7/24/2012 6:36 PM ET|
What no one's telling US workers
While policy wonks argue about how to address income inequality in this country, plenty of hardworking Americans need to hear a more practical message.
The simmering debate over income inequality got a jolt of energy recently with the publication of Edward Conard's book "Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong." Conard is a former partner of Mitt Romney's at Bain Capital, so his book can be interpreted (rightly or wrongly) as the Bain View of the Universe.
Romney's critics have been gleefully attacking Conard's book and its elitist, trickle-down view of the economy -- which plays right into President Barack Obama's call for more fairness and higher taxes on the wealthy. But this predictable argument over the diverging living standards for rich and poor -- with liberals insisting that the rich have gotten too rich and conservatives arguing that more spending by the rich would make everybody better off -- basically misses the point. In fact, it does a disservice to hard-working people who need pragmatic guidance on how to plan for their financial future.
Conard mounts an unapologetic defense of the 1% and the economic activity they generate, arguing that spending and investment by the wealthy is the main thing that keeps the economy humming and creates jobs. The New York Times Magazine summarized his argument this way: "If we had a little more (income inequality), then everyone, particularly the 99%, would be better off."
That type of reasoning drives liberals bananas, and they do have data on their side. Since about 1980, for example, incomes for top earners have risen sharply, while they've risen much more slowly for everybody else. Over the past decade, the median income has been stagnant, producing a bulging gap between the rich and everybody else.
The big question is what to do about it, and here's where the policy wonks arguing about income inequality break ties with real Americans. Experts on both sides typically call for new policies in Washington to fix whatever they feel is wrong with unequal incomes. But policy changes won't solve most of the problems ordinary people face, and even if they did, it would take years.
Relying on solutions from Washington, in fact, may be the very thing that generates dangerous unintended consequences. If you think politicians will help you get ahead then you'll be less likely to take action on your own to make yourself better off.
What politicians and policymakers really ought to be telling struggling Americans is this: You're on your own. The government is running out of money and is borderline dysfunctional besides. Instead of new policies that will make the economy more fair, we need more self-sufficient workers who aren't looking to government for answers.
The trick is figuring out what ordinary people can do to make themselves better off. To do that, it helps to understand the real problem, which isn't income inequality in itself. It's a decline in economic mobility, which means it's getting harder for people to boost their earnings, move up the socioeconomic ladder and improve their living standards.
The economy is changing rapidly, and it's not completely clear why it's gotten so much harder to get ahead. But there are certainly clues. Education has a lot to do with it: There are very limited opportunities these days for people who don't have a college degree or whose training is outdated. Technology is another factor. People whose careers are tied to the digital revolution enjoy the good fortune of working in a burgeoning field, while many others work in shrinking fields being decimated by new technology. Workers able to ride the wave of globalization, at companies that do business around the world, have an edge.
Attitude is another factor. Too many American workers rely on somebody else for their livelihood, without the grit that it takes to adapt and recover when something goes wrong. This is the natural byproduct of a long era of prosperity in which living standards rose for nearly everybody, just because the economy was booming. It didn't take extraordinary fortitude to get ahead. Often, all you had to do was show up.
Things are different now, and the bar for success is higher. Instead of arguing over the abstract causes of income inequality or hoping for miracles from Washington, national leaders ought to be sending this message to America's workers: Get smarter. Work harder. Go where the opportunity is. Prosperity isn't going to trickle down from the wealthy, or arrive in the form of a government check. The only person looking out for you is you.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
Both the Left and the Right are correct. Most Older American generations made life too easy for their children and eliminated the need to be responsible for their actions. Talk to any lecturer on the collage symposium circuit, they will tell you most of the students are from foreign countries. The students and their families have risked everything to get them an education in America and if the student fails the repercussions for the student and the family are very severe. They are motivated to succeed. Why would an American student want to spend 12 yrs working hard barely scraping by, and missing 12 yrs of fun and incur the debt to get a PHD when they already have everything they think they could ever want. Sitting on their parents couch, watching movies on their parents DVD Bluray player, their choice of Xbox, PS3, or WII on their parents big screen TV, surfing the Internet, keeping their face book page updated letting all their friends keep up with their wonderful daily lives and expressing their oh so important opinions. Driving their car provided by their parents to hang out with friends and party. It’s a great life what else is there. When the young adults begin having children and start taking on the responsibilities of having and providing for a family they are unable to accept losing all their fun. The kids get in the way; grandparents will watch the kid(s) so they can go party and make more. Buy the child an electronic gadget to keep them busy and out of their hair. A job that is a real fun and party killer, but that is taken care of by the nanny state. No job required to continue to live the life style their accustomed to and desire. I am amazed at how family and friends game all the different government systems, and continue to drain the parents of everything they worked for, and the grandparents feel they have to help because of the grandchildren and it’s not the kids fault. While some who truly need the help seem to fall through the cracks in the system. There is no need or desire to succeed as an American you are entitled, it is what you have been taught and shown your entire life. The jobs that could have made a difference have all been out sourced or sent overseas, and it wasn’t the poor that sent those jobs away. The uber rich control and are the government. They pass laws that benefit their family businesses while at the same time eliminating the competition of the small to medium businesses that do provide what few jobs are left. The uber rich took their fortunes overseas many years ago and will continue to strip America of anything of value before it sinks, they can’t be touched they control BOTH political parties. So now we are told we need to up the taxes on the few remaining businesses that are left in America, these are the bad and evil rich keeping us all from getting our proper amount of ? The grand parents will pass away all their money spent by their own children who bled them dry on overseas products and gadgets provided by the now overseas uber rich. Competition from America successfully wiped out, destroyed, and not a threat. Yes both sides rich and poor have caused this in equal measures.
