount to his kids so they would work!). But I would consider crucifying those who inherited their success and then arrogantly enforce their ability to lord it over those who did not. As was said about Bush, “he was born on third base and thinks he hit a triple.” Dubya’s extended efforts to make sure that those who inherited money get to keep it all but those who work hard at minimum wage can’t get more is abhorrent to me, and truly un-American. Supposedly, we don’t believe in a class system here. And liberalism is about making sure we don’t have one. Whereas many conservatives are about establishing exactly that. Because I think all Americans have the potential to contribute to modern America, whether they have money yet or not. And that’s what makes me a liberal.

Well said motive.

RV, I guess the best way to ensure a comfortable future is to marry a woman with HUGE…tracts of land.

RV, I have very rarely seen this explained as well as you have, thank you! Still some people will not get it but at least those who really want to understand it will. I still want to win that lottery though!

By the way, GNWachs, if you worked 108 hrs/wk, that’s 15+ hours per day for a 7-day week, 18 for 6 (which seems most likely), or 21+ for 5.

I’m not doubting that you did it, but I doubt that you were any sort of salaried employee. If your job enjoyed standing on your feet, or pushing a mop, or even sitting behind a service counter, it’s unlikely you would have survived a year.

Attempting to work two full-time jobs is generally the last resort of people who simply aren’t paid enough to live on, working anything resembling “reasonable hours”, and even if they hack it for a year they aren’t going to have made much headway getting out of desperation. Simply working harder isn’t enough.

Neither is it an answer to say “well, they should have developed more marketable skills”, because there aren’t enough jobs for the people who ARE skilled. Too many people with skills and/or education are being denied even the LOW paying jobs, because they’re overqualified.

If you WANT to work more than 40 hours a week to bump yourself up a bit (and “a bit” is really the most one can expect, unless you’re already ahead of the game), that’s fine. But anyone who DOES work full-time for an employer, even if it’s making lattes or cleaning toilets (or picking fruit), ought to at least be able to cover their basic expenses, INCLUDING health care.

Fritzoid

I was an physician intern at a major hospital. 36 on and 12 off. That is now illegal. Salary $204/month. rent $123/month You do the math.

Well said RV and MM.

I’ve just moved to the USA from Canada and I’ve been here 2 months and am really starting to see a different class system. People here think they don’t deserve more than minimum wage (or nearly, $10/hr) they have a weird idea that suffering and hard work will pay off and don’t consider that working smarter and harder cooperatively is actually how rich people get rich. Also they don’t seem to understand that wealth and money are different - that financial disparity is a form of social control etc etc. I won’t say there is a lack of a feeling of entitlement - because there is the individualistic consumer mentality but people don’t feel entitled to the equality, basic health, etc that they should. One of the unusual ways I see this is the hippy/progressive communities. These people feel entitled to equality but only in an outsider way. They feel that a good life is possible but never (Even after they become influential in the community) see themselves as universally equal or able to let go of the dog-eat-dog primitavism. So they continue to work in jobs they shouldn’t for meagre pay or get lucky and rich and perpetuate the same problems, not seeing themselves in others.

You guys have a weird system of living down here. Canada isn’t really much different but it isn’t quite so obvious (or maybe it’s just more clear to someone not in it)

RV what you are saying about innumeracy rings true. There have been studies, I think maybe I read one in Harper’s… Basically like 25% of people believe they are in the top 5% and 60% believe they are in the top 20%. Capitalism exploits people’s natural optimism and encourages backstabbing. If we keep looking upwards we can’t see what is beside us and where we actually are.

Car ownership is another example. Cars are so expensive and costly. No where else in the world are so many people homeless and yet living in a car too. Gas and road subsidy plays a large part of course (no, that isn’t socialism! ;-) but the ideas that cars are cheap and easy is tied to that idea of aspiring towards luxury and that buying a luxury product means your wage slavery isn’t really real.

We are strong in one another.

Excellent posts above by several people.

RV, First, save your sympathy for someone else. Do not waste your pity on someone who is quite satisfied with their lot in life. Because I’ve learned how to save I make quite a bit more then I need. Also, I am amassing my nest egg for my own security and comfort, not to achieve some status of ownership that would include me in an exclusive club.

I am, according to the Bureau of Labor Statistics in the top 10% of wage earners and I take pride in that and I spoke of that in a previous post.

Second, while my investments haven’t done so well over the past 2 years, over the last 20 years I have averaged better then %17 including these down years. Some of that is due to luck and some of that is due to long nights of studying companies and markets. My co-workers would tell me in the morning what Monica did on Friends or how the Bulls pulled off a big win the night before because they applied their freetime differently.

