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Belmont Club

The Problem of Wealth

December 9th, 2013 - 1:32 pm

The Associated Press describes a new problem in Obama’s America.  Wealth is once again threatening to rear its ugly head. You may not realize it, but there’s a danger that as many as one in five Americans may get rich sometime in their lifetimes.

WASHINGTON (AP) – Fully 20 percent of U.S. adults become rich for parts of their lives, wielding extensive influence over America’s economy and politics, according to new survey data.

These “new rich,” made up largely of older professionals, working married couples and more educated singles, are becoming politically influential, and economists say their capacity to spend is key to the U.S. economic recovery. But their rise is also a sign of the nation’s continuing economic polarization.

They extend well beyond the wealthiest 1 percent, a traditional group of super-rich millionaires and billionaires with long-held family assets. The new rich have household income of $250,000 or more at some point during their working lives, putting them – if sometimes temporarily – in the top 2 percent of earners.

The new survey data on the affluent are being published in an upcoming book, and an analysis by The AP-NORC Center for Public Affairs Research provided additional information on the views of the group.

In a country where poverty is at a record high, today’s new rich are notable for their sense of economic fragility. They rely on income from their work to maintain their social position and pay for things such as private tutoring for their children. That makes them much more fiscally conservative than other Americans, polling suggests, and less likely to support public programs, such as food stamps or early public education, to help the disadvantaged.

Last week, President Barack Obama asserted that growing inequality is “the defining challenge of our time,” signaling that it will be a major theme for Democrats in next year’s elections.

The story relates how “after growing up on food stamps, [a man named] Lott now splurges occasionally on nicer restaurants, Hugo Boss shoes and extended vacations to New Orleans, Atlanta and parts of Latin America.” Clearly this does not bode well for income equality if your goal is income equality.

Quite apart from being distasteful, it is also destabilizing. Nobody — at least nobody of quality — likes a parvenu. By definition income equality refers to the distribution of income. The only ways to achieve it are to reduce income variance or apply some redistributional mechanism to level things off.

What is more some of those newly wealthy will also lose their fortunes some time in their lives. The process of the poor striking it rich and the rich going bust creates a turmoil in the income structure that is inimical to social stability. How can you plan for the future when you don’t know what it is?

During the 2008 presidential campaign Barack Obama had a conversational encounter with Samuel Joseph Wurzelbacher, who became known as “Joe the Plumber” that captured the dilemma. When Joe the Plumber declared his desire to earn $250,000 a year Obama replied:

It’s not that I want to punish your success. I just want to make sure that everybody who is behind you, that they’ve got a chance at success, too… My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. If you’ve got a plumbing business, you’re gonna be better off [...] if you’ve got a whole bunch of customers who can afford to hire you, and right now everybody’s so pinched that business is bad for everybody and I think when you spread the wealth around, it’s good for everybody.

But the difficulty, Wurzelbacher later told Katie Couric, was that in order to “spread the wealth around” you had to tax the rich. And who exactly were these rich who should be taxed?

Asked whether Obama’s proposed $250,000 tax threshold would affect him, Wurzelbacher replied: “Not right now at presently, but (…) he’s going to do that now for people who make $250,000 a year. When’s he going to decide that $100,000 is too much? (…) You’re on a slippery slope here. You vote on somebody who decides that $250,000 and you’re rich? And $100,000 and you’re rich? (…) Where does it end?”

It ends when there’s “income equality”.

A quarter million a year now marks the danger threshold, the point at which differences become undesirable. Ironically one person who might actually not consider this a problem was the arch Communist Deng Xiaoping. He is famous for having said: “To get rich is glorious!”. This is now disputed.

Deng is commonly quoted with this phrase in western media but there is no proof that he actually said it. However, this phrase in Chinese is more accurately translated as “wealth is glorious,” where wealth can have a very general meaning, including knowledge, personal relationships, family: anything of value. Understood this way, the quote is not as directly controversial as a ideological/political statement, and so it is not hard to believe that he really did say this.

The probable truth is that wealth is both glorious and shameful. It’s glorious for the IRS so they can have something to tax. It’s shameful for the individual since he must be encouraged to “spread it around.”


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Top Rated Comments   
Everyone seems to have the two truths here.

Socialists confuse Capital, that is saved wealth to be used and invested to create more wealth, with Swag to be distributed to vassals and consumed.

