The Weiner Component #31 – Wealth and the Distribution of the National Income

Quarterly Gross Domestic Product (year-on-year...

Quarterly Gross Domestic Product (year-on-year growth in real GDP) and Unemployment Rate (simple monthly average) (Photo credit: Wikipedia)

It is interesting to note that the GDP for 2013 is higher than it was for 2008, which was before the Real Estate Crash; that corporate profits are higher than they have ever been; and that the stock market has reach a higher level than it ever was in 2008 or earlier.  We now have more money flowing through the economy than has ever been during the entire history of the United States.  Theoretically, it follows, that the economy should have recovered from the Debacle, unemployment should be down to 2 ½ to 3 ½ percent, and the overall society should be functioning positively for most of the population. 

This, of course, is not happening.  What has occurred instead is that we currently have, throughout the United States, an overall average of just below eight percent unemployment, with a number of people being underemployed or working part time.  At the moment Congress is putting the nation through the sequester which is making a percentage of the poor poorer, even to the point of limiting food programs for children and many pregnant women of the lower echelon of our society.  Some people may die from lack of food before this Congressional made crisis is over.  As the sequester fully comes into being there will be will be newborn infants among the casualties. (Malnutrition can cause death or improper brain development during the first few years of life.)  In addition unemployment will increase significantly.

 Why is this?  Between 2009 and 2013 there was a significant redistribution of the National Income, money has moved up to the upper few percent of the population, while incomes have stayed the same or decreased for the middle and lower classes.  Where the average compensation package for CEOs of large corporations was eight to ten million a year in 2008, it is sixteen to twenty million a year for these same people in 2012.  Meg Whitman, the current CEO of Hewlett Packard, who was hired several years ago to turn the company around after its stock dropped to 1/3 of its original value, received slightly over fifteen million dollars for 2012.  What would she have gotten if she had been successful?

Since the late 2008 Crash there has been an increase in population and gradually in overall demand for goods and services.  A goodly part of the population and been unemployed and underemployed and they have been able to afford very little.  Yet demand in 2012 and 2013 has increased significantly.  There has been economic growth but a significant percentage of the population has been left out of it.  A goodly part of the upper economic echelon has increased their earnings, taken more of the GDP than they did in 2008.  The economy has grown but a fair percentage of the population has been left high and dry.  

Every tax, including the income tax, in this country is regressive; the more one earns the smaller a percentage of their income is paid in taxes.  If the distribution of income had been on a fairer basis then practically all of the population would have money to satisfy their wants and needs.  The overall spending for goods and services would be substantially higher than it is now and productivity would increase well beyond what it is now.  Profits would rise above their present high level and everyone, including the upper two percent would be earning more that they currently are.  It is an interesting bit of irony that the well to do are actually reducing their potential earning by their own penurious policies.  If they allowed the minimum wage and overall salaries to rise they would be allowing themselves to make greater profits and not only would the general population be far better off but their profits would far exceed their current high levels.

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