Adieu to the Middle Class

[mutepointe]

i think that one of the reasons that universal health care is being so maligned in the usa is because the business owners can keep their employees under their thumbs. and the employees stay there because what else is there.

the poor may be richer than ever before but why do the rich have to be so much much more rich than ever before. and if i person really looked at what poverty was like in previous centuries, do we really want to risk that again?

when people talk about the fall of the roman empire, folks sometimes ask, "didn't they see it coming?" well, when this happens again, many of us can proudly say from the soup line (if there is one), "yes, we saw this coming years ago."

i'm going to strap my two canoes together, make a pontoon boat, and live on the water.

[crookedtune]

Even if someone wanted to engineer a depression (possibly for income tax purposes?), I suspect there are enough checks and balances in place to prevent that sort of thing reaching the extent it did in the 30s.

djm

Rereading my earlier post, I need to clarify. I really don't think anyone's engineering a depression, or wants one. My point was merely that the middle -class is being squeezed far more than has happened in the last six decades. Things are cyclical, and there will be corrections. The hope is that the corrections will be smallish, (think recessions), rather than major, (think depressions and war).

A related thought: War wouldn't have the same financial-healing power that it did in the 1940s, since it wouldn't involve employing thousands to work in munitions factories, etc... It's a very different world. The best one can hope for is prevention through smarter living and routine stewardship.

[BillChin]

...

the poor may be richer than ever before but why do the rich have to be so much much more rich than ever before. and if i person really looked at what poverty was like in previous centuries, do we really want to risk that again?

The gap has ebbed and flowed. No one alive today approaches the wealth of the old time European kings. King Louis XIV of France poured 60% of his wealthy country's domestic product into construction of his palace at Versailles. Even the wealthiest people in first world nations don't get close to 1% of the GDP for each year. The top person does in North Korea and some other poor post-revolution dictatorships.

Maybe that's why there is no revolution, the peasants see the historical results. A lot of dead peasants, a few dead rich people, a lot of political prisoners, a stagnant or depressed economy, and at the end of the day an even greater wealth disparity than pre-revolution.

There are several reasons for a greater gap. Free trade policies, large pools of educated and talented labor in India and China, lots of place to hide money from tax-happy nations that believe increasing taxes will actually have an impact on the truly wealthy. Raising taxes can be an effective barrier to prevent middle class people from ever having the chance at becoming wealthy. The top wealthy are rarely impacted.

In America, the biggest increases in pay have been in the entertainment field. Radio personality Howard Stern, gets $100 to $200 million a year for a few hours of work each day. TV talk show hosts Oprah WInfrey, Jay Leno, David Letterman receive $40 to $100 million a year for their part time jobs. Movie stars get similarly outsized checks for a few months of work. 20 years ago, the salaries were much smaller, and the networks got a much bigger slice.

The press doesn't seem to target these entertainers (unlike CEOs) even though boycotts and protests could be extremely effective against popular media figures. Perhaps the journalists eat at the same gold plated trough, with top journalists getting similarly outsized checks for their efforts. Perhaps they fear setting that stone in motion lest it roll over their mansions and private jets.

The two richest Americans, Bill Gates and Warren Buffett have pledged virtually their entire fortunes to charitable pursuits. The Walmart enriched Walton family is not so generous and gives a modest amount to charity.

Those that say this is unfair, then who deserves the money? In the case of the TV talk shows, the company? The talk show camera people? The producers? The writers? All of those employed at the top shows get paid very well for their jobs. Those that would like to have a talk show but can't get in the door? Government bureaucrats?

The folks that invented and sold YouTube got a huge windfall. Who should have gotten the money if not the people that created it? Should taxes be so high that even that kind of innovation is not rewarded and those folks are forced to remain middle class?

Certainly there is a better point of balance. However, I haven't heard any well though out policy that can bring us there. Some policy proposals or political speeches sound more like revenge based political rants than sound policy. Revenge doesn't make for sound economic policy.

Many of the forces that are changing things are outside of the U. S., so changes in policy in one country can only have small effects. The very rich will leave long before their 300 foot yachts get burned at the dock, and their private jets impounded. There are plenty of places where they will be welcome with open arms.

[BillChin]

oops, double post, deleting...

[chas]

The gap has ebbed and flowed.

Good point, and good post, Bill. I seem to remember there was a retreat to an island (off the coast of Georgia), where some dozen or so people gathered annually around 100 years ago. They represented something approaching half the wealth in the US. As wealthy as the Gateses and Buffets of the country are, there's nothing approaching that kind of concentration even in the last couple of decades.

[DCrom]

i think that one of the reasons that universal health care is being so maligned in the usa is because the business owners can keep their employees under their thumbs. and the employees stay there because what else is there.

