It seems from the article that the writer wants to at least give the implication that this portends something inherently unfair:
“According to analysis by the Pew Research Center released Monday, younger Americans have been left behind as the oldest generation has seen wealth surge since the mid-1980s”
Just look at some of the statistics on these greedy elderly people:
Households headed by adults younger than 35 had a median net worth of $3,662 in 2009.
Households headed by adults ages 65 years and older had a median of $170,494 in 2009.
The net worth in the less than 35 age bracket declined 68% since 1984.
The net worth in the 65 and older bracket increased 42% in the same time frame.
Is this really a story?
CNNMoney is comparing 2 separate things at the same time and getting them muddled.
First, instead of pitting the two age groups against each other, it should serve as an example of how the American dream is still achievable – you can be better off tomorrow than you are today! People, on average, tend to be better off financially as they move through life. This is a good thing. They accumulate more assets and less liabilities – their net worth improves. Comparing younger and older people in this sense is like saying that older Americans are less young than younger Americans. it may be true, but it’s a pointless comparison.
Secondly, comparing these segments to similar segments from 1984 is wildly inaccurate. Here’s why:
The economy in 1984 was on an upswing after the brutal recession of 1980-82, while the economy in 2009 was still in the midst of the Great Recession.
Housing prices were hardest hit in the 2008-2009 recession. Most homeowners in the under 35 age set had recently purchased their homes at high prices and had very little or no equity, in contrast to the over 65 age set who had held homes for longer (on average) and not lost as much equity. This skews the net worth towards the older set.
Simple demographics are different. People are working and living longer in 2009 than they were in 1984, giving them longer to accumulate more worth.
Children were deferring there entrance to the workforce longer in 2009 than they did in 1984, staying in school longer and accumulating student loan and credit card debt when they would have been earning a salary and likely saving some money or buying assets like houses.
Maybe I’m cynical, but it seems like this CNNMoney piece is just meant to contribute to the sense of class warfare out there and lead people to assume this ” 47-to-one wealth gap” is the result of unfair tax policies, or greed, or Halliburton or whatever. Then again, maybe it’s just a poorly written, minimally researched piece to fill some deadline for the writer.
Judging by some of the comments on the original article, quite a few are taking the story as a justification for class envy, which is just a sad state of affairs.
Much of the coverage of the Occupy Wall Street protests has focused on whether there is a single, overall point or purpose to the movement and even whether it is a movement at all.
It’s hard to argue that a gathering – be it a movement or simply a protest – is successful if no one can come to a consensus as to the what it’s all about.
The folks at NPR’s Planet Money went down to see what the OWS protests were about, and they concluded that it is more of a “venue” than a movement. It seems that the OWS group is a loose conglomerate of disparate interests – at least on the surface.
“We went downtown this week to talk to the protesters at Occupy Wall Street. We asked people why they were there. We heard lots of different answers.”
But delve a little deeper and you find that it’s a platform for launching a whole new society. One based on Participatory Economics. More on that in a minute. First, the General Assembly.
The General Assembly.
At the heart of the OWS gathering is what the organizers call the “General Assembly” It takes place nightly, and it’s where everyone goes to discuss topics important to them.
For example:
“Should we buy some sleeping bags? What if we just buy fabric and make our own sleeping bags? How will we keep the sleeping bags clean?”
But in the midst of such discussion, a challenger arises to question the authority of the “facilitators.” Asking if they alone grant the power to be heard – without the general consent of the group body – can they be consider legitimate themselves? That’s right, before the meeting can be facilitated the very framework must be agreed upon and legitimized by the group body!
This led the Planet Money team to conclude that:
“It’s not a movement; it’s a venue. Standing around, talking about what everybody wants — this is a model of how the protesters want society to be.”
But could this ever really work? Could you base a society on this model and have it function better than the current society?
It turns out that an economics professor has been dreaming up such a system for the past 40 years and he calls it Participatory Economics.