American Socialists serve to truly rich, what FDR called the "malefactors of great wealth" by rallying the masses against the productive middle class. An income of $250,000/yr is not that of the rich and privileged. It is far more than most of humanity have ever known but it does not admit one to the security of great power except as a servant. Except for a few rentiers that is the income of productive professionals. The truly rich, with assets over $20,000,000 and an income over $2,000,000, are not threatened by the American Socialists.

The natural pattern of politics is the alliance of a wise ruler with the productive middle classes in opposition to the entrenched Aristocracy/Oligarchs, who lead ally with and manipulate the ignorant peasantry. When the center or Monarchy is captured by or allied with the Aristocracy or the Oligarchs then the system fails. That has happened now in America and happened in England when Charles I joined with the Lords against the Commons in the Civil War. When the masses turn on the Aristocrats at the same time then you have the conditions of the French Revolution. If the Aristocrats accept the rise of the productive Merchants as sponsored by a wise Executive, and allow wealth and opportunity to flow to the peasants who are freed from subservience, then you have the conditions of the English Restoration Settlement. That model for success was also followed in America before Obama.
45 weeks ago
45 weeks ago Link To Comment
A ditch-digger with heavy equipment earns a lot more than a ditch-digger with a shovel.

The difference is capital. Somebody bought heavy equipment with capital.

Capital is extra money.

The ones with extra money are the rich.

Some rich guy figured out a way to make a ditch-digger more productive than he had been, to make himself richer.

But it also makes the ditch-digger richer.

The extra ditch-digger income is trickle-down.

Trickle-down is not dimes falling from the pockets of the rich but the return to wisely used capital.

When you tax the rich more, their living standard doesn't change. Rather, their investment declines. The extra money goes first.

A tax on the rich is a tax on the earnings of ditch-diggers, not a tax on the life style of the rich.

Think of capital, extra money, as seed corn. Seed corn is extra corn that's not eaten. It's what gives you much more corn next year.

Taxing away the seed corn to distribute it as food is disastrous.

If somebody says, "At some point, you have enough money," he doesn't understand that money beyond enough money is the seed corn.
45 weeks ago
45 weeks ago Link To Comment
I'm strongly in favor of the progressive income tax. Tax the daylights out of the Progressives.
45 weeks ago
45 weeks ago Link To Comment
All Comments   (42)
All Comments   (42)
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The part that really got me was the statement “This little-known group may pose the biggest barrier to reducing the nation's income inequality.”

Barrier? Why? Because they actually worked and earned their money? Because they escaped the lower classes and thus are not beholden to the government? And does this mean they are more likely to favor Tea Party ideas than are Inherited Old Money, Race Pimps, or the Hollywood Rich?

Or is it simply that the fact of their existence makes the whole OWS idea look like BS?

In Hillarycare they hit upon the idea that health care providers were not producers but rather more mouths to be fed by the government. Have fewer doctors and other medical professionals and the costs of health care has to go down. Sounds nuts, but in fact that is a fine example of the kind of thinking the Denizens of DC do every day. They ask “How many people do we have to pay?” rather than figure out what kind of capability is required to perform a task. Fewer producers that have to be paid means more money available to buy non-producers in order to buy votes. This is the same thought process at work. The newly rich who get into the “2%”, the Joe the Plumbers, are not “theirs” and thus a problem, being people who neither can be bought nor are a source of donations.
44 weeks ago
44 weeks ago Link To Comment
For some years now "cranks" have claimed that the truly-rich are in cahoots with the socialists, which is why the threshold for what the "progressives" consider "rich" is set so low. The idea is, according to these "nut cases," ithat the truly-rich, or mega-rich, want to crush any potential opposition/competition by making it difficult to move up from mere affluence to outright wealthy status.

I no longer dismiss this as a nutty theory. I think it has some validity. There are many ways to show that, if not an actual and comprehensive conspiracy, that it is a mindset that has been handed all sort of tools to accomplish this goal.
45 weeks ago
45 weeks ago Link To Comment
A quick thought on how the lower middle class is being screwed by the Feds. These folks pay very little INCOME tax, but they do incur payroll taxes, supposedly for Social Security and Medicare. However, as we all know, those programs have tens of TRILLIONS of dollars in unfunded liabilities. In reality, the payroll taxes of the lower middle class are not paying for their retirement security, instead those funds are squandered today on the frauds & fantasies of the Crony Class.
45 weeks ago
45 weeks ago Link To Comment
Social Security has been described as a program in which black males pay money to elderly white females. A black male is far less likely to live to see his SS benefits than is a white female.
44 weeks ago
44 weeks ago Link To Comment
It's interesting to think about what $250,000 means now. In 1969, when I bought my first house for $35,000, gold was $35/ounce. In 1968 when I bought my first new car, a Mustang convertible, it cost $3050. At that time my income was about $20,000/ year. Do a little calculation. That $20,000 in 1969 dollars was worth about $250,000 now. Congratulations ! Progress !
45 weeks ago
45 weeks ago Link To Comment
--nice expression of the 'fifty years ago, a dime was worth a dollar' rule of thumb.
44 weeks ago
44 weeks ago Link To Comment
All Obama wants to do is bring the Kulaks to heel.