My original post was intended to point out that we shouldn’t resent those who have achieved success but try to learn from them and employ their techniques.

I advocate only that we don’t steal from others to make things more fair for all. Too many people including the first poster (mattro53) want to have you believe that it’s OK to steal from the wealthy because they didn’t earn it and there are probably some that fall into that category. But success is achievable for everyone if they work hard, avoid vice (read here the 7 deadly sins) and watch for opportunities.

Now that my investments are well established and I have a better understanding of the markets I have more freetime to devote to my Church, Boyscouts, Cubscouts, 4-H and my kids activities.

Stealing is wrong!!!! And using the government to do it through taxes and redistribution doesn’t make it any more palatible.

Some of you above have understood my post and what motivated it. Too many of you believe this old adage “Don’t try to keep up with the Jones, Drag them down to your level”

Kevin, if you define “taxes” completely as “theft” then there is simply no real ground for discussion between us. If you feel the overriding ethic of this country should be “I got mine - and I get to keep all of it,” then you should re-read the preamble to the Constitution. Fact is, there are many benefits to all Americans by being part of this nation (sorry, Canadians, I’m making a point here), most of which is taken for granted by citizens. Pretending that this is all free is disingenuous at best. And some of what we need to do to keep this nation strong may require some minor contributions by those who have more to provide. But since we have one of the lowest tax rates on the rich anywhere in the industrialized world, it’s not as if it’s a big sacrifice.

MM, I’m not a libertarian and I don’t define all taxes as theft. I categorize money taken from one group to give to another solely for their upkeep (Social Security, Medicaid, Medicare, Foodstamps, Welfare) as theft. Perhaps that is a bit harsh and in rereading it I don’t even feel that strongly about the current state of taxation but I would feel additional taxes for those purposes would increase my resentment of the programs they support.

RV, OK so I have read (not recently) the Grapes of Wrath and it was a pretty good piece of FICTION. Steinbeck wasn’t my favorite author but I recognize him as a good artist. Yes, good people fall on hard times and sometimes bad people don’t fall on hard times when they should. That’s life and those of us who save for a rainy day are just chumps by your defintion. I don’t object to others inheriting their wealth and I hope they do well with it.

As for Godspeak - Yes St. Thomas wrote of the seven deadly sins but every one of those vices is destructive to life whether you believe in god (notice the small g) or not.

Avarice, Pride, Sloth, Lust, Wrath, Gluttony, and Envy all lead to a less happy life. It sounds, above, as though there is a lot of Envy for what others have and the solution I hear offered is to confiscate it for the greater good because somehow they aren’t entitled too it.

Yes I go to church but I’m not spouting Catholic dogma. I really try to live my life so as to avoid those things that can lead me into trouble and while I’m not perfect I’m fairly successful at it. Avoiding those vices makes it possible for me to save for a rainy day. But since we are offering books to each other…How about Atlas Shrugged for you? It is also a work of fiction but does a good job of showing what happens when a nation (in this case America but it was an interpretation of what happened in the USSR in the early 1900s) decides to take the rewards of wealth production away. America isn’t perfect but It’s a pretty bleeep great country full of industrious, smart, and capable people. The government should be working at how to unleash their potential as MM suggest earlier. And in some ways it does through: Schools, Transportation, Defense of Life and Property rights, etc. The government shouldn’t be trying to figure out how to tear people down so that others don’t have to look at their achievements and that is where MM get’s it wrong. Others having wealth is not “Lording it over you.” They don’t even know you. (I don’t think anyway, maybe your famous). Your own anger over the good fortune of others is the problem.

Kevin,

There is a common misconception about “taxes”. Once paid they are not YOURS anymore. “Your” taxes do not pay only for programs you support or benefit you financially or philisophically. There are millions of people who feel that as a nation we spend too much on defense as opposed to more social programs like public education. Just as there are millions who feel we do not spend ENOUGH on defense. The government is not stealing your money through taxes. It is paying for things you cannot afford to pay for yourself. So stop thinking that it is. The taxes YOU pay provide the umbrella you live under that allows you to live like you do. If taxes need to be raised to continue to provide that umbrella, then pay them. You feel that taxes take YOUR wealth and give it away to SOME of those around you. Yet you want the government (ALL the people) to GIVE you money through lower taxes. Where do you get off taking money from ME to maintain your extravagent lifestyle? The services the government provides to all of our society end up getting cut when you cry, bleeep and moan about your inability to invest more.

