This continues from a very recent post of mine called Absurd
This post is all conjecture; I'll admit that right up front. However, the mechanisms I'm talking about exist.
Looking at my last post, "Absurd," what would a better distribution of wealth look like?
I'll give an off-the-cuff suggestion of a target. Not a target that would strike anyone as communist; in fact, a target that is still wildly inegalitarian. Here it is, divided like my last post into Quintiles (fifths, or 20% blocks of America's population):
Bottom quintile 3%
Lower middle 6%
Upper middle 24%
So, we're still talking unequal enough such that no quintile is more than half the size of the one above it. The ratio of top quintile to bottom is 55/3. This is not an egalitarian solution.
What would something even this skewed mean?
The top would take a cut of 29% in terms of percentage of the whole economy, but they'd still be left with well over half the country's wealth for just 20% of the population. Also, unlike any other quintile, they would be more than twice the size of the one below them. Keep in mind that this is cut in percentage of the economy, not an absolute number. This becomes important later.
The results for everyone else:
The upper middle better than doubles in wealth.
The middle triples in wealth.
The lower middle and lower each have their wealth multiplied by 30. Yes, thirty.
Keep in mind that this puts the lower middle quintile at more money than the actual middle has now.
What would this mean in consumer spending? What would it mean for all these extra people to be able to afford (or afford more, better, and in some cases just new):
Event tickets for entertainment (concerts, sporting events, movies)?
Businesses would make fortunes.
Tax revenues would skyrocket, in part because lower income people don't shelter their income like the wealthy do.
Primary and secondary education would actually be paid for without our cutting it to ribbons. We'd end up with educated kids because of improved tax revenues.
Social service spending would plummet. Crime and associated expenses and opportunity costs (like prison) would presumably drop as more people had legal ways to make a decent living.
And here's the kicker:
Businesses would expand by enough that general economic expansion might very well make up for the cuts in the top quintile's share. In other words, 55% of a larger pie might add up to as much money as 84% of a smaller one (84% being the current share of the top quintile). The top end of the population would be less rich in comparison to the rest of the population but might not actually end up less rich at all in absolute terms.
In other words, in the long run, this might not even end up costing the top quintile any money.
Are you beginning to see why policies leading to this kind of polarization are so fundamentally stupid? There are hardly any winners and hundreds of millions of losers.
As I have said many, many times before:
I do not understand why Wall Street and the business community in general tolerate the status quo. They of all people would profit enormously from average Americans having money.