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2003: The Rich Got Richer . . . and so did everyone else.

Discussion in 'Legal' started by FRIZ, Dec 31, 2003.

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  1. FRIZ

    FRIZ Member

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    The Weekly Standard
    12/30/2003

    2003: The Rich Got Richer . . . and so did everyone else.
    by Irwin M. Stelzer

    http://www.weeklystandard.com/Content/Public/Articles/000/000/003/545jspjt.asp

    MOST ANALYSTS expected this year to end with a whimper. Instead, it is ending with a bang, and not only because Saddam Hussein was extracted from his rat hole. The economy is roaring ahead at a pace that so amazes observers they are guessing it will slow a bit in the new year. That would still mean an economy growing fast enough to satisfy those in charge of George W. Bush's reelection campaign.

    Big-company share prices rose by more than 20 percent, and the high-tech and small-business sectors soared at twice that rate. Productivity is scaling new heights, profits are up, incomes are rising, inflation is nonexistent, and the dollar is in a so-far agreeable decline, shrinking the trade deficit. The unemployment rate has fallen to the level it averaged in the 1990s, which decade included both boom and bust. The Bureau of Labor Statistics' survey of households shows that over 2 million more Americans are working at year end than were employed at the start of 2003.

    America's industries and workers produced almost $500 billion more goods and services in 2003 than during the previous year. That means that America added to the size of its economy an amount equal to a Brazil, or an India, or over one-and-a-half Russias.

    Of the world's ten largest businesses, measured by market capitalization, eight are in the United States (the others are the U.K.'s BP and HSBC Holdings). Americans bought over 16 million cars and light trucks and some 2 million houses in 2003 (estimates for the most recent months, as yet untabulated by government, come from Morgan Stanley), as consumers rewarded Bush for his tax cuts by spending about $3 out of every $4 he refunded to them, thereby putting the economy on course to become a plus in the election that is less than a year away, and finally getting our two lagging indicators--employment and CEO confidence--to turn up.

    BUT ENOUGH about the year we are about to see off. This last column of 2003 (sighs of relief from readers are not appreciated) is the place to take a longer look at the past performance of the American economy. The American system is deservedly famous for the material benefits it produces, but less well known for the system's ability to distribute those benefits very widely. There is some useful evidence of the ubiquity of progress that has seen, according to some observers, the material well-being of today's secretary exceed that of Queen Victoria.

    As Gregg Easterbrook, an editor at the New Republic, reports in his new book, "The Progress Paradox," there are at least 200 housing developments built around golf courses, and not all are occupied by the very rich. One such, which includes "a well-reviewed eighteen-hole course reached from the porch door via personal cart . . . [offers] beautiful, well-appointed homes . . . from about $285,000 . . . , within the means of tens of millions of Americans."

    The list goes on. Almost 15 percent of all homes purchased are for use as second, vacation homes, at which Americans deploy their 3 million all-terrain recreational vehicles (cost: about $5,000 each), or their recreational watercraft, on which they spent an amount greater than the GDP of North Korea. All of this, says Easterbrook, illustrates "the grand increase in living standards for people who aren't rich." Indeed, so widespread is American affluence that "old money"--from the merger boom of the 1980s--is complaining about the crowding of marinas, golf clubs, and ski slopes created by "new money" arrivistes who made their fortunes in the high-tech boom of the 1990s.

    Of course, no sensible person would claim that poverty has been eliminated in America. Or ever will be, since the poverty line is periodically raised. But remember: Data gathered by the Federal Reserve Bank of Dallas show that over 40 percent of America's poor own their own homes, 72 percent have washing machines, 60 percent own microwave ovens, 92 percent have color television sets, half have air conditioners, and 72 percent own one or more cars.

    IT IS FASHIONABLE to dismiss these indicators of material prosperity on two grounds. The first is that inequality is rampant and rising; the second is that money can't produce happiness.

    There is no question that statistical measures show a rise in inequality. The main reason: America welcomes more immigrants--legal and illegal--than all the other countries of the world combined. These newcomers typically start at the bottom rung of the economic ladder. Exclude them from the statistics, calculates Easterbrook, and the increase in inequality disappears. Indeed, for the 9 out of 10 Americans that are native born, inequality is declining. And here is the reason that will surprise America's critics: The decline in inequality is due in good part to the rising affluence of African Americans.

