Archive for February, 2013

Narrowing the Wealth Gap

Saturday, February 9th, 2013

February 9, 2013

This is a follow up to my post of November 2011, ” Its November but Risk Off “ and,  December 29, 2011 ” A Review of Posts to this Site “ in which I promise to become more familiar with issues that are systemic in nature and troublesome to our USA sense of economic fair play on a level playing field.

There is no denying the rich are getting richer at a far faster rate than the middle and lower stratas.   And, the gap  is getting more and more obvious and irksome.  This is not to deny the meritorious a  just reward. It is about making the system more balanced so that all sides see more justice in the system. The alternative is a slide toward social unrest and the danger that social unrest can only be solved by political ( military ) means.  Step one of the slide  – “Occupy Wall Street”

Without balance you have the following at work.  Upper Strata……$2,000 per hour x 40 hours per week equal $4,160,000 per annum  – – Upper Mid Strata …..$200 per hour x 40 hours equal  $416,000 per annum ……Middle Mid  Strata ……$100 per hour x 40 hours equal $208,000 per annum.  Lower Mid Strata $50 per hour x 40 hours equal $104,000 per annum.  ( needs two salaries to qualify for  “yuppie ” status )  Working Poor $25 per hour X 40 hours equals $52,000 per annum ( needs two salaries to subsist with children and no health issues ).  Guess where this has to end up !

Here you are heading toward a fork in the road that offers 2 solutions

#1  Political –   Direct Confiscation ( Estate Tax ) and punishingly higher tax brackets for millionaires……..Confrontation / Gridlock.

#2 Economic – More sophisticated balanced ways to narrow the wealth gap…..

For instance …..The .003% solution.   There is an article in the NY Times , Feb 7 issue, page B5  – which describes an opportunity to narrow the wealth gap in a way  that is painless and funds the avoidance of  cutting the Social Security / Medicaid Safety Net.  This would be the introduction of a transaction tax of 3 cents on every $100 traded to be paid by financial traders via a transaction charge on every trade. It could raise $358 billion over 10 years.  It is aimed at no group, just an activity.  Trading costs have gone down drastically over the past ten years  and trading volume has soared.  In fact many blame the lower costs to trade for the frenetic speculative daily volume and wild swings  including  flash trading  issues.

Very interesting ( to me ) is that if the tax stamp isn’t linked to a  transaction, then neither the transaction or any legal action arising from the transaction could be enforced by the USA judicial system.

As a New Yorker, I will find it very interesting to follow the actions of my senior Senator Charles Schumer  a  ” heavyweight Democrat ” who serves on the Senate Finance Committee.  It is said that Senator Schumer often acts as if his main constituency is Wall Street. So, it will be interesting to see how he reconciles his allegiances on this issue.   Social Capitalists ( such as I )  would be happy to pay the tax  and I would hope  that  Warren Buffett  and Barak Obama would be for the transaction tax)

I consider this proposal a good and constructive step toward a gentle narrowing of the wealth gap while simultaneously helping those threatened with loss of medical benefits and social security through no fault of their own.

Richard Maurice Gore