Logically Spontaneous

The 100% Solution for the 99%

Posted: October 20, 2011

Table of Contents

Introduction

How To Fix The Economy

Economic Problems

1) Income Inequality Influences the US Personal Savings Rate
2) Income Disparity Sparked by Low Top Marginal Tax Rates
3) Unequal Distribution of Wealth
4) Tax Breaks and Tax Loopholes for the Rich
5) Low Capital Gains Tax Rates Cause Investment Bubbles
6) Great Depression VS Great Recession
7) The Job Creators Myth Debunked
8) Government Spending and the National Debt

Economic Solutions

1) How To Fix Income Inequality
2) Restructuring is Needed to Stop Government Overspending
3) Use Taxes for Economic Recovery

Conclusion

This is America

Resources

List of Economic Resources

Brian Rogel isn’t a household name but his analysis of wealth inequality could become household reading.
-YAHOO! News

Disclaimer:

This is a working paper and will be updated and expanded upon as time permits. All comments, questions, and alternative opinions are greatly appreciated.

About the Author – Brian Rogel

Co-Founder of Helping the Underprivileged Grow, Actor/Producer for Joey's Town TV Show, and freelance writer. Google+

20 comments on “The 100% Solution for the 99%

    • Brian Rogel on said:

      Hi Rick,
      I’m glad you found the information helpful. Also, thanks for passing along the restore democracy link. I’ll definitely make sure to check it out.

  1. “The last economic depression was righted partially through an increase to the top marginal tax rate. A current bump to this rate would rebalance the economy and get money to the people who need and use it. Personal savings would increase leading to higher consumer confidence. Spending on goods and services would then rise with consumer confidence and becomes the catalyst for new job creation.”

    I would argue that this would be the result. Practically speaking, taxing the ‘rich’ would create an environment where this ‘could’ happen, but I don’t think that’s the case. For the single reason that we’re not changing anyone’s behavior. How would personal savings increase when the all that people know is spend, consume, spend, consume. The average American spends $1.22 for every dollar earned. Not much room for personal savings.

    I agree that there’s a problem. A major problem. But, I don’t believe in the idea that wealth must be distributed amongst everyone, and I don’t believe in taxing a certain group of Americans more to do so. I say this because I don’t believe all ‘rich’ people are evil, like the Democrats and media would like everyone to believe. I think we need to make changes with how the government handles its’ money, which is our money, and how individual Americans handle theirs. No amount of taxation can fix this.

    • Brian Rogel on said:

      Hi Emma,
      Thanks for your comment. You touched on two very good points.

      You’re completely right about the importance of changing how government handles money. It’s an issue I wrote about in the section covering economic solutions. That being said, I still don’t think it can single-handedly restore balance to the economy without also making changes to the tax code.

      Not every top marginal tax rate needs to be raised, but some do. The capital gains tax rate is currently being used as a loophole for people with money to obtain more money. Low capital gains tax rates also show a very high correlation with economic turbulence and wealth inequality.

      The important thing for people to realize is raising the top marginal capital gains tax rate isn’t “taxing the rich”. The rich aren’t being forced to create income through investments. It simply shores up a glaring loophole that’s currently being exploited.

    • Brian Rogel on said:

      Hi David,
      I appreciate the recommendation. I read reviews and it sounds like a very informative book. Thanks for pointing it out.

  2. Obviously the income gap is streaching far too wide for the likes of the average american..Greed and carpetbagging is running amuk in society…I see the day..approx. a year from now when social unrest and protesting will cause upheavals in the way Washington , the wealthy and their lackies will have to change their ways and the way they look at the rest of the country, minus their self serving ways

    • Brian Rogel on said:

      Hi Rick,
      That’s certainly where things seem to be heading if nothing is changed. I try to keep an optimistic view for the future of this country, but the rate at which the wealthiest individuals are leaving paints a grim view of what may be to come.