One thing you should add is that wages remained stagnant since the Clinton years. Wages haven’t kept up with inflation because labor is so easy to find now a days. Because of the over population, illegal and legal immigration, and the outsourcing of jobs the job market basically is loaded with labor and not enough jobs. Its a race to the bottom when you think about it. Who will work for less?

GNWachs, like I said I don’t doubt that you put in the hours. An intern at a hospital is technically salaried, yes, but it’s an extension of training in a sense. A first-year associate in a large law partnership is also salaried, and they often put in hellacious hours (not what you did, but it’s gruelling nonetheless). But the work they do at that level is a way of “paying their dues” before they enter the partnership and start pulling in REAL money. For the people who can hack it, great. But these types of jobs have high burn-out rates. I’m not a lawyer myself but I work with them; this firm only recruits from the top 10% of the graduates of the top 10% of the law schools. And yet I’ve seen many very driven, very competent young people leave the profession because they’ve decided they’d rather have a LIFE than a career.

Again though, those who are on a “professional” job track are ahead of the game to begin with. There aren’t enough jobs of that nature to go around. Our economic system seems designed to divide participants into a select few “Winners” and a vast sea of “Also-rans.” The Rags-to-Riches story IS a possibility, but it is the exception rather than the rule.

Just posted this elsewhere, but it works here as well:

“Come, ye blessed of My Father, inherit the kingdom prepared for you from the foundation of the world: for I was an hungered, and ye gave Me meat: I was thirsty, and ye gave Me drink: I was a stranger, and ye took Me in: naked, and ye clothed Me: I was sick, and ye visited Me: I was in prison, and ye came unto Me.” But those whom Christ commends know not that they have been ministering unto Him. To their perplexed inquiries He answers, “Inasmuch as ye have done it unto one of the least of these My brethren, ye have done it unto Me.”

@fritzoid

My children well know my internship/medical school history and have taken a different path. My one child who elected to become a physician has told me the rules are different now. Life first and profession second. Fewer hours, less income, less responsibility.

@MM America having the lowest tax rate is a common liberal myth. It simply isn’t true. Add together Federal income Tax, medicare Tax, State Income Tax, City Income Tax, State Sales Tax, City Sales Tax, City property tax etc etc and we here in NYC are well over 50% even after deductions.

RV

How are my numbers a myth? What is the top Federal Tax rate? what are the NYS and NYC tax rates? what is the NYC property tax rate? What are the NYS/NYC sales tax rates? What is the estate tax rate?

GNW: In most parts of the world, they have VAT on top of income taxes, which ranges from 7%-25%. The average state sales tax rate in the US is roughly 5%. It’s higher in NYC (which has city tax), but that’s hardly typical.

“When you look at the overall tax burden, the U.S. is quite low,” said Eric Toder, a senior fellow at the Urban Institute in Washington, D.C., and former director of the office of research for the Internal Revenue Service. For a family with one wage-earner and two children, only Iceland and Ireland have a lower income tax burden than the U.S., according to the most recent data for 2005. http://moneycentral.msn.com/content/Taxes/P148855.asp

MM

To the man standing with one foot in a bucket of boiling water and one foot in a bucket of ice, why are you complaining your average temperature is perfect.

You have proved my oft repeated point made in other posts. 46% of Americans pay zero Federal income tax. Of course the average American pays less in tax than other countries. You can’t pay much less than 0%. But for those in the upper most brackets we pay over 50% in total tax burden. More than other countries.

GNW, RV has covered details far better than I could. I will note that I believe you are cherry-picking your numbers. All working Americans pay things like FICA, whether or not they pay “Federal Income Tax.” Furthermore, income from trusts and stocks and whatnot are taxed at a far lower rate – which means rich people get taxed less on TOTAL income. What would be an acceptable rate for you, GNW? Forget the “45% pay no tax” nonsense and tell me – are you willing to pay more than zero to support American infrastructure? Roads, military, research, etc.? If not, then we might as well abandon this discussion entirely.

MM

I should indeed pay a fair tax on those -infrastructure,military, research etc. But when something is free it has less importance. I won’t forget the 46% because for them lets spend more, it doesn’t come out of my pocket.

There have been surveys fior years and surprisingly everyone - rich, poor, black white- comes up with the same number (approx) 25%. I would be willing to pay 25% of my income in taxes, not 40%.

Kevin, you are quite presumptuous to read into my very short posts what you you have read. How dare you presume to state that I am in favor of stealing from the affluent to give to the lazy? Or, are you just spouting mindless conservative cliches with some personal anecdotes mixed in? Most wealth in this country is inherited. I do not have a problem with people earning or inheriting wealth. I do have a problem with the rich and powerful buying the government in an effort to amass even more wealth and power at the expense of the less affluent. Work used to be valued in this country. Since Carter, it is government policy to hold down wages in order to make investments more valuable. When the government manipulates interest rates to control inflation, they are doing it to keep wages down.