Participatory Economics (ParEcon): A Theoretical Alternative to Capitalism
Participatory Economics is the brain child of economics professor Robin Hahnel. Hahnel, a self proclaimed “libertarian socialist” (you figure it out, because I can’t), has spent 40 years developing a new model for economics that is more democratic than capitalism.
The basic theory is that the best system of economics (and society in general) is one that is based upon group participation. In Hahnel’s world, there are no owners, no bosses and everyone is equal. In Participatory Economics, people gather in groups to do business as a worker group.
Businesses would be run by the employees, broken down by committee. There would be a committee to determine what kind of product to make, in what styles. Compensation would be determined by peer review and have little bearing on success of the company.
Supply and demand would be managed by a national network of these worker groups coming together to make requests for more goods and services. Some other committee would employ a computer algorithm developed by Mr. Hahnel that seeks to optimize utilization of resources.
Besides sounding like a plot for some cautionary sci-fi apocalypse tale, it’s likely to fail utterly when dealing with shocks to the system like a natural disaster destroying a food crop or other “unexpected” demands of the supply. In fact, when questioned about this Professor Hahnel admits that his system “may be a little weak” in such situations. He essential goes on to say that it would be worth such problems in the end because it’s a more fair system overall.
This is antithetical to the society the founders created for America and the basis of free market capitalism. The framework which the founders created grants the power to the individual, not groups. Once the power and control moves to groups, the individual is lost. In free market capitalism, supply and demand is managed by the price mechanism which has proven itself to be the fastest and most efficient way to manage the consumption of scarce resources with alternative uses.
In essence, the protestors want a society in which an idea is floated by an individual but everybody gets a say in whether that idea is accepted or not, and to what degree it is accepted. Rule by committee in it’s most benign form, rule by the mob in it’s malignant form.
History shows this is folly.
NPR asks, “But is this effective?”
No. Of course not. In fact, even one of the protestors himself – a former facilitator no less – when interviewed by NPR admitted it’s not effective. But that’s not the point he says. The problem with effective governance is that “some people will feel disenfranchised and that their feelings are not being heard”.
It sounds like the individual is first and foremost, but by structuring decisions based by committee or group quickly absorbs the individual into the collective.
Like the 1825 failed socialist experiment New Harmony of Robert Owen, this model is destined to fail.
Josiah Warren (original participant in New Harmony) wrote:
“It seemed that the difference of opinion, tastes and purposes increased just in proportion to the demand for conformity. Two years were worn out in this way; at the end of which, I believe that not more than three persons had the least hope of success. Most of the experimenters left in despair of all reforms, and conservatism felt itself confirmed. We had tried every conceivable form of organization and government. We had a world in miniature. –we had enacted the French revolution over again with despairing hearts instead of corpses as a result. …It appeared that it was nature’s own inherent law of diversity that had conquered us …our ‘united interests’ were directly at war with the individualities of persons and circumstances and the instinct of self-preservation… and it was evident that just in proportion to the contact of persons or interests, so are concessions and compromises indispensable.” (Periodical Letter II 1856).
Participatory Economics. Mutualism. Socialism. Call it what you like, it amounts to Collectivism and it doesn’t work. It aims to replace an imperfect system (Capitalism) with an even more imperfect system.
No system is perfect. The best we can do is devise a system that provides the individual with the most latitude and freedom to make of his own life what he wishes (provided he does not harm others in the process).
That’s capitalism. Not the crony capitalism of Washington D.C., but free market capitalism.
The founding fathers new such collectivist systems were doomed to fail. They considered many forms of government throughout history and after careful deliberation and much spirited debate settled upon a representative republic as the surest way to promote prosperity and preserve liberty and freedom of the individual. Pure democracy devolves to mob rule (Greece, anybody?) and monarchy is dictatorship by a different name. At either end of the spectrum, individual liberty and freedom cannot exist.
The founding fathers knew that there was no single, perfect system. It’s why the preamble of the constitution states:
“We the people of the United States, in order to form a more perfect union, ..”
It’s a more perfect union, not a perfect union.
Collectivism fails every time it’s tried, and the Occupy movement is no different.