  3. RudiKelle on said:

    Maaate !! You have finally showed up in mainstream media – someone must have made a mistake. Thanks for showing us poor people how we have been ripped of all these decades. If OWS picks you up, Money will lose it’s power over governments. Good Luck.

    • he didn’t need a panel of epterxs or a credit rating agency to tell us we needed entitlement reform but… you’d never really know it from the actions he’s taken since he came into office.

      • Brian Rogel on said:

        Yeah, sadly there’s a big difference between knowing we need it and actually taking the steps toward true change.

        It normally takes the outcry of a large number of people before something of this magnitude gets acted upon. Hopefully OWS was the trigger to bring this issue to the forefront.

  4. Thank you sir!

    There are compound factors in this debacle, but you’ve hit on some of the most salient. Understood also that historically bubbles occur from excess capital accumulation, this time it was a global phenomenon.

    With Asian managers also active screwing their workers & reaping huge price-point margins we saw a classic trade surplus boomerang coming back as massive cash inflows (see also: This American Life, The Giant Pool of Money). There is nothing more dangerous to markets than depository excesses, because trickle-down becomes perversely bubble-down when it has nowhere else to go.

    And this is what happened: We can overproduce, relative to the ability of global workforces to consume.

    This is manifold.

    The demand side has been beggared by the supply side. To the extent that capital accumulated in the hands of too few (the surplus value of productivity gains not shared with their workforces, but gleaned by their managers and investors) came the deleterious effect of inadequate gross consumption from the bottom-up – from the working classes themselves that drive a substantial part of any economy.

    And with Asian trickle-down not seeing consumer expansion anywhere else, it sought some safe haven in what was purported to be the most reliable investment pool in the world: American Real Estate. But just as surely as excess deposits in the 1980’s drove the Bank of New England to ease its lending policies in an attempt to keep up with its interest differentials, this giant pool of money — on the order of $2 Trillion, flooded our real estate markets. And in typical American fashion we opened the gates wider to make it easier for that cash to flow in, leading to a bubble of increasingly mcmansed & overleveraged home owners & shoddy mortgage portfolios.

    And as if that weren’t bad enough, we then engaged in other perverse practices, also related to global wage suppression and skewed wealth accumulation.

    We encouraged the massive offshoring of jobs in every practical way imaginable, to the extent that somewhere on the order of 40 municipal areas in the USA were already in recession by 2007 due to offshoring of commodity manufacturing.

    This only rendered the demand-side bubble in real estate all the more hollow, all the more beyond the ability of personal income.

    And to make it all the more brinksmanshiplike, we encouraged our working class to devote more and more of their savings in 401k’s, state pensions and IRA’s that themselves contributed to the investment bubbles.

    But it was based on less and less supply-side production: We weren’t producing widgets – what was left of Amalgamated Widgets was a brand name. Instead more and more of our investments were not in each other’s productivity, but in each other’s ability to service debt.

    And with that we financialized the country, producing less and less while trying to float more and more profits from the extraction of fees atop more and more debt. In this type of game there can only be very few winners over the long term.

    So now we have the West having had its heyday, increasingly indebted to itelf and Asia. We have Asia, which has a problem of too much thrift (a veiled term for vast oligarchy deposits resulting from wage suppression). There’s a global imbalance in thrift (resulting from greed) and debt (resulting from greed) that is leading to… THIS.

    This mess we have right here, right now.

    Why do people go to Las Vegas? Because they believe the odds are for returning home with more money than they bring? Of course not, otherwise Las Vegas wouldn’t exist. The reason people go to Las Vegas is that they believe they have money to burn & might stand a chance of getting even with fate, just once, and for the sake of having been gratified in doing so.

    And this is what our uber-rich are faced with: Going to ‘Vegas every day & trying to beat the odds on their massive portfolios, capturing ROI from far flung investments around the globe, even if the risk is to crash the house if the bets get too big, driven by too few players who cash out with their winnings instead of staying in the game. And they’ve stopped tipping the croupier, the pit boss, the martini girl & the pepper boy in the restaurant.

