AP survey: US income gap is holding back economy


#1

An interesting addition to the several threads going about economic practices - mimimum wage, trickle-down economics, income inequality, etc.

abcnews.go.com/Business/wireStory/ap-survey-us-income-gap-holding-back-economy-21247960

WASHINGTON (AP) -- The growing gap between the richest Americans and everyone else isn't bad just for individuals.

It's hurting the U.S. economy.

So says a majority of more than three dozen economists surveyed last week by The Associated Press. Their concerns tap into a debate that's intensified as middle-class pay has stagnated while wealthier households have thrived.

A key source of the economists' concern: Higher pay and outsize stock market gains are flowing mainly to affluent Americans. Yet these households spend less of their money than do low- and middle-income consumers who make up most of the population but whose pay is barely rising.

"What you want is a broader spending base," says Scott Brown, chief economist at Raymond James, a financial advisory firm. "You want more people spending money."

continue reading....


#2

Call Homer Simpson.

Let's see, people with less money spend less. People with more money spend more. There's no reason to give the peasants more money because there's no money in that. Or jobs.

And water is wet.

Peace,
Ed


#3

Actually the economists are saying that lower income households spend *more *of their income than do higher income households.

Regardless of that, it does make sense that in a consumer based economy, the more people who have an income, the better off we are. Wasn’t that Henry Ford’s theory? - make sure the workers can buy the product you make.


#4

What is obvious is this: Say you make 100 dollars a week, sure you have to spend almost all of it. If you’re rich and have 1,000 a week, you can spend five times as much, resulting in this: low income people need to spend 98% of their income a week to survive. The rich can spend 50% of their 1,000 and buy all kinds of stuff nobody really needs.

Hey AP. How much will my Obamacare bill affect my disposal income every month? Answer: I’m down to almost none.

Hey businesses. Why don’t you hire more people? That would help inspire consumer confidence.

Peace,
Ed

  • The numbers used above were not actual but the percentages are.

#5

[quote="Mrs_Sally, post:3, topic:348495"]
Actually the economists are saying that lower income households spend *more *of their income than do higher income households.

Regardless of that, it does make sense that in a consumer based economy, the more people who have an income, the better off we are. Wasn't that Henry Ford's theory? - make sure the workers can buy the product you make.

[/quote]

The problem is the stagnation. A large portion of the money in the US is stagnant in the accounts of the Nation's wealthiest. Unfortunately, they aren't the big consumers. There is no growth to be had if that money remains stagnant. If the money is allowed to trickle down, then maybe we can see some real growth as the consumers start spending. Trickle down economics looks great on paper, but when you add in the human factor, there is no trickle… just stagnation.


#6

The wealthy are spending their money and investing it. However, where they are spending and investing is with other wealthy people & corporations. The way money makes it’s way down to the lower classes is through employment. And we all know how well that’s going.


#7

Pick up a copy of the Wall Street Journal. People with money want more money and people who want them to invest will be selling them on anything that promises high returns and low risk. Who cares about trickle down when you can keep trickling up?

Allowed to trickle down? By who? Big money types? They’re gonna keep it and keep investing and it will stay in constant circulation. When their broker tells them to stock up on Euros and medical device manufacturers with strong track records, where will that money trickle down to? The true rulers of this country: Wall Street. Fees, commissions, charges… and new financial “products” like, ohhhh, Credit Default Swaps!! Oh, wait. Never mind.

I know! We’ll start falsely inflating home values!!! Wait a minute… What? That didn’t work out?

Ed


#8

[quote="Dawnia, post:6, topic:348495"]
The wealthy are spending their money and investing it. However, where they are spending and investing is with other wealthy people & corporations. The way money makes it's way down to the lower classes is through employment. And we all know how well that's going.

[/quote]

Very true… and to compound matters, the income they are making from those investments are not treated as income for the purposes of taxation.


#9

So do any of these learned men think that it’s a mere coincidence that this economic misery orrcurred during the Obama administration with the “Stimulus,” billions wasted on green energy companies that went bankrupt, bailing out GM and the ultimate job killer OBAMACARE. There are literally thousands of new regulations spewing out of the swamp that stifle business creation or expansion. Oh and Obama’s refusal to allow the Keystone Pipeline and other energy development on government land, shutting down the Gulf, etc etc etc.

Saying that the rich are getting richer because Wall Street is at record levels is like saying water is wet. The rich don’t have to spend their money as do we mere mortals so much is reinvested but again, in the stock market or other financial instruments. Until the stranglehold the Democrat policies have on the economy loosen up a bit, until we get rid of Obamacare, don’t expect anything better.