And that, combined with the lust of the MSM to join the Crony/Commissar class, explains why the Tea Party was singled out for demonization as soon as its initial successes showed that free individuals were organizing against the Socialist/Chicago command-and-control mob.

Not for nothing has the IRS set its sights on those Kulaks, and demanded their donor lists.
45 weeks ago
45 weeks ago Link To Comment
"My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. If you’ve got a plumbing business, you’re gonna be better off"

Spoken from a man who has never worked for a living
45 weeks ago
45 weeks ago Link To Comment
Why was 250K set as the threshold at which someone is considered rich and higher tax rates/additional Obamacare taxes kick in? Thinking back to the time all this was being debated in 2009, there were two camps one of which wanted to set the limit at 1 million and the other at 250K.

I think the real reason that the limit was set at 250K, is that is near the point at which the Social Security 13% tax on wages phases out. If the Social Security tax cut off is at 112K, then a two income family only gets to keep the extra 13% on their wages between 225K and 250K before higher taxes kick in.

Given the fact that the Social Security wage limit creeps up every year, it won't be long until there is no window left. I think the Alternate Minimum Tax is also structured to kick in at about this point. The net effect being that you can't escape paying 35-40% of you income in Federal taxes.

Despite collecting more revenue than ever before, the Federal Government continues to run up trillion dollar annual deficits. You can't squeeze blood out of a turnip, but I'm sure the Federales are willing to give it a go.
45 weeks ago
45 weeks ago Link To Comment
Cua $250k was the number in about 1987, which is the last time Obambus formed a new concept.
45 weeks ago
45 weeks ago Link To Comment
Why describe people earning 250K are rich? It is to prepare the battle field for a tax hike on those earning income between 250K and 1M. Simple. It is class warfare, or shall I say, war against the makers.
45 weeks ago
45 weeks ago Link To Comment
What are both sides in America fighting for? The right to imprison (use the government against) those they don't like. Those that fight for liberty are universally denigrated or at minimum declared foolish.
45 weeks ago
45 weeks ago Link To Comment
Everyone seems to have the two truths here.

Socialists confuse Capital, that is saved wealth to be used and invested to create more wealth, with Swag to be distributed to vassals and consumed.

American Socialists serve to truly rich, what FDR called the "malefactors of great wealth" by rallying the masses against the productive middle class. An income of $250,000/yr is not that of the rich and privileged. It is far more than most of humanity have ever known but it does not admit one to the security of great power except as a servant. Except for a few rentiers that is the income of productive professionals. The truly rich, with assets over $20,000,000 and an income over $2,000,000, are not threatened by the American Socialists.

The natural pattern of politics is the alliance of a wise ruler with the productive middle classes in opposition to the entrenched Aristocracy/Oligarchs, who lead ally with and manipulate the ignorant peasantry. When the center or Monarchy is captured by or allied with the Aristocracy or the Oligarchs then the system fails. That has happened now in America and happened in England when Charles I joined with the Lords against the Commons in the Civil War. When the masses turn on the Aristocrats at the same time then you have the conditions of the French Revolution. If the Aristocrats accept the rise of the productive Merchants as sponsored by a wise Executive, and allow wealth and opportunity to flow to the peasants who are freed from subservience, then you have the conditions of the English Restoration Settlement. That model for success was also followed in America before Obama.
45 weeks ago
45 weeks ago Link To Comment
The problem of wealth is that so many people measure wealth in dollars and cents. They value "success" as fame and fortune.

Success is being able to look yourself in the eye in the mirror. I got paid zero for coming up with the idea of the venturi tube to fight the hell fires of Kuwait, after Saddam torched 750 Kuwaiti oil wells during the Gulf War. But I can take satisfaction in seeing how they proliferated among the well control teams in the desert. Despite what Obama says, I can truthfully say "I built that." Where once there was a black, oily cloud over one thousand miles long, the sun now shines.

I helped do that. That was a success.
45 weeks ago
45 weeks ago Link To Comment
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