The US is a nation of spenders not savers.
“. . . given that the US has one of the highest median incomes and a relatively low cost of living, why are people not translating that income to wealth?”
Servicing debt, perhaps? The payday loan business is booming, and it siphons off a substantial amount of whatever little discretionary income many low-wage people have.
I can understand very low income getting caught in the payday loan trap, but I don’t really understand the problem with people near the median income level. Relative to Australia or most of Europe, food, shelter and clothing costs are lower in the United States.
“busdriver, No, it’s not a zero sum game; plenty of wealth is being created. It’s just that virtually all of it is going to the top now. And when the top feel threatened, as they did in 2008 and as they do today, they do things like stop hiring, stop giving raises, even cutting staff, wages and benefits.”
And that statement does not explain how this helps: “So a widening income gap suppresses job creation and income growth for workers. That’s how someone who owns no financial instruments is hurt by market losses. And unlike the wealthy, they have no cushion.”
A widening income gap has nothing to do with suppressing job creation and income growth. Pulling the upper middle class and above down will absolutely not help the people at the bottom end. That will not create job creation and income growth, I have no idea why people would connect those two concepts.
What I think would be helpful, obviously, is to help the people at the bottom, and the lower middle class move up. Demonizing the upper income groups are not helpful to this cause. If you want tax fairness, tax all income as ordinary income, and there you go.
Post 363…
What about education and medical costs?
The increasing cost of housing depends on location.
If you have an income of $100,000, which the urban institute says is upper middle class, what kind of home can you buy in SF, Silicon Valley, Manhattan, etc?
The lower end of the upper middle class used to be able to buy homes in SF.
Which leads me to … Where do the families with incomes over $100,000 live?
Using PCE instead of CPI increases real income and lowers inflation.
If the starting point is a different year than 1979, you will get very different results as far as who is receiving the income gains in this country.
There is nothing about the increasing share of social good costs that have to be picked up by individuals.
When I graduated from UC Berkeley in 1979, my tuition was $240 a quarter (tuition was called something else back then). $720 a year. What is it today?
This discussion should probably be in a different thread.
I think that taxing dividends at ordinary income rates makes sense. However, it makes little sense to treat long-term capital gains as ordinary income.
Whereas regular income has no risk (in the sense that people who have jobs almost always get paid, not that they will always have jobs), and dividend income has little risk, capital gains has high risk and should be treated differently from a tax perspective. In addition, current tax law does not account for the effects of inflation on long-term capital gains, and limits losses to $3000 per year whereas gains are unlimited.
Why should buying a home in a highly expensive area be considered a necessity or entitlement?
Guess who just got two plane tickets to England for a great price :D/
One thing that comes up in conversation is how much wealth it takes these days to generate income in retirement.
With the 10 year treasury yielding around 1.5 percent, $1 million generated $15,000 a year. If The S&P 500 index dividend yields about 2 percent, $1 million invested will generate $20,000 a year in income.
If a person has $1 million, a 50 percent allocation of 10 year treasuries and a 50 percent allocation of the S&P 500 index,
That $1 million gives a person $17,500 in income.
That’s not much. Most households don’t have $ 1 million in financial assets.
That calculation assumes zero gains or losses on the money invested in the index. The average return (including dividends) has been 10%.
Nobody said buying a home in an expensive area is an entitlement.
Upper middle class income doesn’t buy as much as it used to in certain areas.
That is a lower standard of living in those areas.
When looking at income, we have to look at what that income can purchase. The pce index uses services and goods substitution to figure out inflation. Some of that is bs. If I want to buy beef and beef prices rise too much so now I buy chicken, I am no longer buying beef. We are no longer comparing apples and apples.
Theoretically no. However, one has to live somewhere and the rents for an apartment can cost 2500 too unless you live far away.
The 10 percent returns depend on what time frame you use and when you purchase stocks.
What are the returns since the year 2,000?
Also, the weakest companies of the S&P drop out of the index so there is survival bias to the upside.
I’ve been off the computer for a day or 2 and came to catch up on the Brexit discussion… But this thread sounds like the retirement thread. Or the investment thread.
Well it looks like banks are wasting no time. There will be Brexit remorse, no doubt.
https://next.ft.com/content/a3a92744-3a52-11e6-9a05-82a9b15a8ee7
Partly my fault. I will stop going off-track.
Well…I will stop now.
Back to Brexit…
Brexit is intertwined with the economy. The outcome would have been different if people were content. Besides, is there anymore to say about Brexit after 26 pages? I am surprised with the intensity of the thread. I think people are projecting it onto our November election. For people in Hillary camp, this Bexit had to be wrong. I hate that kind of intellectual rigidity.
A petition of over 1.5 million are asking for another vote.
With Brexit, Maybe London real estate will get a little cheaper.