    Which leaves happiness, a commodity many argue cannot be bought with money. America's Founding Fathers were certainly onto something when, in the Declaration of Independence from British tyranny, they held it to be "self-evident" that the "Pursuit of Happiness" is among the unalienable rights of all people. But they failed to opine on whether that pursuit would be aided or impeded by increased material well-being.

    Charles Murray, the social scientist who has written a book on the subject of happiness, says that although moving from very poor to reasonably well off increases happiness, students of the subject are uncertain whether beyond that point more income results in greater happiness. The portion of Americans who consider themselves "very happy" or "pretty happy" has hovered around 87 percent in recent years. So it seems unlikely that wealth, which unambiguously increases choice, can also produce misery, although it may produce the leisure time in which to find things to be unhappy about. This economist leaves the final decision about the relationship of wealth to happiness to sociologists, and confines himself to wishing all of our readers a prosperous and happy New Year.
     
  2. Art Eatman

    Art Eatman Administrator Staff Member

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    My problem with this rosy picture is that corporate profitability is still in the toilet (P/E ratios averaging above 30) and that the buying power of the middle class is still stagnant--if not in constant-dollar decline.

    The "new" jobs don't pay as much per hour as the "old" jobs.

    Average household debt is stated to be some $8,000 per each, for credit cards. Now, since I'm aware of several households at $zero, somebody out there is in deep doodoo. And personal bankruptcy filings are still increasing...We're at record highs of house payments being a month or more behind.

    Part of the deal of the European Union is that no member country's budget shall be over 3% of GDP as deficit spending. We're what, 4+ to 5%?

    And, to keep this at least mildly gun related, with the Euro now at US $1.25--up from US 0.84 just a couple of years back--any foreign-made pistols and rifles are gonna increase dramatically in price.

    Art
     
  3. FRIZ

    FRIZ Member

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    Hi Art:

    Hi Art:
    Thank you for bringing some very interesting points to our attention. But I would like to add the following.

    “Part of the deal of the European Union is that no member country's budget shall be over 3% of GDP as deficit spending. We're what, 4+ to 5%?â€

    Germany and France, the two main players in the European Union, are again not able to comply with the 3% cap on deficit spending.

    “with the Euro now at US $1.25--up from US 0.84 just a couple of years backâ€

    This means that U.S. products and services are now very attractively priced in the world market. It means that more U.S. products and services are sold abroad. This brings down our trade deficit, boosts our economy, and ultimately causes U.S. companies to hire again.

    Happy New Year.
    FRIZ
     
  4. Mike Irwin

    Mike Irwin Member

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    WAAAAAAAAAAAAAAAAAAA!

    The Rich don't pay their fair share of taxes!


    They're getting rich on the blood and toil of the poorest members of society!


    WAAAAAAAAAAAAAAAAAAAAAAAAAAAA!


    All I can say to that is...

    Good.
     
  5. FRIZ

    FRIZ Member

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    ...In 2000 (the latest figures) the richest 1 percent of Americans paid 26 percent of federal taxes and the richest 10 percent paid 52 percent, says the Congressional Budget Office. Meanwhile, most spending goes to the poor and middle class. In fiscal 2003 federal spending, excluding defense and interest payments, totaled $1.6 trillion. Of that, 81 percent went for social programs, including $475 billion to 47 million Social Security beneficiaries, $249 billion for 41 million Medicare recipients, $161 billion for 40 million Medicaid beneficiaries and $25 billion for 21 million food stamp recipients...

    The Washington Post
    Thursday, December 18, 2003; Page A35
    Muzzling Speech
    By Robert J. Samuelson
    http://www.washingtonpost.com/wp-dyn/articles/A9997-2003Dec17.html
     
  6. 7.62FullMetalJacket

    7.62FullMetalJacket Member

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    Welcome to socialism.:mad:
     
  7. w4rma

    w4rma member

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    Economy On the rebound? (No)

    By John Atcheson
    Originally published December 24, 2003


    WASHINGTON - Before America allows President Bush to take bows on the economy, let's take a closer look at this recovery. A simple thought experiment will help.

    Imagine for a moment that you took all your credit cards and maxed them out. Now take your mortgage and borrow the maximum on it. Cash in the kid's college fund, your rainy day savings, your 401(k) retirement savings. While you're at it, stop paying for your health insurance and the maintenance on your house, your car and your yard. Now take all that money and spend it. Feeling pretty flush? Sure you are. You just pumped tens, maybe hundreds of thousands of dollars into your pocket.

