A Few thoughts about the Rich, the Middle Class and the Poor

© 2014 Rick Adamson

By Rick Adamson 9.30.14

Thoughts about the reports that most of the wealth created over the last 6 years has gone to the richest 1 percent of the population, that the middle class is stagnant and the poor have gotten poorer. I have no reason to doubt that the reports are true. But, unlike some people I have talked to, I do not blame the rich or assume that they did anything against the law.

Some of the reasons for this dilemma follow:

1. In recent years much of the wealth created in this country has been in the financial area.  Just look at the stock markets.  They are in record territory. This is an area of the economy where wealthy people tend to play while most everyday folks do not. So those of us who do not play the markets do not benefit from its gains while the 1 percenters do.
2. Big corporations have been earning record profits.  You see, they are able to meet the demand for their products with fewer workers, so they are not hiring many new employees, resulting in higher profits.  This contributes to the rising stock market as well as to the tremendous salaries they pay their executives. Just like in athletics, when things are going good (profits) the coaches (executives) get the credit and are paid respectively. Again the 1 percenters benefit. In addition, there has been a lot of chatter about corporations moving overseas in order to reduce their U.S. taxes and others who hold massive amount of money overseas for the same reason.
3. The spread between what financial institutions pay for their money (savings accounts) and what they charge for loans is at historic levels. One institution just offered to pay me 1 percent per year if I would purchase a certificate of deposit from them and at the same time they would charge me 18 percent per year if I borrowed money from them (credit card). That is a 17 percent spread which is huge when filtered throughout the economy. The 1 percenters gain once again.
4. Technology has also played a role. Over the last six years several billionaires and many millionaires have been created due to technology companies going public.

It is easy to criticize these folks because they are making tons of money while the rest of us are taking a hair cut. However, for the most part, their activities are legal and even encouraged by FedGov. I do not blame these folks for, as long as they comply with our laws, attempting to make a profit. If you do, consider when it was that a poor person offered you a job.

The problem is with the laws and FedGov policy. So let’s talk about some changes that should be considered:

1. Get people back to work. Jobs are created by businesses and uncertainty is the largest nemesis of business.  Business is all about taking risks and they want more certainty in the economy in order to feel confident about expanding and hiring more employees.  This could be done by-
• Repealing Obamacare. This law has resulted in more uncertainty than any law in history.  It has resulted in uncertainty about costs which has resulted in reduced working hours for the employed, more part time jobs and a reduction in full time work. It has been terrible from the point of view of the economy. It also discourages workers from seeking more work. See how here…  Read more…
• Changing the laws that encourage corporations to move overseas in order to reduce U.S. taxes. This reduces U.S. jobs.
• Reducing the corporate income tax rates on money parked overseas.  The money will come home and be reinvested which will create more jobs.
• Approving the Keystone pipeline.
• Reducing the red tape involved in obtaining permits in order to drill for oil and gas on Federal land.
• Cutting back on the number of regulations coming out of Washington, on a daily basis, which create uncertainty and inhibit business expansion.  For example, FedGov’s war on coal and truckers.
• In short, change FedGov’s attitude from anti business to pro business.
2. Stimulate demand for U.S. made products and services-
• Place selected tariffs on products being imported from China and elsewhere which result in the elimination of U.S. jobs if their governments’ subsidized the production of said product. For example, 40 percent of the profits reported by Chinese steel makers come from subsidies from the Chinese government, not real profits at all.
• Aggressively encourage exports. Some 70 percent of the U.S. economy relies on domestic consumption.  If exports were increased we would be less susceptible to domestic consumption patterns.
• Reduce the corporate income tax rate. This will allow companies to reduce the price of their products which will stimulate demand.
3. Increase peoples’ pay.  The majority of people today are not happy with the economy and wonder where the economic recovery went.  That concern is actually what prompted this article.  The reason for these feelings is probably because folks have not seen any increase in their paychecks and have not for many years. This is due to many reasons, some are which have been discussed, but I believe that the labor force has undergone a fundamental change over the last 20 years due to technology and the exportation of jobs to lower cost countries, among other reasons. Many of the jobs that existed when our fathers and mothers were working simply are no longer available. Here are some things to think about-
• The required labor force of today is more skilled than that of the past so workers have to attain more education/skill.
• Some selected tariffs, as discussed above, which would fight against unfair competition would help.
• A robust economy would help and FedGov could promote that by becoming more pro business and reduce its’ regulations. Reduced regulation would help get FedGov’s boot off the neck of the economy.
• Increase the minimum wage although we may need two different rates. Read more…
4. Adopt the Fair Tax Plan. This would reduce working peoples’ income and social security tax to zero. They would have more money to spend which would stimulate the economy. Read more…
5. Reform our welfare system in order to encourage work vs. the current system which discourages working and seriously study the causes of poverty in an effort to reduce or eliminate it altogether.  Read more…
6. Consider providing free or subsidized college/technical education to citizens who want it.
7. Shrink the size of FedGov by restricting its influence to areas specifically given it by the  States and the People (the Constitution).  Article 1, Section 8 lists just 18 specific areas over which the Congress was given legislative authority, however, FedGov has vastly exceeded its mandate and needs to be restrained. Read more…

Some folk’s say that is all fine and good but how do we change the laws when so much control is in the hands of the 1 percenters and their crony politicians? Here are some thoughts:

1. Congressional term limits.
2. Regulate lobbyists out of business. See more here…
3. Encourage every citizen of voting age to register and vote but require a picture ID (which would only be issued to citizens).
4. Campaign finance reform.  See one example here… Consider only allowing political contributions to be made by citizens of voting age. 
5. Get FedGov out of our day-to-day affairs (see 1-4 just above)
6. Require a period of national service of every young citizen including some education in U.S. history and civics.
7. See some additional thoughts on Government here…

 GOD Bless America