Shrinking Middle Class

[mom31257]

Did anyone else see this article? Where are we headed as a nation? What steps can we take to actively solve this problem? What can we do locally? It just seems so out of our hands. I want a great future for my kids. I don't mean that I want them to be rich. That's actually the last thing I want. I do want them to have a decent life like us, a job, house, food on the table, and needs met.

Yahoo Article Shrinking Middle Class

[Renee in NC]

Wages are falling, too. In 2000, my dh made $1.50 more an hour than he makes now doing basically the same work. Adjusted for inflation, it is $4 an hour less than he made 10 years ago. I have heard over and over again about how people are making less than they were.

 

I realize this is anecdotal - I wonder if their are statistics somewhere looking at wages?

[MtnTeaching]

I worry about this, too. My husband and I recently discussed the fact that our children will most likely have a very different life than we did. We were extremely blessed to have pretty much any job we wanted and an overabundance of "things". Most of all, I never once doubted that we would always have the freedoms "endowed to us by our Creator" and our Constitution.

 

We've decided to keep doing what we are doing with a few additions. Giving our children the best education we can (that cannot be taken away), loving them, building our relationships, modeling helping others when they are in need, teaching the peace that can be found through our religion and giving even more of an effort to make sure they have knowledge of "practical skills". (I'm going to have to learn a lot of those right along with them).:001_smile:

 

Hopefully and prayerfully, you and I are worrying for nothing and our children will have fulfilling lives, full of love and lacking in need. But it sure helps me to sleep a little better if I know I'm doing what I can to prepare them better than I would have been if things continue to head in the direction they're going.:grouphug:

[LisaKinVA]

I've been saying this was going to happen for 20 years. Nothing like being the lone voice in a school filled with free traders who loved to quote Adam Smith (out of context). :glare:

 

We are building the smallest house we can live in -- spending money to provide our children with the BEST education we can, reducing, re-using, making from scratch, and praying for guidance for the rest.

[ChrisOR]

I believe it too. DH's income varies year-to-year but is approximately the same as it was 10 years ago, yet it is tough to make ends meet now whereas then, we felt more than able. We spent money more freely, ate out frequently, took road trips. Now, we budget, cringe if we have to eat out due to schedules, and vacation at grandparents' houses. The big budget busters ... housing, car, food and insurance ... eat up almost 80% of our income. We don't have a car payment or college debt.

[Cedarmom]

Well wages are dropping I agree. On the other hand part of the statistics they showed were about savings and retirement. ANd I just finished reading a Dave Ramsey book. So, I propose that part of the problem, is that, even when people are making enough money to save for retirement, and emergencies they are not setting money aside for that.. More people than last generation are being stuck in the just spend whatever money you have and use credit cards. Think of the long lines for the new I-phone, or how many people have big screen tv's. In other words, many people are living paycheck to paycheck when they could have money left over. But they are too caught up in keeping up with the Jone.s. So, I thin k part of the solution is to teach our kids how to budget, how to save moeny.

 

I realize that many people, especially in today's econonmy, truly are watching every penny, and still not making it. I'm sure other posters will post their ideas on how to imprvoe that. My post is just to address the statistcis of people not saving, or putting money into retirement and I listed one of the reasons.

[mom31257]

Well wages are dropping I agree. On the other hand part of the statistics they showed were about savings and retirement. ANd I just finished reading a Dave Ramsey book. So, I propose that part of the problem, is that, even when people are making enough money to save for retirement, and emergencies they are not setting money aside for that.. More people than last generation are being stuck in the just spend whatever money you have and use credit cards. Think of the long lines for the new I-phone, or how many people have big screen tv's. In other words, many people are living paycheck to paycheck when they could have money left over. But they are too caught up in keeping up with the Jone.s. So, I thin k part of the solution is to teach our kids how to budget, how to save moeny.

 

I realize that many people, especially in today's econonmy, truly are watching every penny, and still not making it. I'm sure other posters will post their ideas on how to imprvoe that. My post is just to address the statistcis of people not saving, or putting money into retirement and I listed one of the reasons.

 

I definitely agree that a lot of people don't know who to manage their money, which creates big problems. Many people were and are buying $5 Starbucks every day, when they could make a cup of coffee with flavored creamer at home much cheaper.