    But you'd never do that.

    Because you know that just because you'd be living large for the time being, you wouldn't be wealthier. In fact, you'd be getting poorer by the minute. And yet, that's exactly what Mr. Bush's recovery is - a giant borrowing binge. But he'd rather you didn't know that. In February, the administration buried a report from its own Treasury Department that said our current fiscal policies, the ones Mr. Bush likes to claim are bringing on a "recovery," would create more than $44 trillion in chronic debt.

    As the London Financial Times noted, $44 trillion is roughly equivalent to 10 times the publicly held national debt, four years of U.S. economic output or more than 94 percent of all U.S. household assets. No wonder things seem good. We've cashed in everything we own at the Bush Pawn Shop, and now we're flashing a serious wad of walkin' around money.

    The Democrats like to point out that we're still down some 2.5 million jobs since Mr. Bush took over and that, absent a miracle, Mr. Bush is likely to be the first president since Herbert Hoover to have fewer jobs at the end of his administration than when he took over. But the real story is, how can we not be living even larger, after borrowing all our children's assets and shrinking the Federal Reserve rate to the lowest level since 1958? What have we got to show for it?

    An essentially jobless recovery. Mr. Bush likes to say the jobs will come. They'd better. Because right now, all he's managed to do is spend about $350 billion of "your money" to hire 328,000 checkout clerks and greeters at the local Wal-Mart. Meanwhile, we've shipped some 2.6 million high-paying manufacturing jobs overseas since January 2001.

    Is this a success?

    So if we're cutting taxes by $350 billion a year in order to stimulate the economy and the economy is growing, but we're only getting an anemic response in employment, what's up? Kenneth L. Lay's stock portfolio, for one thing. And the portfolio of those Bush pioneers we hear so much about. And, of course, Mr. Bush's campaign contributions. As for the rest of us?

    Mr. Bush seems to think people can eat gross domestic product. But a growing economy doesn't mean a whole lot if it's not creating jobs. Unless you happen to be Ken Lay or one of those Bush pioneers who don't need a job to earn money. For them, so long as the rest of us keep mortgaging our future, they can keep getting richer.

    Not a surprising result, really. Look at Mr. Bush's economic plan. He says the tax cuts were about "your money." But the truth is, if you're like 80 percent of Americans, most of the taxes you pay from "your money" are in the form of payroll taxes. And until Mr. Bush gave it away, you got "your money" and more back in the form of Social Security, Medicare and disability income.

    Mr. Lay and his friends pay most of their taxes in the form of income taxes, dividends and capital gains. Guess which ones Mr. Bush cut? Not your payroll taxes. What's the biggest pot of money subject to double taxation? "Your money" - the payroll tax. What double taxation did Mr. Bush eliminate? Ken and friends' dividend tax. For some reason, Mr. Bush thought it was OK for you to be double taxed, but not all right for Ken and his CEO friends. Bottom line: Mr. Bush traded away "your money" to give his wealthiest millionaire buddies an annual tax cut of $40,000 or more each.

    The Democrats seem to be trembling at the recent numbers on the economy. They shouldn't. We can't be a nation of Wal-Mart shoppers if we're all employed at Wal-Mart. And that's exactly where Mr. Bush's plan is taking most of us. Democrats should just quit worrying and give credit - or blame - where it's due.

    John Atcheson has held a variety of policy positions in several federal government agencies.
    http://www.sunspot.net/news/opinion...dec24,0,3292091.story?coll=bal-oped-headlines
     
  8. El Tejon

    El Tejon Member

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    2003: El Tejon continues to pull the wagon while others ride in it and bitch that I am not pulling fast enough.

    2004: Dcotor Mean and the rest of the Democratic candidates want to increase the weight of the wagon.:uhoh:
     
  9. greyhound

    greyhound Member

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    Okey doke.

    (Taking a look at the WHOLE picture.)

    OK, take that bow now, President Bush.:D

    Seriously, yes I am troubled by the deficit spending, but regardless of what the hard left seems to think 9/11 started a WAR, not a "law enforcement matter", and what was appropriate in say, the 90s, is not now.

    Yes we are going to have to deal with that deficit, but for right now given the accompanying growth, the economy is moving along fine.
     
