1 in 4 households are struggling

Sir_Humphrey

Demanufacture wrote: »

Disposable income is also going to decrease over the coming years with higher taxes, unemployment and the real threat of IR increases (they can't go down), which will compound people's debt woes.

The picture isn't rosy.

The inescapable conclusion is that the gap between rich and poor has now grown to such an extent that the bottom can no longer afford a lifestyle worthy of a rich country. This is crippling the economy as there no longer enough aggregate demand, as the rich tend to hoard a lot of their wealth.

There are three ways to get the effective demand up. Allow another debt bubble or alter the distribution of wealth so that it becomes more equal. The latter involves redistibuting excess savings from the rich (either through taxation or heavy wage regulation) to the poor (who would spend the money.) The money of course would circulate back up to the rich via company profits. The third way is for much higher public spending to fill the demand gap.

If we do not get effective demand up, the future for this country is not going to be pretty. All QE appears to be doing is inflating asset prices - this should not be a surprise as without state direction, the fund were never going to go to productive investment as the banks are not interested in long term value and are broken anyway.

Right Libertarians who argue against this are digging a grave for Capitalism.

bendix

Sir_Humphrey wrote: »

The inescapable conclusion is that the gap between rich and poor has now grown to such an extent that the bottom can no longer afford a lifestyle worthy of a rich country. .

I'm glad your role in the civil service is protecting us from firework dangers, and not something more meaningful. Thank God, you're not in the Treasury, for example.

Do you have any evidence to back up the oft-repeated cliche about the gap between the rich and poor widening. Simple logic would suggest that the burst of the asset class bubble - particularly shares and property - would have hit the more well-off much harder than the poor, given that it is likely only the wealthy who have such assets. If that supposition is true, then the gap would shrink, not widen, making the wealthy significantly less wealthy, but the poor only marginally poorer.

Post some stats, please, Sir Humphrey, if you're going to make such wild assertions.

dopester

Sir_Humphrey wrote: »

The inescapable conclusion is that the gap between rich and poor has now grown to such an extent that the bottom can no longer afford a lifestyle worthy of a rich country. This is crippling the economy as there no longer enough aggregate demand, as the rich tend to hoard a lot of their wealth.

There are three ways to get the effective demand up. Allow another debt bubble or alter the distribution of wealth so that it becomes more equal. The latter involves redistibuting excess savings from the rich (either through taxation or heavy wage regulation) to the poor (who would spend the money.) The money of course would circulate back up to the rich via company profits. The third way is for much higher public spending to fill the demand gap.

Hoarding wealth lol. Yes.. that wealth windfall tax, 'given to the poor to spend the money', is certain to reimburse those it was earned by and taken from in a previous economic cycle and circumstances. :rolleyes:

I'll quote a post I made in August 2008 as my main response.

dopester wrote: »

When economies go in to recession throughout history you often get the rich getting blamed by those who want them brought down, punished, or a bite of their apple. "It wouldn't have happened except for the inequality of wealth" or variations on that.

And wealth taxes are the worst, which could come in during an irrational response to the crisis. Wealth taxes are vindictive and work against recovery. It makes the rich and able poorer or sends them abroad. Wealth is an antidote to recession and not the cause. Confiscatory taxes reduce savings, discourage work, increase indebtedness and hinder any economic recovery.

Also an item I've just read elsewhere: (In my view if you can create and then hold on to wealth, with all of the pitfalls, risks and dangers in life over time... you do fairly well - quite apart from your confiscatory taxes.)

A June 2009 World Wealth Report by Capgemini SA and Merrill Lynch Global Wealth Management says the number of people globally with invest-able assets of $30 million fell 24.6 percent in 2008. On average, they lost 23.9 percent of their wealth.

dopester

Going back a few years here with a projection for future deflation / depression... following on from their calculations that the top 1 percent of income earners pay twenty-four times their proportionate share of total federal income tax.

Nonetheless, the delusion that the rich pay "low or zero" tax resonates with a deep wish to increase the redistribution of income. You will hear more about it in the months and years to come. Before long, half the people you meet will have it in the back of their heads that, if a depression begins, it was because of the inequality of wealth.