I’ve lived through several recessions and my parents through the Depression. Nothing like this in scope and length. We have met the enemy and he is us. The economy is a self inflicted wound.

2014 cannot come soon enough.

Lisa


#10

The economy is a self-inflicted wound? WALL STREET BROUGHT THE WORLD TO ITS KNEES. Just LIKE IT DID IN THE FIRST GREAT DEPRESSION. JUST KEEP HANDING OUT LOTS AND LOTS OF CREDIT !!

Please call the Federal Reserve and ask them why they are printing so much money. Did any of those charged with wrongdoing concerning the Second Great Depression get any jail time? No. Fines. Pocket change.

Ed


#11

The real problem is that, with lower-middle class households (you know, the ones that make just enough to not qualify for any government help), all money is generally spent on non-negotiables (e.g., food, gasoline, rent, household bills, possibly medicine). There often isn’t even money left over for emergencies, let alone clothing or extras. Forget about spending money on many “extras” - there isn’t even money left to save! And simply being able to buy essentials doesn’t really help the economy at all.

Honestly, the reason why employment remains low is due to demand being low. The reason demand is low is because a large percentage of the middle class have seen their gross wages stagnate and their net wages decrease while the cost of essentials has risen. If these employees have received a raise, it is more than cancelled out by the increases in insurance premiums (if they still have insurance through their employer) and/or the increase in food costs, because the raises are smaller than inflation and/or health care costs.

Businesses would be benefitted by self-imposing rules that require set percentages of profit-sharing among the employees of the business. I don’t know what the set percentages should be, but I’ll say, maybe 25% of payroll should be to upper managment, 25% to mid-level managment, and maybe 50% to lower-level employees. Maybe the upper-level percentage should be slightly smaller or larger, I don’t know, but the idea is that it should not only be the upper-level employees who participate in the company’s success and not only the lower-level employees who participate in a company’s failures (by getting laid off without fanfare or parachute). And, it’s possible, that if the employees were paid better, they would, in turn, spend their money at the company they work at, increasing profits for all, and allowing the employers to hire more people.

The problem with so-called “trickle down” economics is that the money hasn’t trickled down - it’s been used solely to make the rich richer.


#12

I don’t disagree with a major CAUSE of the financial collapse but realize that again government policies allowing junk loans (same as the S&L collapse just not as big) to be bundled and sold with we the taxpayers, not the executives, on the hook. The financial industry with a few minor exceptions was bailed out as was GM. That no one went to jail, but instead those like Franklin Raines pocketed millions, is an outrage and a reflection of the corruption of the Justice Department.

That being said, once we shot ourself in the foot with stupid policies, why turn the gun on our head and continue with ever increasing government control whether by a bailout (how many billions did we lose on GM?) or green energy loans to pay off campaign contributors and the stifling of our growing energy sector. The Leftist policies in Washington DC are killing the economy and the country. I hoped we’d just have to live through one term of Soviet Lite but now we’re stuck for another three years.

All you need to do is look at the success stories, the STATES where things are booming. They are NOT those with Democrat governors, high taxes and a fear of fracking. All we need to do is export the same policies that turned North Dakota …NORTH DAKOTA? into the country’s turbo charger and we could beat this rap.

Once the Fed quits printing money we’ll be in real trouble. But even the few who have enough political courage to stand in the doorway and say STOP THE MADNESS! are torn down, demeaned and criticized.

We did this to ourselves in electing a far Left statist. Now we are reaping what the majority sowed.

Lisa


#13

they say that democracy is tyranny of the mediocre. I have been surprised at the quality of the two previous republican candidates in the Presidential race. America pulled the world into the global financial crisis by shady financials and a broken banking system. I note that the new Liberal government in Australia has just bolstered our Reserve Bank’s financial reserves by many billion dollars in the expectation of a fallout from any cessation of quantitative printing of new banknotes in America that are founded on even more debt to China. We are heading for another world crisis and no country will be immune, but those countries supporting their standard of living on massive uncontrolled debt will be hardest hit.
I had hope for the American economy once the housing crisis was over, but massive government social spending without even any fiscal analysis has shattered such hopes.
I look at the declining manufacturing, the bankrupt cities and the crumbling infrastructure and watch your government’s only response is to raise the debt ceiling and I turn off the computer.