 

I know families who eat out all the time. Even if you are eating fast food, it is still cheaper to cook at home. I don't understand how people can't cook quickly at home. There are so many convenience foods now, which obviously wouldn't matter about being unhealthy since they eat out. I picked up a rotisserie chicken and got 2 meals for our family of 4, plus lunch for a couple of us. It was only $6.

 

Most of our money goes to housing costs, maintaining our cars, insurance, food, some vacationing, and charitable giving. I am thankful that most of that is at least supporting America. We don't buy clothes until we really need them.

[Renee in NC]

I believe it too. DH's income varies year-to-year but is approximately the same as it was 10 years ago, yet it is tough to make ends meet now whereas then, we felt more than able. We spent money more freely, ate out frequently, took road trips. Now, we budget, cringe if we have to eat out due to schedules, and vacation at grandparents' houses. The big budget busters ... housing, car, food and insurance ... eat up almost 80% of our income. We don't have a car payment or college debt.

 

That's true - gas, for example, was $1.29 per gallon 10 years ago, too. I could feed a family of 6 on $240 a month. I look at our budget and cringe - insurance is higher, gas is higher, utilities are higher, etc. Our lifestyle has drastically changed, that is for sure!

[cathmom]

That is a scary article!

[elegantlion]

We've seen this coming too, as dh hasn't been able to raise his prices to keep up with inflation. We've had basically the same income for several years and we're sliding further down the middle class scale.

 

We've given up a lot of thing, like travel, and are working to downsize dramatically so dh can go back to school and change careers.

 

A solution, IDK? My dh is in remodel construction and when the first wave hit years ago it was good for business. People were traveling less, moving less often, and fixing up the homes where they were. Today it seems less people even have money for fixing up and maintaining their homes.

[Kathleen in VA]

We're feeling it as well. I buy less and less each time I go grocery shopping (this has actually worked in our favor because I am buying fewer snacks and treats and focusing on the good stuff). I've got two dead cars in the driveway and no funds to repair either so we are a one-car family for now. The last time we bought a car was in 2002 - it was a 1998 Caravan.

 

I haven't bought new clothes for years - and now I don't even shop thrift stores or yard sales. We have no budget for homeschool books for next year, so I am borrowing from friends and we are going to use the library a. lot.

 

We don't travel - never have. Now we don't even have the funds to go to local museums or the public pool.

 

We can't downsize because our house is only 1000 sf (no basement) to begin with and there are six of us living here. Dh has always worked two jobs and I proofread part-time, so we aren't able to bring in more income. Ds21 and dd17 do work and that has eased the load a bit since they are able to buy their own clothes and extras.

 

If I didn't know that God is sovereign and that He is my provider, I would probably be very worried about it all. What I realize instead, is that we're ok and that all we really need we have. The situation is forcing us to see what is truly important in life.

[mcconnellboys]

This is not new, it's been coming down the pike for about 3 decades (at least). There's more out there on the topic:

 

http://www.newint.org/issue281/death.htm

 

http://www.youtube.com/watch?v=PBf70qX1sBw

 

and that's just a couple of other pieces....

 

We can get more efficient at saving instead of wasting. We can think of ways to consolidate, reuse, save. We can get more proficient at being doers - makers of necessities - rather than just consumers. We can teach our children these lessons and more: that less is more; that happiness does not have to be about stuff. Our world is going to change. I don't see any way around it. We have to evolve and change with it if we're going to survive and thrive....

[tex-mex]

I've been saying this was going to happen for 20 years. Nothing like being the lone voice in a school filled with free traders who loved to quote Adam Smith (out of context). :glare:

 

We are building the smallest house we can live in -- spending money to provide our children with the BEST education we can, reducing, re-using, making from scratch, and praying for guidance for the rest.

:iagree: Hubby has been saying this for the last decade. Baby, the good $$$ times are over.

[OrganicAnn]

I guess what I can't reconcile is the shrinking middle class with the explosion of expenses stuff. I'm amazed at the number of fairly big and expensive newer homes that were built in the last 20 years and while I know the housing has slumped, most of these home are still occupied. It used to be that middle class families lived in 3 bedroom 2 bath ranch houses on about 1/3 acre of land (this is in the midwest). Then there is that fact that so many pay for tv (cable) and all the i-phones other technology. I'm in favor of technology just not quite so much. Then there is healthcare costs. Then there is retirement. I'll bet in the past most people didn't fund the majority of their own retirement (via 401k), so they didn't need as much salary to cover all these expenses. Anyway, I wonder if priorities/cost structures were different if the middle class wouldn't be shrinking so much. But I do get the part about shrinking wages, we've experienced that too.