Time to put a limit to how much profit can be made from other people's labor.
Time to put a limit to how much profit can be made on housing, should be sold at cost, and limit quantity owned per person.
Time to limit percent of profit over cost.
Time to limit greed, with law.
If a personworks hard and earns a ton of money they should be able to keep it NOT share with others who don't work or are lazy to work. Further, high tax rates should not be put on the person who earns that money. WE have forgotten our values in this contry. Why work hard if the Gov't takes all your earn away from you? That is upside down. &
You can't compare the outliers like Warren Buffet, Michael Dell and Bill Gates with all the other CEO's on the pay scale. I would say the median (not mean, which is skewed by Gates, et al), for CEO pay is between $3 and $4 million... Being the top CEO is like making it to the big leagues in sports, or the Hollywood movies... Only the best rise to that level (whether they perform or not is a different story). Outside of all those CEO outliers, I think incomes are very well balanced in the country. Even doctor specialist only earn about $500K a year -- but they pay over $100K in malpractice. The mean income in the US is like $45K... Hence, Specialized doctors with decades of schooling only make 10 times more than the average.
Last paragraph suffices. I have some thoughts:
I do not want "Trickle Down Economics". Trickle down must really appeal to the wealthy. What a joke! Work and receive proper compensation. Save 10%, be charitable, purchase worthwhile products made in USA when there is a choice. Encourage small businesses by giving tax breaks for each job it creates. Higher Import tariffs on flimsy non-essential products. Discourage companies from "off shoring" USA jobs--penalty fines. Encourage our youth not to rely on student loans that they will regret having to start out their young lives so much in debt. Support community colleges, technical schools and military service. Insist on civility between all elected (and hired) state and federal officials. Insist on fiduciary principles regarding how our tax monies are spent.
The real conundrum is only big business can afford the gov. tax regardless who the figureheads are!
Most people are not looking for a handout, they are looking for a fair chance to make a living and climb the economic ladder. Now they tell you to keep quiet or they will replace you with someone who will do what they are told when they are told.
I started working in high school and then got an all expenses paid tour of east Asia by Uncle Sam, after that I got a job filling little cups with epoxy but I worked my way up through engineering into a management job over the next 24 years. When that job got shipped to China i worked as an engineer for a tiny company where we built and repaired custom power supplies (5 employees). When that dried up after 8 years I went to work repairing mail sorting machines at USPS. I retired from there with 11+ years and a small pension and SS to live on. I saved up some money along the way and guess what, as long as I'm careful I do fine.
BTW that all was done with a HS diploma because employees back then didn't care what letters you had after your name, they only cared what you could do. These days the human resources folks do a great job of shunting capable workers aside because they don't now the buzz word of the moment, who cares what they know or what they could do if given a chance.
A pox on all of them.
This guy wrote in his book, "if we had a little more inequality it would be better for the economy,"? Let's break down what he said about the 1% having more money to spend is better for the economy into a smaller example. So if my neighborhood has 100 people living in it besides myself and I own the only grocery store. You mean to tell me that if only 10 people in the neighborhood have enough money to spend on groceries that's better than 90 people being able to purchase gorceries?
All the BS reasons why we need the elite 1% calling the shots is wasted on their own deaf ears. The 99% already know better.
If the rich keep robbing form the poor, soon there won't be any more money to take.
Yes the 1% are spending & investing. Spending on luxury items. So how many of you produce luxury items? Investing in bonds, precious metals, money markets, anything as long as it doesn't produce jobs.
FDR ran into this 80 years ago. Gold (currency) speculation turned a major U.S. recession into a worldwide depression. It got so bad he had to take us off the gold standard. In his desparate attempts to persuade the rich to invest in jobs, he adopted measures later ruled to be un-Constitutional.
Tax the rich. Force them to increase production in order to have the profits they need to maintain their lifestyles. In order to increase production, they're going to have to hire more producers.
Too many American workers rely on somebody else for their livelihood, without the grit that it takes to adapt and recover when something goes wrong............
you are f-in kidding me.........we lack DADDY'S money to start a new venture.....we are not "oh well, that didnt work" let me invest another million in my next project
The best thing to do is to get a change by electing all those in office out this will send a message
that lawyers should not be in office as they are all cheats and crooks of s---.
If you want to be in office all you have to do is have money and be a lawyer and lie
cheat and spend other peoples money. I have never heard a politician tell the truth.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON PERSONAL FINANCE
Even those who don't like to shop are probably hitting the stores this month. Here's what to be on the lookout for and here's what to avoid.