  10. El Tejon

    El Tejon Member

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    I propose dealing with any budget shortfalls by abolishing the Departments of HHS, Energy, Education and the EPA and auctioning off small arms (M14s, M1s, etc.) via the CMP. More money to help kill the New Barbary pirates. Talk about a win-win proposal!:cool:
     
  11. BigG

    BigG Member

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    Teej, you got a pretty good handle on the economy. I vote for you for head of OMB.
     
  12. El Tejon

    El Tejon Member

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    BigG, can I be Attorney General or, better yet, head up ATFE instead, please!:)
     
  13. BigG

    BigG Member

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    OK, Teej, AG. If I were king, BATFE would cease to exist in about a millisecond. ;)
     
  14. Mike Irwin

    Mike Irwin Member

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    All I know is that since April I've seen my mutual fund portfolios gain (minus my scheduled contributions) nearly $50,000, and the value of my house based on comparable sales in my neighborhood has gone from about $265,000 to $305,000.

    I don't care if it's a jobless recovery or not.
     
  15. Engsetter

    Engsetter Member

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    Yeah, you may not care now. You say your house is worth $305,000 today. If you paid more than $152,500 for it in the year 2000 then you have not kept up with inflation. Why? The dollar has lost 30% percent in value this year alone, and the dollar has lost 50% of its value since the year 2000.

    The stock market is up; house prices are up, it’s all an illusion.
     
  16. JohnBT

    JohnBT Member

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    I think you're confusing inflation with the decline of the dollar against Euro. Unless you're buying something made in Europe that 30% drop against the Euro isn't going to have much if any effect on your purchasing power.

    If the rich don't buy stuff then the poorer man won't have a job making it. The economy requires consumers to function.

    The economy is rolling around here it appears. According to yesterday's paper the regional unemployment rate is 3.3%. The Charlottesville area is down in the 2's and some smaller areas are in the 1's.

    John
     
  17. El Tejon

    El Tejon Member

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    Eng. what is this the Carter years? What's the inflation rate now?:scrutiny:

    Would not a little more inflation be good right now?:confused:
     
  18. BenW

    BenW Member

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    Why does he write "your money" using quotations? Is he pulling a smug, statist "it's not REALLY your money, it's our money" routine? Why yes he is.

    I don't want my money to go to the disability payment of someone who "hurt their back" at work but can collect disability to go skiing in Vail. I can also handle saving for my own retirement, thank you very much. Like El Tejon, I'm getting tired of pulling the cart (excellent analogy by the way El T), especially for people making me buy my own horseshoes to do it.
     
  19. 7.62FullMetalJacket

    7.62FullMetalJacket Member

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    I am with El Tejon on this.

    I am getting tired of pulling the cart. 50% of workers pay no federal income tax. By default, any cut in income taxes is going to return to the "rich" that paid taxes. How can a tax cut go to people who do not pay taxes? That is called welfare. If you keep making my cart heavier, I will either tire of pulling, or climb on to the cart. Then who will pull the cart?

    All indicators show that the economy is growing. Consumer spending creates jobs. Were you ever hired by a poor person? "Rich" people like me create markets and hire people. I am not rich. Only the government and communists thinks I am rich.

    Socialism has been tried and failed (or is failing). Communism imploded. Free-market capitalism backed-up with a constituional republic prevails every time. Stop trying to tear it down.
     
  20. Mike Irwin

    Mike Irwin Member

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    "Yeah, you may not care now. You say your house is worth $305,000 today. If you paid more than $152,500 for it in the year 2000 then you have not kept up with inflation. Why? The dollar has lost 30% percent in value this year alone, and the dollar has lost 50% of its value since the year 2000."

    I beg your pardon?

    I guess I wasn't looking when the inflation rate skyrocketed to approximately 32%.

    Your figures are WAY off.

    I'm curious...

    Where did you get such unique figures?

    The international currency market?

    Sorry, but that doesn't have a direct correlation to the value of the dollar towards domestic purchases.

    Oh, by the way...

    I paid $154,900 for my home in November 1993.

    My interest rate at that time was, IIRC, 7.5%.

    My interest rate now, since my last refinance, is 4.25%.

    Incidentally, since 1993?

    My salary has more than doubled. There were some hard times along the way, including a year out of my primary profession in 1994-95, and a relatively low paying job from 1995 to 1998, but I'm doing OK. In fact, I'm doing so OK that I'm considered one of the "rich" by the Democrats.
     
  21. Engsetter

    Engsetter Member

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    “I think you're confusing inflation with the decline of the dollar against Euro.â€
    Well you must ask yourself; what is inflation? The drop against the Euro is a symptom.