[Cedarmom]

I guess what I can't reconcile is the shrinking middle class with the explosion of expenses stuff. I'm amazed at the number of fairly big and expensive newer homes that were built in the last 20 years and while I know the housing has slumped, most of these home are still occupied. It used to be that middle class families lived in 3 bedroom 2 bath ranch houses on about 1/3 acre of land (this is in the midwest). Then there is that fact that so many pay for tv (cable) and all the i-phones other technology. I'm in favor of technology just not quite so much. Then there is healthcare costs. Then there is retirement. I'll bet in the past most people didn't fund the majority of their own retirement (via 401k), so they didn't need as much salary to cover all these expenses. Anyway, I wonder if priorities/cost structures were different if the middle class wouldn't be shrinking so much. But I do get the part about shrinking wages, we've experienced that too.

 

:iagree :

[Xuzi]

One thing that's always popped into my head anytime someone's mentioned a "shrinking middle class", is how much did it genuinly grow anyway? It seems like there was a large chunk of people living a "middle class" lifestyle on a lower class income, relying on creative financing and massive credit card debt to keep them in that lifestyle.

 

I also agree that the list of "necessities" (like cable TV being something you just naturally get, like a fridge for your food) has gotten more expensive, and society is going to have re-learn being frugal.

[MaMa2005]

One thing that's always popped into my head anytime someone's mentioned a "shrinking middle class", is how much did it genuinely grow anyway? It seems like there was a large chunk of people living a "middle class" lifestyle on a lower class income, relying on creative financing and massive credit card debt to keep them in that lifestyle.

 

 

:iagree:

[cathmom]

I think that in the last 10-20 years, yes, credit played a part in there appearing to be a larger middle class than there was. But from my childhood I remember that there were the genuinely poor, the well-to-do, the extremely rich, and then everybody else. The "everybody else" is what is shrinking. People who had a decent amount of financial security before are now living on the edge.

[Skadi]

What people call middle class today was upper class in the 1950's. I'll start worrying about the disappearance of the middle class when the people I know who get welfare benefits stop having three cell phones, cable TV, computers with internet, and two cars.

 

It seems to me like a lot of people who say they suffer from the "shrinking middle class" today are just people who don't know how to live within their budgets -- and when it comes down to it, they believe they shouldn't have to.

[BeautifulLife]

 

We can get more efficient at saving instead of wasting. We can think of ways to consolidate, reuse, save. We can get more proficient at being doers - makers of necessities - rather than just consumers. We can teach our children these lessons and more: that less is more; that happiness does not have to be about stuff. Our world is going to change. I don't see any way around it. We have to evolve and change with it if we're going to survive and thrive....

 

I recently read Radical Homemakers and this was basically what I got out of it. We've become such a consumer society... she made the point of being producers instead.

[DawnM]

DH took a paycut of sorts. His bonus (typically 10% of his salary) was not given at all last year and there have not been any increase in living or raises for almost 2 years.

 

Thankfully, he has a stable job and it doesn't look like there will be any issues with being laid off.....there is certainly always the possibility, but he doesn't seem to be in any immediate worry.

 

So, we live with less.....cut out some of the extras, save more, and hope to downsize our house. We bought more than we should have as now we really want to pay off a house within 5-8 years....not doable in this house unless we get some windfall we aren't aware of.

 

15% of our incomes have been saved since we started working. But I worry about the statistics given in that article! Will we need to support those folks who didn't save?

 

Dawn

[AuntieM]

We have experienced a shrinking of our income in some ways. Prices on consumer goods - including essentials like groceries - have definitely risen. And with my kids getting older, providing food and clothing has become more expensive, and I do find home schooling older kids involves more costs than younger ones. At the same time, dh has not received any bonuses or cost of living increases in three years now. So I am having to do more stretching than I have in the past.

 

I agree that as a society in general, our standards (expectations?) are higher. But I don't think that accounts for *all* the shrinking.