The saddest part of this whole episode is that it is fueled by people who are frustrated with the current system as they see it, and feel the only solution is to riot for revolution. While the solution already exists and has been hiding in plain sight.
Perhaps if their education had been a bit more complete and less radical, they would focus their efforts on occupying the voting booth instead of everything else.
We all know the economic state of the country in pretty bad, and here’s a visual representation of one factor of the economy – unemployment.
You can see that despite the rhetoric (and trillions of dollars in spending), the unemployment rate hasn’t moved much. This first graph covers the unemployment rate from the start of the recession to August, 2011. The August figure is important because it’s the first time in over 40 years that the U.S. economy produced a net 0 new jobs.
The second graphic shows major U.S. cities that are losing or gaining the most jobs. It’s important to note that this data is NOT seasonally adjusted.
Don’t look now but Warren Buffett is at it again. This time he’s written an op-ed in the NYT in which he claims it’s time “the rich” stop being “coddled” by Congress:
“My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice,” The 80-year-old “Oracle of Omaha” wrote in an opinion article in The New York Times.
Aw, poor Warren and his buds want to step up to the plate and give more money to those paragons of fiscal prudence in the Capitol, but Congress just won’t tear off the shackles of financial freedom darn it.
Now don’t get me wrong, I’m no Buffett hater. Far from it. I respect the man immensely for his investing and business acumen. But every time he opens his mouth on government policy it seems to me he makes startlingly weak and misplaced arguments for what would only result in bigger government with more spending and bigger deficits.
Let’s consider his parroting of the “shared sacrifice” mantra of the big government, big spenders in Washington D. C.. Is it really a sacrifice if the government makes you pay more in taxes? Isn’t that really just obeying the tax law? If Mr. Buffett and the wealthy in America really want to sacrifice, let them pay extra taxes.Make it in the form of a donation to the federal government that they can enter in whatever amount they see as fair “sacrifice” for the greater good.
This argument that higher tax rates need to be enforced so the rich can do their part is insulting, and misleading.
Speaking of his recent $6,938,744 tax bill, Buffett said this:
“That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income – and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent,” he said.
A large part of why Buffett’s tax burden is so much lower (as a percentage) than his employees is that his employees work for a salary, and most likely don’t take full use of tax-advantaged moves like investing in an IRA or 401(k) or health savings accounts,etc.. that allow people to “spend” that money before taxes – thus lowering their taxable income and their overall tax burden.
Just think about this logically for a minute. In this brief quote, Buffett wants you to believe that the tax rate on the wealthy is somehow higher than the rate on the middle and lower class wage earners. It’s not. It’s only effectively higher.The wealthy have a better sense of the tax code and they know how to minimize their tax bill using it.
This is key to understanding Buffett’s argument for Congress raising income tax rates. He puts out a public plea and Congress raises tax rates on “the rich.” Buffett and the wealthy know how to work the system to limit their taxable income and would likely pay only a nominal increase in real taxes if the rate were increased – but it lets him appear willing to “sacrifice”. What a great guy! Plus, if congress simply raises the rates, he pays far less in taxes than if they implement a flatter tax system and eliminate some of those perks he uses to lower his taxable income today.
He’s made similar pleas to raise the so-called death tax ( estate tax), because guys like Buffett know how to protect their assets from such a tax. He’s said as much in interviews – that the only people who would pay more if there was an increase in the estate tax are those who are not savvy enough to avoid it, and therefore don’t deserve to pass that down to their beneficiary.
By letting people “donate” more than their required tax bill, we would be giving Buffett and his friends who are tired of being “coddled” by the government a chance to really open their pocket books and make a true sacrifice to the government they so dearly love, and no longer hide behind Congress.
Anyone have a guess what would happen to the deficit if guys like Buffett paid more in taxes? Would the government put that extra income toward paying down the deficit, or spend it (and then some) on new programs or budget increases in already bloated programs?
If you honestly think more tax revenue will result in a lower deficit, please leave me your name and number in the comment section… I have a wonderful deal on an historic bridge I’d love to sell to you.
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