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Thread: Why do the Rich get Richer and the Poor get Poorer?

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    Cyburbian michaelskis's avatar
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    Why do the Rich get Richer and the Poor get Poorer?

    This statement has been pushed around for quite some time and while I think that it is very true, I don’t fully understand why. Additionally what can be done to fix this problem in America?
    Not my monkey, not my circus. - Old Polish Proverb

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    Chairman of the bored Maister's avatar
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    Taking money from rich people and handing it over to the poorest people will not ultimately solve the problem of poverty. It is a necessary component of any solution but alone will never accomplish its intended objective. Wealth redistribution must be accompanied by the acquisition of considerable knowlege as well.
    People will miss that it once meant something to be Southern or Midwestern. It doesn't mean much now, except for the climate. The question, “Where are you from?” doesn't lead to anything odd or interesting. They live somewhere near a Gap store, and what else do you need to know? - Garrison Keillor

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    Cyburbian Jeff's avatar
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    What gives you the right to take away another mans money and give it away to someone else?

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    Cyburbian jordanb's avatar
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    ^-- A precedent going back to Otto Von Bismarck and others. Wealth equalization is one of the fundemental purposes of progressive taxation.

    Anyway, I agree with Maister. In large part, economic stratification is one of the unavoidable evils of a capitalist system (the basic tenant of which is that having and investing money brings one more money). You need to have a system to counteract that tendancy or you have nothing, BUT that's not the only thing. People also need to self-actualize and there needs to be mechinisims to alow them to do that.
    Reality does not conform to your ideology.
    http://neighborhoods.chicago.il.us Photographs of Life in the Neighborhoods of Chicago
    http://hafd.org/~jordanb/ Pretentious Weblog.

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    Chairman of the bored Maister's avatar
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    Quote Originally posted by Jeff
    What gives you the right to take away another mans money and give it away to someone else?
    By the consent of the governed. The authority to tax is spelled out in the Constitution. In other words a majority of the electorate voted in leaders who made it law. Viva democracy!
    People will miss that it once meant something to be Southern or Midwestern. It doesn't mean much now, except for the climate. The question, “Where are you from?” doesn't lead to anything odd or interesting. They live somewhere near a Gap store, and what else do you need to know? - Garrison Keillor

  6. #6
    Cyburbian Jeff's avatar
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    Nice try. In your Socialist state everyone would be given an equal allowance, regardless of what they do for a living, or how they got to where they are.

  7. #7
    Cyburbian hilldweller's avatar
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    Wealth can be multiplied through investments. Poor people have to pinch every penny so they can't take advantage of this.

    I also think its true that homeownership is a path to wealth creation.

  8. #8

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    Well... I honestly agree with Masiter, also. Just "giving" money away won't solve anything.

    The problem I see is that the niches for successful self actualization (jordanb) may be becoming more and more restricted. Due to the structure of the economy as well as rent seeking government action. It's harder to find a niche not already filled by the larger economic structures which dominate the world. Education is becoming more and more costly, and more and more is required to become a professional. Plus, there is no real frontier. With 300 million people, it's harder to pull up stakes and start over.

    Or, maybe not. Given the greater availability of information, the reduction of race and gender and ethnic stereotyping and limitations, and the sheer size and complexity of the American economy, what I just said above may be balderdash. I have read that studies have shown that the vaunted class mobility in the United States is no higher and in some cases is lower than in many European countries.

    One interesting conversation (often overblown, but that's ok) can be found in the mutualist movement. "Pro-Free Market, Anti-Capitalist" They don't see this as a contradiction. They argue that corporations are totally a creature of the State (jaws made that point once) and use the State to crush true free markets. I don't share the faith of jaws and others that free markets can solve everything (I still love my free local park system for example), but there are a lot of interesting arguments being promoted. (I wonder what jresta is doing. He was interested in this as well).

    So....does the centralization of the world economy mean the inevitable "trickle up" of profits and resources? I guess there are arguments pro and con, of course. But, it does mean people have less and less control over their own independence.

    Some interesting starting points:

    http://mutualist.blogspot.com/ (Warning, m'skis. Being libertarians who are anti-State, they are very, very anti-war as well.

    Another interesting site, not focused on mutualism per se, but still very skeptical of top-down economic systems and "managerialism" http://www.ufobreakfast.com/

    And, I really really like Barbara Erenreich's blog. She wrote "Nickeled and Dimed" and "Bait and Switch" Her basic them is very much skepticism of top-down economic structures and "bossism." http://ehrenreich.blogs.com/barbaras_blog/

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    Super Moderator kjel's avatar
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    Here's a link to an pretty good explanation as to some of the factors contributing to the widening income gap. http://www.census.gov/prod/1/pop/p60-191.pdf

    In a nutshell.....

    The minimum wage has not kept pace with cost of living. The federal minimum wage is $5.15 an hour, many states have surpassed that. The purchasing power of minimum wage is considerably less as to compared to that of 1968 which was considered the "golden age" of minimum wage where it afforded the most living.