[Crimson Wife]

The middle class is shrinking in that it used to be a guy with no more than a high school diploma and not much in the way of skills could go out and get a decent-paying manufacturing job to support his family. Because of automation & outsourcing those days are gone. With the huge increase in immigration, wages have been stagnating or falling for the other types of jobs that don't require much in the way of education or skills.

 

When I was a kid, only rich folks could afford to hire a gardener. Now because of all the immigrants, in my neck of the woods you can get weekly yard service for less than what it costs to have cable TV. That's a boon for those families who've managed to stay in the middle class, but very bad for those not so fortunate. :(

[mcconnellboys]

I'm starting to see a grassroots movement both here and in the town where I grew up of people getting back to being producers. Most can't do everything, but they are learning to do one or two things well and then moving on from there. Like gardening, for example, or keeping chickens, or they're learning to make their own thread and dye it and weave it or felt it or knit/crochet with it, etc. Some are growing their own fiber via sheep or llamas, etc., too. I'm trying to do my part to encourage such efforts by buying more from local producers whenever I can. I'd like to see our communities get more self-sufficient before a crisis, rather than after.....

[JoyfulMama]

The middle class is shrinking in that it used to be a guy with no more than a high school diploma and not much in the way of skills could go out and get a decent-paying manufacturing job to support his family. Because of automation & outsourcing those days are gone. With the huge increase in immigration, wages have been stagnating or falling for the other types of jobs that don't require much in the way of education or skills.

 

We too are seeing a change in manufacturing. There was an article in the NYT (?) recently noting changes DH has seen. He's been frustrated for years with the lack of knowledge base for manufacturing workers, and has encouraged previous employers to assist with providing basic education in order to assist the work flow. Now that so many companies have had major layoffs, often times they are wanting to hire back a work force which has a higher knowledge base than those employees they laid off. I'm not talking college degrees, but 9th grade math and language skills. If they are paying the higher wages required by the unions (and I'm not saying the wages aren't fair) then they want workers who can move forward.

 

We used to feel like we were solid middle class. Now we feel like we are barely in the middle class range, and our income has increased over the last 10 years.

[mom31257]

Thanks for all the thoughts. Dh, too, is experiencing a pay cut this year. He teaches school and last year got his raise, but they cut 3 days from the year leaving him with a small raise. However, we had to upgrade our dental insurance to cover braces, which meant a higher premium.

 

This year there is to be no pay raise and 6 days cut from the schedule which will be a pay cut from last year. Our property taxes went up $350 a year because the state is low on money. There was some kind of tax break that they had to remove. We are trusting God to make it through whatever comes our way.

 

We have been blessed in many ways with some things we enjoy. My dh's parents give us some money every year for a vacation. My sister has a special needs son and can't travel alone, so she often invites me and the kids and will pay for our place to stay and we get our food.

[nono]

However, we had to upgrade our dental insurance to cover braces, which meant a higher premium.

 

 

A perfect example! Braces weren't mainstream 40-50 years ago. A lot of people in the middle class simply had crooked teeth.

[ChrisOR]

It seems to me like a lot of people who say they suffer from the "shrinking middle class" today are just people who don't know how to live within their budgets -- and when it comes down to it, they believe they shouldn't have to.

 

I'm sorry to pull your quote out and disagree, but we do know how to live within our means and the paycheck is stretched to the max.

 

Our healthcare costs (insurance and out-of-pocket) are 19% of our net income. We have insurance through DH's work that shares the premium. Our kids have not been to the pediatrician in three years ... they have not been sick! We do go to the dentist twice a year for cleanings (covered by insurance) and two of our family sees the eye doctor and require glasses.

 

Our paid-for-car expenses come to 15% of our income. This number is figured when we try to budget for maintenance and repairs.

 

Our utilities would be well over 10% of our income, but we found a rental with a woodstove, well water and septic, eliminating natural gas, and city water/sewer bills. So fortunately our utilities are about 5% of our income.

 

I buy the majority of our clothes at Goodwill, equaling 1-2% of our income. I cook mostly from scratch, but do buy a cereal box per week, usually eaten Saturday or Sunday morning.

 

Our splurge is for our kids to have one activity apiece ... two kids old enough so far. Other than cutting the kids' activities, there is no room to cut. Of course, we will when we have to but maybe the kids will be old enough to earn some money babysitting or doing yardwork then.

