The Weiner Component V.2 #48 – Cycles of History

English: US derivatives and US wealth compared...

English: US derivatives and US wealth compared to total world wealth 1995-2007 (Photo credit: Wikipedia)

English: United States wealth compared to the ...

English: United States wealth compared to the rest of the world in the year 2000. (Photo credit: Wikipedia)

In certain respects cycles of history do at times, more or less, repeat themselves.  Following the Civil War massive changes in industrial production coupled with a great increase in immigration from Eastern Europe changed the country in a relatively short period of time from a rural society to an urban one.  In just a few decades the nation went through the Industrial Revolution and the Rise of Cities.

Real GDP for the United States 1920-1940 in 19...

Real GDP for the United States 1920-1940 in 1999 constant dollars, (Photo credit: Wikipedia)

Since there were no laws at this time the period pertaining to urban growth, building construction, or social conditions this period became one of unfettered corruption as the country worked its way through gradually developing labor laws, urbanization and integrating the new population.  As mentioned this was also a period of intense immigration which allowed for the construction of slum dwellings throughout many of the industrial urban centers.

 

The period was known for monopolies and oligopolies and for Boss Politics by both political parties.  New York City had Democratic Boss Tweed and Tammany Hall while upstate there were Republican bosses and political organizations.  This pattern existed throughout the United States.

 

In response, on a grass roots basis, a Progressive Movement began locally in state politics, reaching Congress and the Presidency around the turn of the century.  Reform would continue until the outbreak of World War I, which was called the Great War at that time.

 

Among the population, a very small percentage, probably less than 2% of the population was extremely wealthy, getting richer all the time and controlling upwards of 80 to 90% of the available wealth.  The bulk of the population: small middle class and lower class, lived upon the balance.

 

A similar situation developed from the 1980s on with the upper part of the richest 1% eventually controlling 90 or more percent of the wealth particularly toward the end of the first year of the presidency of Donald J. Trump when the Republican dominated Congress passed the so-called tax reform which was a giant tax give-away to the rich.

 

Among the various so-called reforms was one measure which attempted to radically limit Affordable Health Care (Obamacare) and another measure that did away with or radically reduced the amount of taxes that could be used for a property deduction.  The object of this measure when it was first introduced many years ago was to encourage people to buy their own home.  Without this measure it is easier to rent than to buy property.

 

Doing away with this right changes the complex of home ownership.  There are no longer any real advantages to owning one’s own home.  Instead renting becomes easier and creates a market for those that have excess cash.  This, of course, will be the upper small percentile that is acquiring 90% of the GDP.  It is a simple and safe investment.  And it adds to the money these people acquire, giving them, in time, well over the 90% of the GDP.  In fact it creates a super-rich, a very small middle class, and everyone else.  It is probably the most unproductive distribution of the wealth of the nation.

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Following different studies on and about 2017 the GDP (Gross Domestic Product) in the United States goes from 18,624,475 to 19.3 trillion dollars per fiscal year.  That is the amount of wealth produced in the nation in the period of a year translated into dollars; the value of all the goods and services utilized in a twelve month period.  It is the highest level of any nation on the planet.  Currently 90% of it is controlled by the upper part of the top 1% of the population.

 

This is still a strange distribution of the National Wealth, particularly since the current tax system focuses more and more of it in the hands of fewer and fewer people each year.  These people tend to keep most of this money dormant, simply stored away or put into safe investments like real-estate.  The money is not being used productively.  The society functions on the non-dormant ten percent plus the little this wealthy group is willing to spend.

 

For a society to be healthy there should be a wide distribution of its wealth.  Money that is distributed to the entire society is spent over a number of times, usually from three to twelve times.  It creates numerous times its basic amount of value.  While money going to the upper class generally does not create more than its face amount.  A wide distribution of income means a wide increase in wealth in which everyone benefits, including the very wealthy.  A narrow distribution of wealth does very little for the growth of the society or the living conditions for most of its population.

 

If we consider the GDP, taking the average projection 19 trillion dollars and divide what is probably the average population of the United States, 230 million according to the U.S. Census Bureau.  Thinking back to the errors made at the last Census in 2010 this is probably a conservative figure; 250 million would be more accurate.  With 230 million we get an equal distribution of 82.6 thousand dollars per person.  If the population is 250 million then the distribution is 76 thousand dollars per person.

 

With a narrow distribution of wealth, mostly going to the upper fraction of 1% the mean income is far below the amount stated above.  The current society includes a sizable homeless population which can barely afford to stay alive.  The United States today is anything but a healthy society.

 

While these amounts are approximate they do give an indication of what would be spent upon new productivity.  It would be overwhelming.  Everyone would benefit from the progress and no one, whether they worked or not, would suffer from any kind of want.  To my knowledge no society has ever functioned on this level.  There are always winners and losers within each society.  But do the losers have to be so poor that the depth of their standard of living is questioned by members of the United Nations?

 

Keep in mind that the Federal minimum hourly wage, which was set in 2009, is $7.25 an hour.  While many states have raised their minimum wage well above that figure there are still a large number of states where this is paid to a goodly percentage of their workers.

 

This is $290 a week before anything is taken out for Social Security or Medicare or anything else.  One well known Republican Senator, Orrin Hatch of Utah has stated that the poor are poor because they don’t want to work.  He stated this after serving 42 years in the Senate.  I doubt if he ever tried to live on $290 a week.

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As a rule governments tax their populations in order to raise money to meet their operating expenses.  The Trump tax reform is the first time a government has given a tax reduction based upon deficit spending.  The current tax bill presumably, if no changes occur, will in a decade increase the National Debt by 1 ½ trillion dollars.  The reductions to the wealthy and the large corporations are presumably permanent while the changes to the middle and lower classes are temporary, ending in 2025.

 

Obviously with the Republicans having a majority of one Senator in the Senate the probability is that the Democrats will gain leadership there in the Midterm Election of 2018.  Since the Tax Reform Bill is highly unpopular with the general public it is very possible that the Democrats could also gain control of the House of Representatives in 2018.  This could allow the Democrats to force Trump to allow changes in his current Tax Law in 2019.

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The concept of taxation goes back to the beginnings of civilization.  There is a cost factor to the existence of any form of governmental organization.  Historically there has always been a means established of raising funds, either in kind or financially to pay for this.  Usually the societal leaders figure the cost and tax the people accordingly.

 

Trump’s use of deficit spending is a new variant to taxation.  Here, presumably, a future generation will pay for the tax relief in the present or continue to pay interest upon the amount.

 

Another important use of taxation, which developed over the years, is to attempt to more or less equalize incomes so that everyone in that country can maximize the benefits of that particular society.  Today this would be many of the European nations where everyone has socialized medicine as well as a guaranteed minimum standard of living whether they are employed or not.  Here, unlike the United States, the wealthy pay a larger percentage of their incomes in taxes than those who earn far less.  It is a far more realistic approach than that of America.

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Currently the United States, with Donald J. Trump as President, has a government far more like the one that existed in the late 19th Century than the one that existed after World War II, when the Federal Government turned the country into a middle class nation. His Cabinet consists of millionaires and billionaires, many of whom seem more interested in their own welfare than that of the United States.

 

Lately President Trump has come out with strange statements like the Justice Department was his instrument to use as he saw fit rather than follow the Constitution and the laws.  Trump is attempting to emerge as an absolute autocrat running the United States.  He does not seem to understand the meaning or function of the Constitution.  This type of behavior could lead, even with the current Republican majority in the House of Representatives, to a possible future impeachment.