    Higher educated people earn disproportianately more income than lesser educated individuals, they earn it faster as well which accelerates the issue of disparity. Good paying manufacturing jobs of yesteryear have been eliminated or offshored creating a glut of people that are not qualified to work at anything but the lowest wage type jobs.

    People who are highly educated and earn high salaries are more likely to marry someone from the same situation creating more household wealth.

    Divorce, higher average age of marriage, larger numbers of people choosing not to marry, and single parents contribute to the lower end of the income spectrum. A reduction in the amount of two income households means an increase in the low end of the spectrum.

    Lack of a strong union system. Unions are on life support and unpopular in many places in the U.S. In Europe they are common and prevalent especially in the manufacturing sectors and help to collectively bargain for higher wages across the board. Yes, this is a double edged sword.

    Educational inefficiency. Education overall in America is lousy and inefficient. Poor countries like India and China crank out well educated people at a much larger rate than U.S. institutions....guess who we hire? Additionally, many westernized countries have a two track system in high school where a person chooses to go the academic route and go on to university or goes the trade skill route where they learn a specialized trade that gives them the capacity to earn more money than if they were totally unskilled and working a menial job.

    I'm sure there are quite a few more reasons and probably there are a lot of unknown reasons too. Just food for thought.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

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    Cyburbian donk's avatar
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    To understand one person's take on it check out the red neck manifesto. The author has a clear image that teh rich are keeping teh por down, to exploit them and will continue to do so. Since the poor are down, they drink, smoke crank and are generaly more frivolous with their $$$ because why save for tomorrow when today is such a living hell?

    I definitely have to get this book back from my friend and reread it. I am in that type of mood.
    Too lazy to beat myself up for being to lazy to beat myself up for being too lazy to... well you get the point....

  11. #11
    Cyburbian imaplanner's avatar
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    It takes money to make money. Poor people often do not have the ability to save as the cost of living takes everything they have. No extra money means no money for investments.

    Perhaps more importantly is that every american pays to make the rich richer. The governmment uses tax dollars to subsidize oil companies. The government uses tax money to protect the ports which the rich use to ship their goods. The government uses tax monies to fix the roads which are used by trucks to ship goods. The government allows oil companies and logging companies to use public trust land to make money.

    The government uses its powers to manipulate markets such that companies make more money. The government allows for tax loopholes such that rich people often pay less in taxes than poor people.

    Quite simply - the rich use more services that are funded by taxes. The rich use those services to become richer.

  12. #12
    Cyburbian Tide's avatar
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    Here's an up to date example...

    New Jersey passed the budget (finally). 1% sales tax increase with 50% of that increase's revenue going to property tax relief.
    I am a renter, I see no property tax relief, but I have to pay the 1 cent increase, I am therefore subsidizing property owners??? I think that's bull crap.
    @GigCityPlanner

  13. #13
    Cyburbian jordanb's avatar
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    ^-- Sales tax is the most regressive tax there is (it takes a very big bite out of the incomes of the poor. It is much easier for the rich to avoid and even when they pay it, it amounts to a much smaller percentage of their income).

    Jacking the sales tax to reduce the property tax.. Your governor needs to be taken out back and shot.
    Reality does not conform to your ideology.
    http://neighborhoods.chicago.il.us Photographs of Life in the Neighborhoods of Chicago
    http://hafd.org/~jordanb/ Pretentious Weblog.

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    Cyburbian zman's avatar
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    As we live in a society, with other people around us and interacting with us, why is it bad to help eachother out?
    Especially when it comes to basic human necessities such as healthcare and education.
    I mean, it seems to rich are trying to keep the poor out of higher education (and sometimes supposed "free" K-12) inorder for them to keep from learning "too much" and with poor people getting sick and not having the proper means to get better means they will focus on their illnesses rather than what is going on.

    See what I mean?
    You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

    You can go out, you can take a ride/And when you get out on your own/You get all smoothed out inside/And it's good to be alone
    -Peart

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    Cyburbian michaelskis's avatar
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    First of all I want to thank everyone for taking a serious approach to this topic and I think that everyone has made some very good points. I am even surprised to see that people who normally don’t agree are in fact agreeing. Unity, such a happy thing.

    After thinking about it for a while, I think that one of the biggest things is lack of options based on education. I also think that health, safety, the cost of health care, and the lack of insurance have greatly added to this problem.
    Not my monkey, not my circus. - Old Polish Proverb

  16. #16
    First reason, the government has been scamming the poor through the Federal Reserve system by making bank deposits earn laughably meager interest, thus eliminating the most convenient channel for wealth-building for those who don't know how to invest their money. Low low low interest rates also make it possible for investment banks like Goldman Sachs to arbitrage the low rates into higher-yielding assets, thus allowing them to earn obscene profits. The poor go deeper in debt, the rich get a free ride to a yacht. Thank you government!

    Quote Originally posted by jordanb
    ^-- A precedent going back to Otto Von Bismarck and others. Wealth equalization is one of the fundemental purposes of progressive taxation.
    Hate to break this to you, but the whole purpose of Bismarck's neo-conservatism was to create a new veil of legitimacy for the Prussian aristocracy by co-opting socialist programs. He didn't give a snot about the poor so long as they didn't question authority.

