Gin One for the Gapper

Don't invade my bedroom, asshole. Didn't you see what happened to Ravi?

Today I’m going to attempt to go biggie size, stay serious and explore a topic for which my brain is three sizes too small. If you’re the sort that enjoys the crashes more than the actual racing, then this post may be for you.

The topic? “Wealth gap.” Or, as Wikipedia likes to call it, “economic inequality.”

The Christian Science Monitor reported recently that the wealth gap hasn’t been this bad since the “roaring 20’s.” Obama says the gap is “unfair.” And Romney supposedly represents the side of “hard work and business savvy.”

Well start with what I’m going to call my “opinion hypothesis.” This is a collection of unsubstantiated and vague feelings that, when taken together, represent an opinion from my gut. I’ll share it with you before I dig across the net for graphs and actual facts. Then we’ll see how divergent the two things really are.

My qualifications? Absolutely none. I’ve merely been alive in the time period I’m about to discuss and I’ve lived with a shrinking discretionary budget. As I am often wont to say, “I used to be somebody.” Other than that, I have no special education or training on this topic. I’m just a person who strives to be a critical thinker, unbiased, and think logically. I may suck at all three, but those are my goals.

Tom’s Opinion Hypothesis: Wealth Gap
May be loosely based on actual facts but is not guaranteed. This comes from my gut. Prior to doing any actual research I’m writing this part from memory.

Back around the time of Ronald Reagan or so (even if he wasn’t the brainchild), the phrase “Trickle-Down Economics” entered our nation’s vernacular or at least my consciousness. In the early 20th century the marginal tax rate on the wealthiest Americans peaked around 90 percent and has trickled down itself ever since. We’ve all seen that graph. Rumor has it that The Beatles found themselves in a 95% tax bracket, thus prompting the song Taxman. It is no coincidence that the math on the lyrics, “There’s one for you, nineteen for me” works out to be 95 percent.

Since the 80’s or so, it is my impression that the gap between the wealthy and poor has increased. It is also my impression that the margin tax rate on the wealth has been further reduced. (George W. Bush tax cuts?) Might there be a coincidence?

Meanwhile, the media reports that the buying power of minimum wage has steadily decreased for decades. Corporations have shifted American jobs to other countries. Incredible wealth has been stolen via excessive risk and basic human greed. The rich got rich and the poor got poorer.

Amazingly, after an incredible period of time, society has finally begun to notice. The “occupy” movement has made popular the notion of the “99 percent.” Are we on the cusp of some sort of change or will the people march resignedly back into their corrals?

The question I’m stuck on: What is the argument in favor of an increasing wealth gap?

I recently heard about something that seemed to prove another of my hypotheses. It is called the Misery Index. It’s an economic indicator that is derived by adding the unemployment rate and the inflation rate. I’ve always believed that wealth was tied to the crime rate, and the Misery Index seems to provide a bit of evidence in support of this belief:

Misery and crime
Some economists posit that the components of the Misery Index drive the crime rate to a degree. Using data from 1960 to 2005, they have found that the Misery Index and the crime rate correlate strongly and that the Misery Index seems to lead the crime rate by a year or so. In fact, the correlation is so strong that the two can be said to be cointegrated, and stronger than correlation with either the unemployment rate or inflation rate alone.

Source: Wikipedia – Misery Index

Oh heavenly magic elixir, or what I call "thinking juice." It's what I use when I'm trying to think the big thoughts, like macroeconomics and shit.

In general, I give humans a bit of credit. I think that, in general, most of them want to lead fulfilling lives of comfort and ease and aren’t overly motivated by excessive greed. Clearly there are always going to be exceptions, but in general, a reasonably happy person with enough of his/her needs met isn’t going to risk all that by adding the element of crime into the mix. Yes, there will always be crimes of passion and sociopaths, but in general, I believe that the more you need the more likely you are to turn to crime as a viable option. I think the Misery Index provides evidence that this is true.

From the mid-60’s to 2006, the “real minimum wage” (adjusted for buying power) dropped by approx. 40 percent. (Source: OregonState.edu graph.) Yes, the graph shows a recent uptick, but my guess is that is the result of a recession dragging everyone else down, not the bottom being brought up in any way.

Thanks to Mitt Romney, a man with a net worth of $190 to $250 million, I know now things like the capital gains tax rate is 15 percent. (I mean, how in the name of fuck would I know it any other way?) Mitt, as we’ve learned, don’t have a regular job. He doesn’t go to work for 40 hours a week (like at the Taco Bell) and earn an hourly wage. So he doesn’t earn money or pay taxes like the rest of us do.