Actually, I've worked for a lot of different companies that offered employee health care benefits.

I can't think of a one that didn't have problems with it - it's one of the biggest time- and money- sinks their HR department needs to deal with, and it costs a LOT of money. The only reason they maintain it is because it's become expected - if they don't have competitive program, they won't be able to get anyone to work for them at all.

If the gov't simply removed the tax exemption for employer-paid health care, people would scream, even if the employees got the money added to their salaries. And after the screaming had died down, you'd see many people choosing the most cost-effective plan they could find and pocketing any savings they could find.

Employers would *love* to quit paying for health care directly - even converting the money paid to salaries would be less expensive for them since they wouldn't need to manage the program. And - for the "they want to trap employees" argument, higher wages work just as effectively as medical coverage, with lower overhead.

We've got the system we have because the costs are hidden from the average person. Those that are covered like the system (until they need to change jobs or retire), employers do it because they have to.

[djm]

Even here, with "social medicine" supposedly in place, we need to have employer-sponsored medical coverage to be able to afford health care. My own employer has decided that it is covering us more than it's competition, so it will phase out medical coverage for retirees; down by 50% by the time I'm 55, down to 0 by the time I'm 60. I am not old enough to retire (well, I am, but can't afford it) but I don't know how to qualify the value of the health coverage. If I retire at 55, I will get full health coverage through my retirement. If I wait until I'm 60, I will only get half the former coverage, but will have had 5 more years to sock salary away for retirement. Anyone here old enough to quantify the value of health insurance in retirement?

djm

[WyoBadger]

i think that one of the reasons that universal health care is being so maligned in the usa is because the business owners can keep their employees under their thumbs. and the employees stay there because what else is there.

I completely disagree. Lots of people who are not business owners are against "Universal Health Care." I myself am, for one very simple reason: I don't want to send more of my money to the federal government, so that someone in DC can decide what to give back to me. Better to keep my own money, do my own thinking, and decide myself how to invest it.

The federal government is already in control of all kinds of things it has no business controlling under the constitution. It can get away with this because it isn't officially "in control;" it simply takes our money, then doesn't give any back to states that refuse to tow the line. Heck of a system.

We're middle class and doin' just fine...we'd probably be doing better if we didn't have to pay quite so much federal income tax.
Tom

[mutepointe]

let me know how it goes when you change jobs and have a pre-existing condition.

[DCrom]

let me know how it goes when you change jobs and have a pre-existing condition.

If employers were OUT of the business of health care (and folks were buying their own coverage directly) it wouldn't matter if you changed jobs.

Our current system is nasty because on the one hand you get coverage for "free" (ie, some of your potential salary goes directly to an insurance company not of your choice) at each job, so most people don't find private coverage necessary or affordable (why pay $$$ every month when you get it for "free"?). And on the other hand, every time you change jobs you have effectively changed insurance companies - which means that you have a much higher chance of being bitten by "prexisting condition" exclusions.

I'd prefer a system where we buy our own coverage (if we want it). And I could stay with the same company no matter how often I changed jobs. But company plans are pretty much enforced by the gov't via the tax code. Even if my employer was willing to give me the money directly (debatable) I'd be paying taxes on it as income, so I'd be at a disadvantage compared to people participating in company plans.

If the gov't wants to subsidize health care, just making the first X dollars/person spent on private insurance tax-free could have the same effect. And across-the-board salary comparisons would be more, not less, accurate.

[mutepointe]

why not just make the health care system as efficient and effective as possible and give everyone the same one payer health care? imagine how many billing clerks could go back to raising their own kids.

[WyoBadger]

why not just make the health care system as efficient and effective as possible and give everyone the same one payer health care? imagine how many billing clerks could go back to raising their own kids.

If it worked that way, I'd be all for it. It's just that history and past experience haven't at all convinced me that turning everything over to government control is going to make it efficient and effective as possible.

Tom

[Brigitte]

Anyone here old enough to quantify the value of health insurance in retirement?

djm

Considering that everyone in older age has a higher chance of getting more serious illnesses, most likely needing the one or other operation (minor one could be a hip replacement or a major one a bi-pass which both are presumably costly if you have to pay them out of the pocket) hence especially in old age health insurance is important. Being retired usually means lesser income to cover for your expenses, you do not want to get bankrupt because of health costs you need to carry yourself.

Hope that helps
Brigitte


P.S. And yes, I think in Germany the gap is growing, too the middle class is sinking down income wise while the rich are getting richer and the poor people raising in number (especially kids are more and more part of the poor statistics) There is an advantage to be poor here though than say in the US, we have still a "social support system in form of governmental monetary support, housing, health coverage etc." that still kind of works, it is not as comfy a cushion as it used to be I believe but still available.