Rich Getting Richer, ever wonder why?

Poor people get rich regularly in this country. Most rich people today are first generation, rich. It happens several different ways, the most certain being saving over time.
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Many times I have been characterized as a "pit bull", most think it is an insult, I don't. Your only real option is to ignore me. My wife can slap me when I get fixated, you can't

 

There are new rich being created all the time. There is turnover. There is a cycle. A person makes a boat load of money and then the focus changes and then new people come along and make more. if your view was true, that would not be the case. To simply illustrate what I mean look at the top richest people today compared to 10 years ago:

http://www.forbes.com/2001/06/21/billionairesindex.html
http://www.forbes.com/wealth/billionaires

Depending on how you look at the top 10 list - there is about a 50% turnover.

A progressive tax system hurts those who are poor wanting to get rich more than it hurt helping the rich stay and get richer.

I suggest a simpler flat tax system would do more to even the playing field. Rich people have more tax advantaged ways to invest and in doing so they can generate extraordinary returns to available to average people.

In some countries and under certain circumstance yes - but not all. And it does not explain widening gap.

I understand your point but in modern times that is simply an excuse. Even if you can not invest in the company you work for through some type of payroll deductions - many companies offer DRIPs (Dividend Reinvestment Plans) where an investtor can start by purchasing one share direct and they have dividends reinvested and a monthly amount added, it may not go as low as $1 but it may be $50.

http://articles.moneycentral.msn.com/Investing/SimpleStrategies/InvestOneDripAtaTime.aspx

I think, perhaps, the real issue is that many poor people may not be aware of their options and the long-term impact of acting on those options.

From the same article cited above.

 

There is nothing I have ever written that supports this statement.

My view is that everyone can "have it".

Some are lucky. Some, as in my example, may simply act directed by how they are incentivized to act - i.e. if tax policy forces wealth preserving and wealth creating actions, those subjected to those incentives get richer than those who don't.

I have a bias against aristocracies and the "elite" either old money "elite", pseudo-intelectual "elite", or career political "elite". I know you don't read what is written, but others who actually read may know that about me.

This is your sad view, not mine.

Most people don't fail. Even some poor people I know are happy with their lives and the choices they have made. I think it is the pseudo- intellectuals and career political classes who thrive on class warfare and try to make people feel bad about not being Bill Gates. I know a lot pf people who would never want to be Bill Gates or even the guy earing a high income trying to live a high income life-style.

 

ace, the trick with you is that you don't seem to quite get the stuff that you write. you don't understand your own framework. it's remarkable. you say one thing and then say you say another. you like to act as though you're advocating some make-believe everyman, but in fact you articulate--routinely---a quite hierarchical view of the world. when you're called on it, you always always revert to presenting yourself as misunderstood, as a victim being put upon by the Other, who you always position as belonging to some other, equally imaginary, elite.

or maybe you really do spontaneously reproduce point for point over and over the exact political line of the far right. like magick.

lately, i've been reading a book by jacques ellul about propaganda. it uses the americans as a model. one of the keys to successful ideological indoctrination is the substitution of a vague imaginary context for reality. in that vague, imaginary world, everything is very simple. inside that space, the domination is total. but it doesn't require recognition on the part of the dominated. in fact, the opposite is true: the more entirely subordinated someone is to a political ideology, the more vociferous they are in asserting that they're not. and being dominated in this way doesn't require consistency of thinking, either internally or across registers--that is between the imaginary world as you present it here and that imaginary world as you think about it, or between that imaginary world and the rest of your life.

of course, if the above is the case you'll deny that it applies to you.

but it does.

 

Just the tip of the iceberg so to speak, the point is that for many people they start poor, get rich, it stabilizes, they get relatively poorer, and die. then some in the next generation comes, they start poor, get richer than the previous generation, it stabilizes....

I would add, return on investment. If I can get 20% compounded after tax, and you get 10% - I will significantly get richer over time than you. The guy who get zero forever will be in poverty.

Government in my view contributes to rich people getting richer through poor tax policy that gives unbalanced and unfair tax advantaged incentives to rich people.

My first job was at a McDonald's and I spent a good portion of my life under 22 in poverty. I graduated college in 1982 during a recession, the first job I had lasted 30 days and I was unemployed for about 6 months after that. My work at McDonald's starting in high-school not only helped my pay for college but I had money saved to live off of until I found a real job. I will forever be grateful to McDonald's - so I am the wrong person to talk to about what people can't do working at the company.

I think, even with our exchange giving additional insight, I have a good understand why the gap is widening. I approached this with a point of view and an open mind. Now I would say my point of view is solidified at this point.

How is this possible? I know in my case I saved, invested, put everything at risk in my business, business goes bad, etc. and I am starting over. And I know what to do and I am confident I will recover. But if you never put everything at risk in a single investment that went bad, how can you be at $0, unless you simply don't save and invest.

Two of my favorite books:

The Millionaire next Door.
Rich Dad, Poor Dad.
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Unless you get more specific with some examples, I really can not respond to your broad general comments.

I am not a professional communicator, and I admit not even a good writer. I suggest that if you think there is a contradiction in what I write that you ask about it.