    Throw in the asinine puzzle palace of securities firms reinsuring each other with financial derivatives, with no limits as to reserve ratios or functional ability to pay, and we have a tower of cards ready to be blown over. Can you say “dominoes?” As in the etymology of the word, “Dominus” for lord, master … the invisible hand, lady fate of chaos theory, Eris herself (all hail!).

    Our suffering here is tied to the suffering of workers abroad. If they are undercutting us in terms of wage, we are allowing the undercutting of their own decent livelihoods in the forbearance we’ve given unfair labor practices abroad. This is what allows financial bubbles and decimation of a middle class on the demand side.

    This is the stuff of 19th Century economics object lessons: The rentier rich who bet in bubbles, the indebted working & consuming class who own less than nothing, an ineffectual leadership sidelined from rational governance by obsequity to its engineers of finance.

    We’ve been here before, and now we have to chart our way through the next phase of what appears to be a near-centennial object lesson.

  5. 1) Bank failures have nothing to do with Cap gains. FDR closed all banks on his second day in office. March 1933. Glass Steagal 2 was enacted in FDR’s 6th week in office. June 1933.

    2) And you incorrectly state that cap gains was 31.5% in 1933, it was 1934. In 1933 Cap gains was 12.5%.

    3) The repeal of Glass Steagal in 1999 and the 2000 Commodities and Futures Modernization Act creating the financial instrument known as the Credit Default Swap are widely regarded as 2 major causes of the financial crisis in 2008.

    4) You never mention effective tax rates or incentivizing capital flow thru deductions and expemtions into incountry investments from 1938 to 1986.

    5) You never mention the 1986 Tax reform Act as being a disincentive for investment in the US for job creation.

    • Brian Rogel on said:

      Hi Dodger,
      Thanks for make these really great points. Since this is a working paper I’ve been continuing to add sections as well as revise information.

      I appreciate you pointing out the discrepancy in the capital gains chart citing 1933 instead of 1934. You were completely right and I’ve made the correction.

      I’ve also included new sections covering job creation, effective tax, and the role of motivation through deduction incentives.

      I’ll continue to add onto the paper to help paint a larger and clearer picture of the landscape of current economics. Thank you again for pointing out some of these very important topics to cover.

  6. Maybe some causes of the wealth disparity is expanding the welfare state and literally paying people to be poor has promoted the idea that not earning a lot isn’t a bad place to be when other people pay for your stuff. My aunt is on welfare, hasn’t worked a day in 20+ years, and lives better and has much better health coverage than a lot of people do.

    It’s amusing to see how various things on those charts coincide with the creation of the Federal Reserve and ending of the gold standard. Maybe people should put more effort into researching those things. Perhaps even a full audit of The Fed is in order like Ron Paul has wanted for 30 years…. The inflation tax is the biggest tax no one talks about.

  7. If someone doesn’t think tax cuts create jobs, someone should tell that to all the Democrats in California who just renewed big tax breaks for Hollywood and then cheered for how many jobs it would save/create.

  8. misanthropope on said:

    cum hoc ergo propter hoc.

    the phenomena are common response; the mutual cause is the US shift from an industrial economy (a pay-for-labor model) to a financial economy (a compounding wealth model).

    you’re welcome.

    • Brian Rogel on said:

      Thanks for taking the time to comment. I’m well aware correlation doesn’t imply causation. This paper works to explain the connection between multiple correlation sets. It also attempts to pinpoint the factor that could be behind the correlation shifts.

      Just as correlation doesn’t imply causation, it could be argued one unsupported sentence doesn’t destroy an argument. Your simplistic view that a shift from an industrial economy to a financial economy was the cause of multiple points of economic instability throughout the past 100 years is frankly far fetched. I’d be happy to discuss it further if you’d be willing to provide articles, research, and data to support your theory.

    • Brian Rogel on said:

      You’re welcome. I was lucky enough to have people critique the paper early on. A few of them said it’d be helpful to clarify some of the definitions. I’m glad to hear it was the right move to make.

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