 

We are not poor, but with the income we've had for 10 years, we used to be solidly middle class. Now, I think we are lower middle class ... same income!

[Renee in NC]

The middle class is shrinking in that it used to be a guy with no more than a high school diploma and not much in the way of skills could go out and get a decent-paying manufacturing job to support his family. Because of automation & outsourcing those days are gone. With the huge increase in immigration, wages have been stagnating or falling for the other types of jobs that don't require much in the way of education or skills.

 

When I was a kid, only rich folks could afford to hire a gardener. Now because of all the immigrants, in my neck of the woods you can get weekly yard service for less than what it costs to have cable TV. That's a boon for those families who've managed to stay in the middle class, but very bad for those not so fortunate. :(

 

:iagree::iagree:

[mom31257]

A perfect example! Braces weren't mainstream 40-50 years ago. A lot of people in the middle class simply had crooked teeth.

 

I do agree because I'm one of those people who has crooked teeth. I would probably do almost anything to get the money for my kids to have braces if they need them. My parents never took me to a dentist. I went to one for the first time when I was just out of college. I have tons of fillings.

 

We actually didn't have a choice with dd. Her bite was off and her teeth were touching in a way that was wearing the enamel off of them. Now that ds's permanent teeth are coming in, I'm wondering if he will have the same problem.

[KidsHappen]

Yes, we are seeing this for the first time in our lives. My hubby is making the exact same amount we made 10 years ago, only expenses have went up and we have had to wipe out or saving for funerals and other emergencies. Two years ago we still had a cushion in the bank and then last year we went down to just making it payday to payday. This year we started accumlating a bit of debt and for the first time in my kids lives we are having to tell them no to things that we would otherswise let them do because we simply can't afford it. I have four grown children that are just making it by, two in college and two in school, plus to grandbabies and three weddings this year. Times are tough.

[Peela]

On a personal level, it's difficult. We are feeling it too. But on another level...it was never a sustainable thing in the first place. We cant consume, and have the whole of Western society based on consuming and shopping and wanting and borrowing to get what seem like necessities now, but really aren't....and continue indefinitely, generation after generation.

It had to change. We just happen to be the ones living through it.

I am a bit excited by it. I love seeing what this is bringing out of people- the learning to be responsible financially, the homemaking skills, the creativity, the going back to basics. The movements towards healthy eating, taking care of the environment (when I was growing up, my greeny parents were considered very radical- now at least it is considered ok to care about the ecology of the planet rather than just economics)....change is change and there will always be change. I see things getting worse in some ways.....I especially dont like the idea of more and more power/money going into the hands of fewer and fewer.......but better in others. There is a counter movement. The internet has opened so much. Consider microfinancing to women in Bangladesh and other places ...where a loan of $200 can mean a woman can set up a proper business and support her children...my understanding is that the repayment of loans is 100%. Consider the organic movement- it is huge. The movement towards healthier living. SO many awesome things are happening at the same time as the collapsing of economic structures that have outlived their day. But they are happening at such a grass roots level that without the internet, and wanting to know, we can miss it and only see what is affecting us, and the bad stuff.

I try and see this stuff from the broadest, most impersonal perspective possible, to keep it all in perspective. Who cares about the middle class anyway? Maybe once society readjusts, we will have something completely different ..and even better.

[nono]

I do agree because I'm one of those people who has crooked teeth. I would probably do almost anything to get the money for my kids to have braces if they need them. My parents never took me to a dentist. I went to one for the first time when I was just out of college. I have tons of fillings.

 

We actually didn't have a choice with dd. Her bite was off and her teeth were touching in a way that was wearing the enamel off of them. Now that ds's permanent teeth are coming in, I'm wondering if he will have the same problem.

 

Oh, I'm not criticizing! Sorry if my post came across that way. :grouphug: Just pointing out how we've redefined the middle class over the years. It's very hard to compare against 40-50 years ago, since the definition was different.

[Mejane]

An anecdote that illustrates the difference as I see it: my parents, who were decidedly middle class, bought homes that cost no more than twice my dad's annual salary (as dictated by the area.) Our homes have always cost approximately three to four times what hubby earns in any given area. We are not extravagant; the COL has simply outpaced earnings.