    “Eng. what is this the Carter years? What's the inflation rate now?â€
    The government says the inflation rate is around 2%. This is a fabrication of the truth as I see it. They calculate the inflation rate based on rent costs not home costs. They also don’t use energy and food costs as part of the equation. Inflation rate is probably over 15%

    “Would not a little more inflation be good right now?â€
    Well, if inflation was truly not being hidden then we would have much higher loan interest rates. The country is going into debt by $2 billion plus per day (1/2 trillion since March) and the printing presses are in high gear pumping out 4.6 billion in cash every week (created from nothing, add that up). We have inflation but a lot more than most think.
     
  22. Engsetter

    Engsetter Member

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    “Where did you get such unique figures?â€
    I don’t remember where I read 50% since 2000, but I can at least give you an article corroborating the 30% loss for this year http://www.house.gov/paul/tst/tst2003/tst120803.htm “The Disappearing Dollarâ€

    “I paid $154,900 for my home in November 1993.â€
    So, I was pretty close to right. I don’t know what the dollar did between the years 1993 to 2000 but it was stronger, at least until the year 1998. You said your house probably had a $40,000 increase in worth in 8 months. Does this not indicate to you something is wrong?

    “My salary has more than doubled.â€
    In general most people’s salaries did close to the same during that period give or take a few years. But today salaries generally have not increased at the rate of inflation.

    “My interest rate now, since my last refinance, is 4.25%.â€
    Home and personal debt is at an all-time high right now. Many people took advantage of the low interest rates but instead of refinancing the original mortgage principle, they also took additional money based on the latest value of the house and bought new cars etc.

    It does not matter whether we borrow or whether the gubmnt borrows or takes money from us through inflation, we can’t borrow our way to prosperity. Collectively we are spending much more money than what is coming in (edit - I meant spending more than saving) that can’t continue forever.

    When I said “It’s all an illusion†what I meant was debt-driven growth is a trap and I believe it’s going to get worse. We are paper rich but dollar poor.
     
    Last edited: Jan 1, 2004
  23. Art Eatman

    Art Eatman Administrator Staff Member

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    Some of us are making out quite well, like Mike (and me), but some ain't. That's why I try to leave my own situation out of my viewpoints and judgements about "the economy".

    I try to follow the "regular" news views of the overall economy, as well as the contrarians ("The Daily Reckoning", for example. It's on the Web, and does daily emails.) I like to believe this lets me do more of my own assessing about "reality".

    I guess I'll always be naive enough to believe that a trainload of unpaid debt is bad, whether at personal or governmental level.

    I also tend to look beyond the immediate good times, wondering about the future. When I read that China's need for oil is doubling every few years, or that our imports of natural gas are climbing at a steady rate, I'm indisposed to give serious consideration to a big pickup or SUV. Increases in natural gas prices means higher electricity costs, as well as higher costs of plastics. And OPEC is mumbling about pricing oil in Euros...

    Dollar down, exports up? Trouble is, nowadays, fewer of our exports are produced by the more highly-paid blue collar workers. And, generally, a smaller percentage of our workforce is employed in export-related businesses. (No specific references, here. Just the gist of what I've read during the last several years.)

    I'm debt-free, and intend to stay that way...

    :), Art
     
  24. Bob Locke

    Bob Locke Member

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    All I really know is this:

    I'm the father of four wonderful kids (10, 8, 6, and 3), the husband of a great wife who doesn't work outside the home, and we have more disposable income right now than at any other point in our 13+ years of being married.

    I made more money this year than any other in my life by a margin of over $10,000, we own a nice home (well, the bank owns it and we're paying them for it, like most folks), and I just bought a 2004 Chevy Silverado 2500 crew cab the day after Thanksgiving.

    I like my job, coworkers, and bosses, have really good benefits at work, and we have 9 years left on a 10-year contract with Colorado Public Service to produce electricity for them so we've all got some pretty good job security. At the end of those 9 years, if we hold to our plan, we'll own this house free and clear, so it won't much matter what happens with PSCO at that point.

    In short, from where I'm sitting things are pretty darn good! :D

    And I'm thankful each and every day, even the ones that suck at work!

    Now if I could just get Unlce Sam to let me opt out of Social Security...
     
  25. JohnBT

    JohnBT Member

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    "Well you must ask yourself; what is inflation?"

    No. Sorry. I know what inflation is.

    John
     
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