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    Unfrozen Caveman Planner mendelman's avatar
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    Quote Originally posted by Tide
    I am a renter, I see no property tax relief, but I have to pay the 1 cent increase, I am therefore subsidizing property owners??? I think that's bull crap.
    Not necessarily. Any smart landlord would wrap the property taxes into the cost of rent. Therefore, making the renter pay their portion of the property taxes, though indirectly.
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

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    Cyburbian Tide's avatar
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    Quote Originally posted by mendelman
    Not necessarily. Any smart landlord would wrap the property taxes into the cost of rent. Therefore, making the renter pay their portion of the property taxes, though indirectly.
    But I don't get a check in the mail like the property owner does... therein is the discrepancy.
    @GigCityPlanner

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    Cyburbian otterpop's avatar
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    An extremely complex equation. One aspect of which is that the rich can afford to hire or influence people to hawk their cause. Poor people do not have that clout. For example, the changes in estate taxation, or forgive me, the death tax. Estate tax affects a proportionately very small part of society and that small group have gotten relief at the expense of the middle-class who will have to pick up the deficeit. It has been called a death tax for purposes of public relations. Sounds like you are turning out the pockets of the deceased, rather than taxes his heirs for income they have received.

    Also the poor have to work very hard for very little pay just to survive, and there is little or nothing left to invest. While the rich have the opportunity to invest their money.

    The cost of living continues to rise. The minimum wage rises very, very slow and it is the rich who protest increases. Minimum wage is exactly that. It is the absolute minimum the government will let you pay someone.
    "I am very good at reading women, but I get into trouble for using the Braille method."

    ~ Otterpop ~

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    Cyburbian jordanb's avatar
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    Quote Originally posted by mendelman
    Not necessarily. Any smart landlord would wrap the property taxes into the cost of rent. Therefore, making the renter pay their portion of the property taxes, though indirectly.
    Only if the cost of housing is supply-driven. In most places (outside of places like Manhattan and San Francisco). The cost is demand driven. In those circumstances the landlord has to set rent to whatever it is the market will bear regardless of costs to him. Meaning there is no, or very little direct correlation between the property tax or other associated costs of ownership and the rent.
    Reality does not conform to your ideology.
    http://neighborhoods.chicago.il.us Photographs of Life in the Neighborhoods of Chicago
    http://hafd.org/~jordanb/ Pretentious Weblog.

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    Super Moderator kjel's avatar
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    Quote Originally posted by Tide
    Here's an up to date example...

    New Jersey passed the budget (finally). 1% sales tax increase with 50% of that increase's revenue going to property tax relief.
    I am a renter, I see no property tax relief, but I have to pay the 1 cent increase, I am therefore subsidizing property owners??? I think that's bull crap.
    Off-topic:
    Oh goody....Rutgers can finally set tuition and rent rates and I can see how empty my wallet will be!


    Well.....part of your rent pays your landlord's property taxes, but I am quite certain you won't benefit from any relief they experience.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

  22. #22
    Quote Originally posted by jordanb
    Only if the cost of housing is supply-driven. In most places (outside of places like Manhattan and San Francisco). The cost is demand driven. In those circumstances the landlord has to set rent to whatever it is the market will bear regardless of costs to him. Meaning there is no, or very little direct correlation between the property tax or other associated costs of ownership and the rent.
    Imputation from consumer prices doesn't mean that owners won't pass up the additional costs of taxes, it means there will be a lag as supply adjusts to the imputed market prices.

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    Super Moderator kjel's avatar
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    Quote Originally posted by jordanb
    ^-- Sales tax is the most regressive tax there is (it takes a very big bite out of the incomes of the poor. It is much easier for the rich to avoid and even when they pay it, it amounts to a much smaller percentage of their income).

    Jacking the sales tax to reduce the property tax.. Your governor needs to be taken out back and shot.
    They just passed the same sort of deal in SC.....we are currently at 5% sales tax on everything including groceries, but not medicine and few other uncommon things.

    The new relief bill agreed upon was increasing the sales tax on durable goods/merchandise etc to 6% and reducing the sales tax on groceries to 3%. In exchange for this, owner occupied real estate taxes will be reduced by approximately 50% which is the portion that is allotted for school funding in most counties. The increase in the sales tax will be used for school funding instead. Rental and commercial properties will still be assessed the school portion of the real estate tax.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

  24. #24
    Unfrozen Caveman Planner mendelman's avatar
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    Quote Originally posted by Tide
    But I don't get a check in the mail like the property owner does... therein is the discrepancy.
    And therein is our cultural bias toward property ownership.

    But we must all remember that the tables turn all the time. Many rich have become poor and many poor have become rich. Though, the accessibity for the poor to become are decreasing, as BKM mentioned.

    To be honest, I really don't see the number of poor increasing. And the relative buying power of the middle class may be decreasing slightly, I still live a very comfortable lifestyle and make a pretty good salary, so I guess I haven't really seen anything supporting "the richer get richer, the poor get poorer".
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

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    Cyburbian Jeff's avatar
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    Has a poor person ever worked for another poor person.

    Enough already.

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