Sunday, August 11, 2013

Government Causes Income Inequality

Whenever there is a really big problem in our country, rest assured that the Government is the cause of that problem.  Only the government is big enough to create the really big problems.  And the idiots in Washington, especially Democrats, never seem to learn their lessons or remember history and continue with more attempts at "central planning."  The ObamaCare debacle is a great example.

Another example,  take one of the problems that "progressives" always talk about:  income inequality.  The problem is that the government itself creates this inequality.  Obama, an economic illiterate,  would love to raise taxes on the so-called "wealthy" to "even things out." The top 10% pay 70% of the income taxes already (or about 23% effective rate). But, if he actually succeeded, the economy would stagnate further and unemployment of poor people would rise even further.  Already black American unemployment is some 15%---twice the average.  It's true that before income taxes were instituted in 1913, that there were fabulously wealthy people, but the economy grew faster before 1913 than after. 

Various government programs (over about 5 administrations and both parties) caused the housing bubble and the resulting bust which left millions of people underwater on their mortgages.  Now the Fed has vowed to create housing inflation again to "rescue" these people.  Except, the Fed can't just inflate housing--it must inflate everything---which hurts the bottom 90%.  Furthermore, we are once again rewarding people who go into debt!  Ugh, people never learn.

More examples:
  • The last mortgage debt crisis, leading to a financial bubble, was promoted and essentially caused by the Fed and Gov't policies (mortgage interest deduction, no capital gains tax on housing).  The subsequent bursting of that bubble and debt hangover has caused an anemic economy for 5 years and counting. That hurts everyone--100% of us. 
  •  The Federal Reserve bond buying program (QE) puts Trillions of dollars into the hands of the top 1% or 0.1%, not the bottom 99.9%. 
  •  The Federal Reserve has vowed to help the stock (and bond) market with their bond buying program. This helps the top 1% and top 10%, not the bottom 90%.
  • The Fed has not only vowed to increase inflation which hurts most people and actually helps the top 10% (who can afford inflation hedges).  Their target of 2% will causes prices to double every 36 years.  If their target is 2%, then by the time the Federal Reserve acts, inflation will go much higher and their resulting knee-jerk reaction will cause another recession.  They never learn!  The next recession will see $2 or $3 Trillion dollar deficits---part of an endless spiral downwards.
  • Thanks to the government, inflation is robbing savers because of the government's zero interest rate "program." For example, inflation is 1.7% and yields on money markets and CDs are 0% and 0.3%, respectively, the Federal Reserve is robbing all of these mom and pop savers who used to enjoy 3.5 to 4.5% yields on their savings. Yes, your government is a bunch of thieves! And they have vowed to continue robbing savers for years to come! Worse, they have vowed to rob you even more if they succeed in increasing inflation! This hurts the bottom 70% who can't afford to invest in the stock market or buy McMansions like the well-off can.  
  • Government (deficit) spending has and will continue to create inflation in things like housing, medical care and college tuition. College education costs have soared as federal and federally guaranteed student loan debt has soared. Out-of-control government spending causes inflation. Wait till the government is paying even more medical bills due to Obama-Care. Inflation in housing helps the well-off.   Inflation in medical care and college tuition hurts many, many people. 
  •  The interventionist policies of the government: the bailouts and the counter-productive policies of the Obama administration have kept unemployment high. The employment participation rate in the economy remains at a 30 year low. Millions are still without work after 5 years of "recovery."  This hurts the bottom 50% the hardest.  The unemployment rate of minority blacks is about 15% versus the 7.6% average. 
  •  Obama would love to tax "wealthy" people (which would be another 'trick' as he would tax the middle class too) to try to attempt to reduce income equality. What he doesn't know, and he doesn't know a lot, is that taxing the well-off will cause the poor to become poorer. If you tax the job creators more, there will be fewer jobs. We should have let him pass all of the taxes that he wanted to prove this. But it wouldn't matter, the Left refuses to learn anything! He believes that wasteful government spending is a better form of "trickling down" (wasteful spending) than true investment of the well-off.  
Now the the government and the Fed are so deeply involved in "manipulating" many markets, even rumors of their withdrawal causes these markets to plunge. Statements from the Fed that they are planning to slow their bond buying program caused government bonds to plunge in value and yields to rise about 1 full percentage point.   In a two week period in May-June 2013, mortgage rates rose from about 3.7% to 4.7%.  It scared the bureaucrats so much that they have back-peddled ever since. The US Government and Federal Reserve policies are mostly the root cause of income inequality---especially in response to the recent recession.  All of the emergency policies of Bernanke should have already been reversed as they are perversely helping the richest Americans and setting up the next big wave of inflation that will hurt the least well-off.

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