Instead, he invests money and pays taxes on what he earns from those investments. I’d try this, too, but it requires actually having some in the first place. Anywho, he pays a rate of 15 percent on those earnings, which are known as “capital gains.”

Me? I’m just a fucked up slob who hauls his ass to work five horrid days a week and takes orders from a disgusting asshole who is rude as hell, and an idiot to boot. And for that glorious service in the name of the greater good, for adding that “value” to society, I pay a higher tax rate than Mitt Romney.

Yeah, I like this system. I like it a lot.

The premise has always been that you have to give the super wealthy an incentive to invest, because said investment is vital to the operation of our country. They aren’t motivated by the things that motivate you and me, like having actual food to eat or a roof over your head for the evening. No, they have to get something out of it or they won’t do jack shit. And that’s the purpose of having such a low capital gains tax rate, to motivate them to do something that, in theory, will eventually pay off by trickling down to the little people. I wrote a little piece about this once called In The Service of the King. If you stay steadfast, loyal and true, you just might get to suckle some flavor from that previously chewed piece of gristle leftover from the Texas-sized steak they enjoyed for their afternoon snack.

Worse, a study broke last month that caused a bit of a stir in the media. Basically it found that the “elite” (aka wealthy) in our society are the sort of people who are more likely to lie, cheat and break the rules. In general, they are the more unethical among us. True, the thesis didn’t prove a causal relationship, but it may be as simple as the fact that those who are willing to lie, cheat and steal are the ones who are more likely to be financially rewarded. I know that has been the case with the last few bosses I have worked for. The only justification they operate under is, “Will it fatten my wallet?” If so, then by all means, lie to everyone. Add 15 extra years to how long you’ve been in business. Lie to your customers about where your products are made. (Go USA!) Photoshop (laughably badly) fake pictures of buildings you have never been in and put them on your website as your HQ. Anything goes as long as it makes you a buck. Where does that leave the simple and humble honest folk? On the bottom and out in the cold. You know, the place where they belong.

I’ve always heard about what makes America great. But what if that was just a bill of goods we all got sold? What if it all really come down to who was willing to lie, cheat and steal the most? The news from last month, if it has any weight at all, lends some credence to this thought.

And we’re told we can’t raise taxes on the rich. Why? Because they are such loyal Americans and have been so blessed by this land of bounty and our way of life, that they’ll simply pull out and go all foreign and shit. They’ll bolt outside of our borders. Now that is truly inspiring. I can’t think of a better class of people where we can put all of our eggs in one basket. Can you? It makes me feel all warm inside and weak-kneed just knowing that they are near. Bask in their goodness.

While the poor were getting poorer the rich were getting richer. And, like the theory suggests, did they use that bounty to invest? To do the right thing for the good of all Americans? Did they put America first? No, actually. It turns out that they just held on to it in their cold dead fingers and kept it for themselves. If the last three to four decades have shown anything, it is that trickle down doesn’t work. It just makes the rich richer.

Now I can’t help but wonder. If you give money to the rich and the rich just keep it, doesn’t that singular fact utterly sink the idea of trickle down? And who do we know that burns through money as fast as they can get it? And in most cases, faster that they get it? (Aka “debt.”) Oh yeah, the middle class! Find a way to get more money into their hands and viola! You’ve got yourself the most effective way of infusing money into an economy that the world has ever seen. It almost makes my head spin to even think about it. Have you seen the lines of people signing up to convert their iPad 2’s into iPad 3’s? And even when quizzed. they can’t explain why they want to, or how the new gadget is going to improve on what they already have? Now those are the folks who need to have more money. If, that is, you want it pumped back into the economy.

So, that brings me back to my main question. What about the wealth gap? Is it good? Is it bad? What do people think and what are the arguments in favor of it being a good thing?

The Christian Science Monitor did a poll and asked people, “Would reducing the income gap between the wealthy and the middle class make the economy and society better off?”

51% said yes.
40% said no.
9% said “not sure” or refused to answer.

Interestingly, 72% of Democrats said yes and 57% of Republicans said no. And, not too surprisingly, those with the lowest incomes were more likely to say yes. The more you made the less likely you were to agree. (Source.)

The facts don’t bear out the promise of trickle-down economics, nor the benefits of reduced taxation of the rich. The last four decades of data poke ample holes. We are where we are. We’d be better off with less of a wealth gap and more money in the hands of a wider group of people. It makes no sense to let it pool with the most unethical among us who do no actual work, don’t actually produce anything, and add the least “value” to the system. There’s a word for that sort of thing and that word is “parasite.” So why are they the ones who are most rewarded?

Who can answer my question? What are the benefits of an ever increasing disparity in the distribution of wealth?