This is unfortunate, because if the bottom does fall out of the economy, as we believe it may, the political strife will be aggravated if people believe that the rich are the source of their miseries. Take note, and, if you have money, try not to show it. The advice, "If you've got it , flaunt it" was composed during a boom. It does not suit depressed circumstances.

Depressions are periods of abrupt political change. What seem like harmless, crank obsessions, like Batra's plan for a wealth tax, could be voted into law, especially at the state level, if the unemployment rate again tops 20 percent.

During the nineteenth century, most states had personal property taxes that included all assets, presumably even stocks and bonds. These taxes were drawn in an age when most assets were tangible assets, like real estate, livestock, farm implements, and buildings that could not be hidden. Personal property taxes are not well suited for an age of intangible assets that can be moved or hidden. But this won't necessarily prevent some hard-pressed state and local governments from reaching for confiscatory personal property taxes in a slump.

A wealth tax at the national level is also a possibility, in spite of the fact that it would be an obvious violation of the U.S. Constitution. The constitutional amendment that provided for an income tax did not repeal the earlier ban on a capital tax. But such niceties may not withstand the rush of circumstances. Remember, Franklin Roosevelt confiscated gold, which was a clear infringement of the prohibition against taking property without compensation. Indeed, it was an idea so radical at the time that a member of Roosevelt's own cabinet described it as "the end of Western civilisation as we know it."

And of course, more moderate policies, such as a steep hike in income tax, are possibilities. Herbert Hoover more than doubled the top federal tax rate in the last depression. Such policies, which would have been entirely unthinkable a few years earlier, may be attempted again.

Such taxes would mainly be vindictive, not economically useful. Wealth is an antidote to depression, not its cause. It would do nothing to stop a depression or strengthen the overall economy. To the contrary, confiscatory taxes would reduce savings, discourage work, and increase indebtedness. To pay a tax on wealth, much of which is illiquid, would require either reduced savings or more borrowing. It would discourage investment in start-up companies that do not pay dividends, and retard the economy in other ways.

In the past, the severity of depressions has been correlated to the amount of debt outstanding when they started. The more debt, the deeper the downturn. Wealth tax cures for depression would make matters worse. But this is not to say that it won't happen.

treliac

Can see the value in both sides of this argument. Am not really sure where my feelings lie though.

I feel that huge imbalance between rich and poor is wrong yet there has to be reward/incentive for those who are prepared to get out there, show leadership and create wealth.

Is it possible to find an equitable balance?

wolvoman

Sir_Humphrey wrote: »

About 90% the same. His error is to ignore the qualitative difference between assets with the same basic function. Where the analogy stretches is that there is a far wider variation between human workers than between housing types.

If his argument were valid, then he should be arguing that tramps living in cardboard boxes should be charged the same rate of council tax.

Perhaps a better analogy would be charging the same running costs for an Aston Martin as for a Smart Car.

Are you being deliberately stupid?

Council tax has nothing to do with running costs. It is a tax based on taking from the better off and giving to the poor.

If you are in Band A or in Band G, you get exactly the same services.

(although in practice the Band A dwellers probably use more of the welfare and education services than the average Band G dweller).

lostinrates

treliac wrote: »

Can see the value in both sides of this argument. Am not really sure where my feelings lie though.

I feel that huge imbalance between rich and poor is wrong yet there has to be reward/incentive for those who are prepared to get out there, show leadership and create wealth.

Is it possible to find an equitable balance?

I wonder i the balance is not so far away: those at the bottom feel they need more, those t the top feel too much is taken.

My pondering at the moment is is where this gulf is greatest...from our proportionally comfortable position I fele the gulf between the ''comfortable'' and the super rich by far the greater. We, my household, can oay our own way, fill our bellies etc etc, but, there are entitlements for those who cannot provide the same to a livable standard in this country...

Sir_Humphrey

wolvoman wrote: »

Are you being deliberately stupid?

Council tax has nothing to do with running costs.

I think you are the one being stupid. If the bins were never emptied, local roads never repaired, local parks never maintained etc etc etc etc etc, then what would be the value of your castle then?

The_White_Horse

why don't the poor just accept that they are poor and that they can't afford to have everything they want?

The_White_Horse

why do the poor always insist that being poor isn't their fault?