I studied and worked hard all my life. I have 2 bachelor’s degrees, but chose to work hard as a teacher rather than to accumulate wealth. As a teacher, I had a nice pension set up. Had is the relevant term. I am one of the unfortunate many who had health insurance and still lost everything. Next time you chose to lecture me, try arming yourself with some knowledge about someone other than yourself. Facts make a more convincing argument.

In my view, the military in this country has not been used to defend this country since WW ll. Name one war since then in which we have been defending ourselves. The military is a global corporate security force. Since the inception of the Cold War the military has been used to protect the overseas assets of the rich and powerful. One could posit that the rich and powerful are stealing from the less affluent to finance their asset security guards. I am a veteran.

mattro

I will make an analogy to your military comment. Every since we immunized millions with smallpox vaccine there have been no cases of smallpox. What a terrible waste of resources to spend on vaccinations.

And one that is actually said all the time. We are wasting a fortune on building prisons. The crime rate is dropping dramatically as we built more prisons.

The crime rate falls when you imprison criminals.

GNW - thanks for that. That’s also a higher rate than the “flat taxers” suggest.

GNW replied to mattro:

I will make an analogy to your military comment. Every since we immunized millions with smallpox vaccine there have been no cases of smallpox. What a terrible waste of resources to spend on vaccinations.

Translation: We were a pox upon the rest of the world.

@RV

You seem to have missed the point. When surveys are done they ask what is the maximum a person should pay in taxes? The answer as to the theoretical maximum is remarkably similar across all groups. the theoretical maximum is 25%. It doesn’t mean that the people who voted for that are actually paying that, it is their vision. Flat tax proponents, like NJ Sen Bradley, have used the number 19%. I simply said if there is a 38% range that is well above what almost everyone thinks is a fair tax.

Now I know why Motivemagnus is so convoluted in regards to reality.. He/she is a consultant.. The only profession where you tend to not know how to do something, but you know how to do things better.. ;) Just teasing Motive..

GNW. your analogies make no sense. Smallpox was and could once again become a real danger. Prisons are being filled with non-violent drug offenders, and studies have shown that prison capacity and population are not directly related to the crime rate.

Actually, WestTex, I left consulting 12 years ago to get more management experience for precisely that reason – too many of my colleagues has intellectual knowledge but no real experience. At first I didn’t want to go back into consulting, but I found a truly awesome company. And now I know much better what it is like from the inside. More consultants should do the same.

I suggest that Ted Rall’s point here is that there is no such thing as the economy - the economy of the super rich (the one reported in the corporate media) is one thing, the economy of those roasting cockroaches over an oil-drum fire something very different. The odd thing is that the latter group is supposed to react with satisfaction - nay, joy - to news about «green shoots» in the conomy of the former one. But perhaps an extra cockroach will trickle down, after all….

Henri

It is fitting to remember why we are celebrating Labor Day. A hundred years or so ago, laborers worked 60 hours a week. Children as young as 12 were required to work. Labor was cheap, and underpaid. Brave people started forming Labor Unions. Through strikes and getting people who supported labor elected, workers cut the work week from 60 to 50, then 48, and finally 40 hours. Factories were forbidden to employ child workers.

Manufacturers could only produce only a third of what they could before. They were forced to introduce automation and the assembly line to keep production up. This succeeded so well that American manufacturing became dominant in the world, and our country became rich!

During WWII, many workers went to war and we again had a huge shortage of labor. Women were brought into the workforce. After the war, there was a surplus of labor, real wages dropped, and the average Americans quality of life started to drop. Still business did really well. We had the Vietnam war, and another labor shortage., and things improved for awhile. When it ended, we had stagflation until Regan became president. He ran constant budget deficits and put the country into a debt spiral. He gave the money to the rich - the start of the “rob from the poor, give to the rich program.”

When W was elected, his people recalled the Vietnam era. They realized that a perpetual war was the solution, and invaded both Afghanistan and Iraq. They encouraged companies to outsource jobs to Mexico, China, and other far eastern countries. With a $500 B annual trade deficit, the end wasn’t long in coming.

We now encourage companies that export jobs, and punish companies that invest in automation and making our workers more productive. Government is now anti-Labor.

Labor Day was started to honor the Labor movement and American workers, once the best in the world. It is now a very hollow holiday unless we remember the glories of the past and learn the lesson we need to to return to those proud days.