[Kathleen in VA]

On a personal level, it's difficult. We are feeling it too. But on another level...it was never a sustainable thing in the first place. We cant consume, and have the whole of Western society based on consuming and shopping and wanting and borrowing to get what seem like necessities now, but really aren't....and continue indefinitely, generation after generation.

It had to change. We just happen to be the ones living through it.

I am a bit excited by it. I love seeing what this is bringing out of people- the learning to be responsible financially, the homemaking skills, the creativity, the going back to basics. The movements towards healthy eating, taking care of the environment (when I was growing up, my greeny parents were considered very radical- now at least it is considered ok to care about the ecology of the planet rather than just economics)....change is change and there will always be change. I see things getting worse in some ways.....I especially dont like the idea of more and more power/money going into the hands of fewer and fewer.......but better in others. There is a counter movement. The internet has opened so much. Consider microfinancing to women in Bangladesh and other places ...where a loan of $200 can mean a woman can set up a proper business and support her children...my understanding is that the repayment of loans is 100%. Consider the organic movement- it is huge. The movement towards healthier living. SO many awesome things are happening at the same time as the collapsing of economic structures that have outlived their day. But they are happening at such a grass roots level that without the internet, and wanting to know, we can miss it and only see what is affecting us, and the bad stuff.

I try and see this stuff from the broadest, most impersonal perspective possible, to keep it all in perspective. Who cares about the middle class anyway? Maybe once society readjusts, we will have something completely different ..and even better.

 

:iagree:Yes, it is a strain on a personal level, but I agree that it couldn't last. I too think it could be a good thing in that people will have to draw from their inner resources and face the challenge. It kind of reminds me of when we have a super big snowstorm and everyone emerges from their cocoons to help each other dig out and clear walkways and such. When Hurricane Isabel (sp?) came through and knocked the power out for 5 days here, we had the opportunity to get to know our neighbors much better. Everyone worked cooperatively to get through it. I'm not saying I'm really looking forward to things crashing, but I can see how it could work for good as well.

[amy g.]

I can't believe how many friends who used to only buy convenience foods are now asking me how to make biscuits, soap, cheese...

 

Last year, we were planning a dairy and commercial kitchen on the property. That was before the Texas laws changed making it very difficult for the small artisan cheese maker to turn a profit.

 

Now, I'm thinking the time may be right to finish the building and use it to hold weekend workshops in heritage gardening, cooking and other arts.

 

People are interested in learning skills, they never thought they would need.

[ChrisOR]

 

Now, I'm thinking the time may be right to finish the building and use it to hold weekend workshops in heritage gardening, cooking and other arts.

 

People are interested in learning skills, they never thought they would need.

 

Neat idea!

[spradlin02]

It's the reason for the progressive tax system and the inheritance tax. The government has been cutting taxes on the wealthy for decades, leaving them with more money. The idea was that if the rich had more money, we'd all be better off. Well, you can make your own judgment on how that has worked.

 

Let's do little math...Let's say you have your average middle class family (family A) and your average really wealthy family (family B). Both have a little money to invest.

 

Family A invests $10,000 hard earned money in a vehicle earning 4% compounding over 10 years. They don't want to be too risky because that's most of the money they have (and it's not the 90's).

So over 10 years that family will gross approximately $4800...not bad.

 

Family B gets a nice fat inheritance from a deceased family member and invests it all, as they are already pretty well set up. Because of this, they willing to take a little more risk with some of the money. So let's say for fun, 25% of their $500,000 inheritance makes 7%, and the rest is at the 4% interest rate.

So over the same period, the well-off family will bring almost a quarter of million dollars.

 

Now, I won't do the math (cause I have other things to do), but now compound that over 25, or even 50 years. I think this example shows why we used to have an inheritance tax, and why a progressive tax system was instituted. Over the course of time, you find more money going to the upper tax brackets that is being pulled out of the middle and lower classes.

 

As more money flows to the top bracket, they get more control and centralization of power. With this increase of monetary influence, you inevitably get an increase in political influence. And then we start seeing policies which benefit the wealthy while the peasant classes get the to rummage through their waste pile.

Edited July 26, 2010 by spradlin02

[Crimson Wife]

The government has been cutting taxes on the wealthy for decades, leaving them with more money.

 

Umm, since the Bush tax cuts passed in 2001, the number of Americans who pay NO Federal income tax has increased 45%, from 30 million to 52 million. A married couple with 2 children and an income of $45k year owes $2,085 less in Federal income tax as a result of the Bush tax cuts. That's almost 5% of their income.