 

http://www.washingtonpost.com/blogs...harts/2011/09/13/gIQANuPoPK_blog.html?hpid=z1

 

the link is to a series of charts from the us census that show income stagnation as the dominant feature of the past 40 years of neo-liberal rule, except for the top end. there's no evidence of the kind of socio-economic mobility that ace likes to muse about in statistically significant terms. this isn't to say there is none, but it's not the experience of most people. this is why i characterize almost everything ace writes as metaphysics. it's got more in common with horatio alger novels than with material reality in the actually existing world.

 

Bullshit. There is some mobility between the rich and the ultra rich, but to try to spin that as poor people actually becoming rich, that is bullshit. And this isn't a matter of opinion, it is a matter of measurable fact.

Less than 20% of kids born to parents in the poorest quintile of income ever rise above the middle quintile. Some 15% reach the middle quintile. The rest, the vast majority, stay poor. Only about 1% of kids born into the lowest quintile ever reach the top 5% in income in the US. On the other hand, 90% of the kids of people on the top 5% of the income distribution stay middle class or richer, with some 50% staying on the richest quintile.

The majority of the intergenerational mobility in the us is between what we could call lower and upper middle class. Poor kids rarely become rich adults, and vice versa.

 

I enjoy statistics.

check this link out, measures net worth as opposed to income. Income can be pretty meaningless depending on how it is calculated and how it is defined. For example Warren Buffet typically only draws a $100,000 annual salary from his business. His real money comes from capital gains. People with capital gains choose when they turn capital gains into income, salaried people don't have that option.

http://www.census.gov/compendia/statab/2011/tables/11s0720.pdf

In particular look at table 720, at the bottom. Renter net worth compared to owner net worth. In 1998 renters were at about 10.7% of owners. In 2007, 9.1%. This most likely before the bulk of the real-estate correction. The separation is big but the change is not and most likely in the favor of renters since 2007. If you do the same with white (non-hispanic) v. non-white, the numbers are 29.8% in 1998 to 33% in 2007. Gap gets smaller. However, you would never know that. And your data suggests the opposite. I wonder why?

Again, at the start of this I made clear - if the rich are getting richer and then resumed under the assumption they are.
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This is simply the normal lifetime pattern for typical people in more or less free capitalism industrialized countries. Most people start at low or no income, they reach a peak, stabilization, and then decline based on consumption of life savings. In the US each succeeding generation surpassed the previous.

It is clear we will not resolve our differences on this point. I believe people are rational and act accordingly. Given the proper incentive even poor people will act in a manner that if nothing else forces them to create wealth.

My son is going to enter college in less than 4 years. I have been and I am planning for the expense. Included in my planning is maximizing our ROI. One option is two years at a local Junior College it has the potential of cutting the costs of his final degree in half.

Another thing is tax deferred savings, and this is part of my point - when my net worth and income was higher the value of contributing to the account was higher and I did. Now, with lower income student loans become more attractive - however, in the long-term savings would be better. However, the system is structured all wrong for real wealth creation. The incentives favors the rich to do the right thing and the poor to do the wrong thing. I am repeating myself, perhaps the point will never be clear.

 

If you say so. But, i guess we first need to agree upon what is "rich". I guess I have to go back to using quotes around "rich". On a normal bell curve if there are 4 standard deviations on each side, I would say the top two on the right are "rich". The middle two I would call middle class. The Two on the left, poor. And the other two, either almost middle class or almost "rich".

In terms of income this may be true. However in terms of net-worth I doubt it. For example I know people who never made more than about $40,000 a year, who own their home, own vacation homes, own cars/boats/RV's/motorcycles, travel, put kids through college, have more income in retirement than they need and will leave money for the children and grand-children when they die. Your statistics don't account for this.
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I think you are being obtuse on this point. Look at the pattern of your parents or grandparents earnings and then let's discuss.

 

are these graphs inflation-adjusted ??

 

I think personal choice is more important than statistical data that has no measures for quality of life. The rich may be getting richer, but to the folks in Timmins they may not care. For everyone else, for example in our country, if you own a home and are in a 35% tax bracket with a mortgage you effectively pay $.65 on the dollar for interest, but if you rent you get no such break. The property owner over time gets richer, the owner of the rental home gets richer, the renter gains no wealth from paying rent. Our tax code at work.

I am referring to a cycle. Rich or not rich, peak earning years occur when a person is between 40 and 60. Then when in retirement earnings from work income drops or stops completely. Historically each succeeding generation earns more than the previous one. This cycle is true with rich/middle class/working poor.

FYI another favorite book of mine: Die Broke by Mark Lavine. That is my plan.
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There are plenty of other legitimate things the charts are not adjusted for though. Even something as simple as paid holidays/vacation can have a measurable impact on the data.

 

First do you acknowledge the inequity and how the incentives set up within the tax code works against the poor and disproportionately benefits the rich? In fact this one tax policy has probably contributed most to people building big and big homes with bigger and bigger mortgages.

I repeat. I support a tax system that is neutral. Renters should not be at a disadvantage compared to homeowners. I would support a flat tax system with no mortgage interest deduction.

There are two types of poor, looking at it in simple terms. There some people who are entrenched poor and it can be generational. There are some people who are temporarily poor or people who start out poor. The statistics you look at do not account for the different types of poor. The statistics don't address demographics. For example in the US, given waves of immigration, detailed looks at these waves would show the make up of the poor changing dramatically. I challenge people to go beyond the cliche driven - rich get richer - line. I don't think it is possible. The class warfare populist message is too powerful of a weapon.