Upside Down 12/15/18

By Richard E. Bleil, Ph.D.

As Americans, we are taught from a very young age of the wonders of capitalism. Capitalism will save us from the perils of communism and socialism, it’s fair market, free trade, freedom. Except, it’s not. Don’t get me wrong; communism has proven to be a failed experiment, so I’m not suggesting a radical change, but clearly our system is failing the common citizen.

Recently, there have been administrations (not just the current one) that has given huge tax breaks to the wealthy with only token breaks for the rest of us in the hopes of placating us. Although it has been demonstrated to be a failure, these administrations are still following “Trickle Down Economics”, although often they try to avoid the term. Reagan coined the phrase and dramatically cut taxes on the wealthy in the hopes that they would, in turn, spend their newfound money on jobs and the economy in some altruistic fashion, but too many wealthy people are more egoistic. George W gave the wealthy further tax breaks, which were meant to be temporary, but somehow lasted far longer than originally stated. The current president is still avoiding the term, but his tax breaks, permanent for the wealthy but temporary for us poor schmoes in the trenches, stating clearly that he anticipates these breaks to be used for economy (and current indicators are showing that these most recent tax breaks will have no better luck that Reagan’s).

Greed always gets in the way. In communism, the government controlled the wealth completely, and although, in theory, it was to be distributed evenly, the reality is that those in power kept it for themselves. The same thing is happening today, here in America. What was supposed to be a system that rewards the hard-working has become a system of the “haves and have-nots”. The wealthy are the business owners, and need not work if they don’t really want to, and the workers are actually losing ground.

Let’s focus on the workers and how they are losing ground. There is a funny thing happening where we feel like we are doing better, and are told that we are doing better. After all, the stock market is up (although economists fear an impending collapse), unemployment is down, and salaries are up. But, the stock market only helps those with investments in the market, and large ones at that. If you have a retirement account, you probably do have investments in the market, but at a significantly reduced amount because of fees and, frankly, the tax bracket in which you are most likely stuck. Those with large amounts of money who can invest heavily may also pay fees, but much smaller in comparison with your investments. As far as unemployment and salaries, yes, this is true, but inflation has outpaced pay raises. You might feel like you are getting ahead because your paycheck is getting bigger, but it is becoming more difficult for Americans actually save money, which is an indicator that we are not as well off as we used to be.

Another indicator is the housing market. This can’t be bad, after all, house payments are cheaper today than rent, so that’s good. But is it? If you are fortunate enough to be a current homeowner, or to have worked long enough to have a good credit history, then this is good news for you, but what about the young people just starting out? It used to be that renting was the economical alternative for people starting out so they could build up some savings (which we already know is a problem) before they have the credit history to buy a house. Today, with pay rates faltering (especially since minimum wage is not a livable income), the cards are stacked against those just entering the job market.

The answer used to be education. If you had a college degree, it was like a magic fix, but this is no longer the case. Tuition cost has far outpaced inflation, putting education out of the reach of many of our young people. Student loans used to be a great way to pay for college, but somewhere in the ’80’s, the view on education seemed to shift from being an investment to being a business. When student loans became privatized, interest rates on student loans increased along with tuition rates, leaving us at a point today where the savvy students are questioning if the pay differential between having a bachelor’s degree or not will actually pay for the cost of the education.

These are just a few of many examples of the current economic perils. Goods are becoming less expensive to produce but cost more, the cost of luxury services such as cable are becoming untenable, and prescription drugs have been demonstrated to be artificially inflated to name a few. The problem is that the current direction of our economy is not sustainable, and is driven by a greedy few. Add all of this up, and we have dangerous days ahead of us.

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