 

I remember being surprised at how much of a difference they made in our tax bill the first year they were in effect and we were far from wealthy (at the time our income was<$60k).

[spradlin02]

Umm, since the Bush tax cuts passed in 2001, the number of Americans who pay NO Federal income tax has increased 45%, from 30 million to 52 million. A married couple with 2 children and an income of $45k year owes $2,085 less in Federal income tax as a result of the Bush tax cuts. That's almost 5% of their income.

 

I remember being surprised at how much of a difference they made in our tax bill the first year they were in effect and we were far from wealthy (at the time our income was<$60k).

 

It reads as if you try to refute my statement, but I'm not sure how.

[FO4UR]

It's the reason for the progressive tax system and the inheritance tax. The government has been cutting taxes on the wealthy for decades, leaving them with more money. The idea was that if the rich had more money, we'd all be better off. Well, you can make your own judgment on how that has worked.

 

Let's do little math...Let's say you have your average middle class family (family A) and your average really wealthy family (family B). Both have a little money to invest.

 

Family A invests $10,000 hard earned money in a vehicle earning 4% compounding over 10 years. They don't want to be too risky because that's most of the money they have (and it's not the 90's).

So over 10 years that family will gross approximately $4800...not bad.

 

Family B gets a nice fat inheritance from a deceased family member and invests it all, as they are already pretty well set up. Because of this, they willing to take a little more risk with some of the money. So let's say for fun, 25% of their $500,000 inheritance makes 7%, and the rest is at the 4% interest rate.

So over the same period, the well-off family will bring almost a quarter of million dollars.

 

Now, I won't do the math (cause I have other things to do), but now compound that over 25, or even 50 years. I think this example shows why we used to have an inheritance tax, and why a progressive tax system was instituted. Over the course of time, you find more money going to the upper tax brackets that is being pulled out of the middle and lower classes.

 

As more money flows to the top bracket, they get more control and centralization of power. With this increase of monetary influence, you inevitably get an increase in political influence. And then we start seeing policies which benefit the wealthy while the peasant classes get the to rummage through their waste pile.

 

 

...but Family B also pays a nice lawyer to find the loopholes and gets out of those taxes, but Family A cannot afford that lawyer and gets whipped!

 

...also, Family B is investing in what? Most likely a few (or a few thousand) jobs are created by their investments.

 

I think anytime we base decisions based on jealousy of "the wealthy" we are blinding ourselves to the true possible outcomes of our decisions. And, no, I am NOT wealthy. LOL (not even close...)

[spradlin02]

...but Family B also pays a nice lawyer to find the loopholes and gets out of those taxes, but Family A cannot afford that lawyer and gets whipped!

 

...also, Family B is investing in what? Most likely a few (or a few thousand) jobs are created by their investments.

 

I think anytime we base decisions based on jealousy of "the wealthy" we are blinding ourselves to the true possible outcomes of our decisions. And, no, I am NOT wealthy. LOL (not even close...)

 

Again, thanks for partially proving my point. As for creating jobs. Sure, they could be creating jobs in China or Brazil. Buying treasury bonds or stock interest in companies doesn't create too many jobs.

 

And in the years since these economic theories have been proposed, I've never seen any evidence that top-down economics really does what it proposes. What's amazing to me, is that they've been able to sell a vast proportion of the American public on voting for economic policies that actually hurt they're financial well-being. It's simply brilliant.

 

As to being jealous of the wealthy, you read way to far into my post.

Edited July 26, 2010 by spradlin02

[Crimson Wife]

It reads as if you try to refute my statement, but I'm not sure how.

 

My point is that the Bush tax cuts that President Obama and Congress want to let expire helped WAY more than just "the wealthy" in this country. The share of Americans that pay ZERO Federal taxes has nearly doubled since the Bush tax cuts were enacted. Tens of millions of low-to-moderate income taxpayers can thank President Bush for putting them into that zero Federal tax liability category.

 

The current situation of having 97% of Federal tax revenue coming from only 50% of taxpayers I'm not so sure is a good thing. That bottom 50% has little incentive to reign in excessive spending by politicians since they're not the ones who are footing the bill. Bread and circuses, anyone?