Week of 11/18/2019

Why Income Inequality Ideas Will Inevitably Fail
– by David Matthews 2

Imagine working in an auto shop and some guy rolls in a very expensive and very old car.  It’s his “dream vehicle” that he’s worked hard to maintain and to use and it’s been running a little funny lately.  It either idles or it runs on overdrive.  It has a hard time shifting gears.  It has no problem running in reverse or running all-out, but everything else seems to sputter, knock, jolt, and rattle.

The owner of the car says that he’s been going to another shop, but they keep telling him that everything is fine and just give him coupons and tell him that he’s just not driving it right.  The shop owner promises that they’ll fix his car.

It doesn’t take long for the mechanics to figure out what is wrong, though.  The car is old, the transmission is falling apart, and the engine is burning out.  At the very least it needs a new transmission and quite possibly a new engine.  But, rather than get those ordered, or tell the car owner what is wrong, they simply change out the belts, add a little more transmission fluid, and some extra engine oil.  The car “sounds” okay, but the mechanics know that it’s just a matter of time before the problems resurface.  It’s a pricy service, and one that guarantees several return trips before the car owner eventually realizes that nothing is really being fixed.

This is the situation that we have with the American economy.  All of the financial problems that a vast majority of Americans are having to go through can be traced to the fact that there is this huge wealth problem, where the rich aren’t just getting richer, but they’re doing so in record leaps and bounds and at the expense of everyone else.  The vast majority of American workers are getting short-changed in terms of income; the cost of living has long exceeded any kind of pittance of growth they get; they’re being forced to take on unsustainable amounts of debt just to make ends meet; and they’re being money-shamed by arrogant so-called “financial experts” that think people are struggling because they’re wasting their money on $7 coffees and avocado toast as they parade about their own “Four Yorkshiremen” fantasies about how “poor” they used to be.

Several of the Democratic presidential wannabes have a “solution” for the problem of income inequality.  Andrew Yang wants a universal basic income.  Two wannabes want to give tax breaks and tax credits to those poor and middle-class Americans.  A few others want to hit up the wealthy and super-wealthy and uber-super-wealthy with more taxes.  And then there is the push to increase the minimum wage up to $15 an hour.

All of those ideas do “sound” good.  Some of them could even be implemented depending on the results of the 2020 Con-game.

There’s just one problem.

Every single one of those ideas will inevitably fail.

They will fail because they really do not address the problem.

The real problem is that America’s economic system has made profit the barometer for success for business.  They are focused on the immediate wealth it accumulates instead of the overall health of the business.  It doesn’t matter if the business dies tomorrow or gets bought out by its competition as long as it pays out their promised profits today.

In order to make as much profit as they can, business executives have to increase revenue, which means higher prices that we all pay, and also keep expenses low, which includes the wages and benefits of the employees.  That means that employees are not paid their true worth.  It means they have to burden more and more of the costs of things like healthcare.  It means that pensions plans are meager, and many may not be able to retire as planned.

It means that, contrary to what was promised, businesses did not take the tax breaks and tax cuts they were given and invest that money in jobs and promotions and wage increases.  Because those are expenses.  Instead, they sat on the increased profits and then rewarded their CEOs for it.  And some even engaged in stock buybacks, which increased the value of their own stocks in the company, thus giving them even more money.

That’s something that people don’t seem to understand when it comes to CEO wages versus overall employee wages.  The CEO works for investors and owners.  His or her job is to deliver the maximum amount of profit possible.  They get paid for doing that and they get rewarded for succeeding.  In order for them to do so, they have to keep expenses low, which includes keeping employee wages and benefits as low as possible.  Giving employees raises and better benefits hurts the overall wealth of the company, which affects the CEO’s wages and benefits.  It really is an “us versus them” situation.

Increasing the minimum wage or requiring a universal basic income is an expense.  Increasing taxes – or, at the very least, removing the tax breaks and tax cuts already given – of the very wealthy and very-very wealthy are expenses.  Business executives need to make up the difference somewhere.  They’re not getting paid to eat that added cost.

Plus, guess what happens when the economy goes crashing down?  We hear that same false promise of giving tax cuts and tax breaks for more jobs and better wages.  And they will get it too.  Because investors and business owners can afford lobbying groups, and they already have a plethora of media services to continually sell the false promise as a solution.  It’s already been sold over and over again, and it will continue to get sold over and over again in the future.

And the tax cuts and tax credits for the poor and struggling middle-class?  Well that’s when you hear the cry about deficits and how we can’t “afford” to give those folks “free stuff”.  They may not be as vocal about it, but guaranteed come the next budget conflict, that will be quietly removed without so much as a single voice raised in public opposition.  Because, you know, deficits. 

Funny how those deficits only seem to matter when it comes to helping the great unwashed instead of the overprivileged elites.

Let’s get brutally honest here... all of the ideas for dealing with income inequality in America ultimately fail if they do not directly address the real source of the problem, which is the business world’s fixation on profits over everything else.  As long as the focus is on the immediate wealth of the business instead of the overall health of it, there will be a continual push for the former over everything else, including the overall economy.

If you really think about it, pretty much every economic downturn and crash that America has endured recently did not happen overnight.  They came from a thousand economic cuts and wounds that would slowly chip away at the hardworking and undervalued Americans.  Price increases here and there.  A reliance on debt just to keep things going.  Costs of everything going up more than the meager wage increases given.  Lather, rinse, repeat.

Eventually, just like that prized car that suddenly isn’t working like it used to, our economy fails.

The question is... who is really willing to fix the problem?  Because there seems to be no shortage of people looking to provide a short-term patch job.