Tuesday, March 27, 2012

When the economic pie grows. . .

I hear this concept of the economic pie, an arbitrary concept of the agregated wealth of a certain economy. But the Idea that if the pie grows you retain your percentage of the pie and your slice increases in pure ludacris. The notion that if wealth it created, it instantly distributes itself over the entire system evenly or even at all i think is bogus.

Many economic thinkers have used this idea that what is good for the economy is good for all, because growing the economic pie is good right? Wrong.
Where the economic pie growing is undoubtedly beneficial to some people , the fact is that all over the world when the pie grows only a select few reap any significant benefits.According to the U.S Census, In my life time alone the wealth of the wealthy (top 10% of the income distrobution) has increased by over 400%, whereas after inflation adjustements the wealth of the other 90% has DECLINED a little over 5%. I don't care what kind of justification one may have, the rich people of the united states have not been producing 400% more that is for sure. Check It

The reason for all of this is pretty evident. Blatant and repetitive tax cuts on the wealthy over the last 40 years. In the mid- late 70's there have been consistent tax cuts, from every single presidency EXCEPT the Clinton administration. That is right. Where these tax cuts have reduced the tax rates of lower income families a small amount, the majority of these tax breaks and incentives were focused primarily on the top 10% of the income distrobution. These consistent tax cuts accounts for two things, the growing income disparity and the outrageous budget deficits we have had over the last 40 years. Check it.
Anyone with a basic understanding of cash flow can tell you that if you have a menial amount of cash on hand, and you have debts that already outweigh your accounts receivables, then you must increase revenue to balance your equation. So why then , if we have consistently been in debt since the first world war, are we consistently reducing taxes (revenue) when our nations debt is already higher than our current revenue? this makes no sense.

Some say reducing taxes is an economical incentive, and that the benefit of reducing taxes is in fact higher than taxing in the first place. I agree that this may be true in some cases, but when these tax cuts are mainly focused on the richest in the country I call bullshit. Many lower income families are already taxed just about nothing, and richer people are usually taxed at a higher rate than that, but the richer people who are benefiting from business with thousands of people or more aren't taking into account that they in turn are using exponentially more public resources than someone who is not doing such massive business. Without our nations infrastructure, its system of laws, its law enforcement, it's national defence, and its international treaties, all business would be moot. Your property rights would not exist if the United States did not defend them, that is they are only self evident because if people try and ignore our basic property rights (Life, Liberty, And the Pursuit of Happiness) we have an awesome government willing to deter/arrest/kill them. Also without our fiat currency, the last 200 years of economic development would be nigh impossible. The investments of tax payers for the last 200 years is what allows your business to even take place, it protects your life blood ( the customer) and allows you to keep what you have without fear of someone taking it from you. Since it is the collective trade of the products of thousands of people that makes the rich so wealthy, they should pay an appropriate coinciding price for the benefits they receive,and since it is exponentially more than the average bear, then their taxes should be exponentially more.

Yet staunch supporters of tax cuts mostly have the same argument, " Its your money, you should have the right to dictate its use, and to take it by law is systematic theft"
Now , this would be true in an anarchist society with no government and no government benefits. But in the united States at least this is not the case. Just being here you receive basic rights that are not free. Any soldier from any war in history can tell you freedom is not free. Our rights to life, liberty and the pursuit of happiness are bought with taxes. The bottom 90% that able to buy products are what gives these people their wealth, it doesn't come out of the ground. These people are able to do so because their rights and prosperity just happens to be a priority of our government, that is why if you are a citizen taxes are mandatory, other wise you would get free riders like GE, Warren Buffet, and Boeing who enjoy billions in profits from millions of customers yet pay lower taxes than a middle class family that only uses the government benefits of a few people (<10 household members).

When the economic pie grows, only the ones slicing it get bigger pieces. The rest of the 90% , the foundation of the economic pie, is getting upset and hungry with the meager slivers that aren't getting any bigger. This is a problem, and it needs to change.

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