#14

The question is are things booming in these states because tax cuts, low wages, and weak labour laws entice manufacturers to locate there? It’s not enough to have a job, if the wages are low, the work place is unsafe, and you have no form of job security. Slavery would get you 100% employment but it wouldn’t better your life.


#15

Every restaurant, bank, store, factory, office, and hospital in my city was started and is sustained by someone wealthy. And most of the jobs in our city are available at these places. There are small businesses that were started by someone with modest wealth (or with a lot of relatives willing to help out!), and these places offer jobs to a few. But the hospital where I work employs thousands and pays living wages and benefits.

And most of the charitable foundations that give funds to everything from hospitals to orchestras to homeless shelters are started and funded by someone wealthy.

And most of the donations of art, music, theater, etc. are donated to the public by someone wealthy. My daughter worked for Shakespeare in the Park in New York City last summer, and pretty much all of the expenses for this were covered by very wealthy people and their foundations. (It’s free to the public–me!)

And even though the wealthy don’t buy the kind of Target and Schnucks junk that all the rest of us buy, they spend a LOT of money and that spending creates a lot of jobs right here in the U.S. No one ships Chinese children overseas to build the big mansions that the wealthy Americans live in. And the wealthy buy luxury cars, boats, clothing, food, recreation, entertainment, etc., and much of this is made/done right here in the U.S.

Open your eyes and look at all the good that wealthy people do. Stop villain-izing them.


#16

Lets see AP polls a lot of leftist economic professors who come to the same brilliant conclusions the Bolsheviks did back in the 1920’s. Take the Kulaks stuff give it to the proles and all will be well. As long as greed and jealousy exist the same old class warfare argument will exist. Who deserves what?

Now facts of life are,

If an executive or business owner cannot see a profit expansion by hiring additional work force there will be no hiring

Create regulations and taxes to stifle and punish achievers and no one will achieve much.

Productivity is the result of a ratio amount produced divided by the labor-hours used. Productivity goes up by increasing the numerator or decreasing the denominator.

Thanks to science and engineering, American manufactures have driven the US to high productivity by decreasing the denominator. HENCE, THE TROUBLE WITH MIDDLE CLASS WAGE STAGNATION.

You know what’s really hypocritical, all this focus on executive pay and no one is talking about the outrageous salaries of University presidents compared to the teaching assistance, big name lawyers compared to law clerks, or Tom Brady’s salary compared to the wages of the hotdog vendor at Gillette field or whatever stadium the Patriots play at .

Thats how you know it is all political b*** s***.


#17

You know what’s really hypocritical, all this focus on executive pay and no one is talking about the outrageous salaries of University presidents compared to the teaching assistance, big name lawyers compared to law clerks, or Tom Brady’s salary compared to the wages of the hotdog vendor at Gillette field or whatever stadium the Patriots play at .

Actually, I have been hearing about exactly those issues in the news. Certainly discussion about University president pay, and amounts given to bug names in sports.

As Cat said, it is true that major philanthrophy in the arts is given by the very wealthy. In terms of ordinary contributions to things like the local food bank, it’s more the ordinary citizen and church-goers more than not.

However, large businesses are now much more focused on executive pay and shareholder payout than the wages and welfare of ordinary employees.

Another Henry Ford quote:
There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.

Today’s version unfortunately seems to be:
There is one rule for the industrialist and that is: Make -]the best quality of /-]goods-] possible/-] at the lowest cost possible, -]paying the highest wages possible/-].

I don’t think that government imposed minimum wages help the situation much, because it is mostly more employment opportunities that help people improve their position in life. However, since we live in a fallen world, and greed is strong, having worker unions or some equivalent has proven to be necessary in many, many situations.


#18

FWIW old man Ford was an entrepreneur who ended up building a mega corporation, he could do what he wanted. Today’s corporations run, by accounting type bureaucrats, whose sole objective is to keep their bosses off their backs. So, if the desire is to maximize shareholder value, by whatever means, guess what……


#19

Red Herring…you are positing a scenario that does not exist. Based on your spelling of “labour” I assumed you are not American and don’t realize that slavery has been outlawed in this country for over a century :D. The reality is that the low tax, business friendly states are booming. Those high tax, anti business (run by Democrats) states, even those with the energy resources that create jobs, are bleeding residents and are losing ground.

The huge and expensive federal and state governments operate as distribution centers for tax dollars but add little to the economy in the form of actual production of products. We cannot tax and spend ourselves into prosperity, something that seems to be lost on those in Washington DC

Let the economy out of jail and keep the bad guys inside.

Lisa


#20

Exactly. So the question shifts to the bosses not the accountants.


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