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OPINION

Wealth and Inequality

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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The Fed will officially grade the economy and in effect, their own handiwork. They've created an easier path for wealth to grow, but their method of using banks and the federal government as conduits is greatly flawed, resulting in a tale of two nations. Some blame capitalism itself for this kerfuffle, while others think the system is okay as a wealth generator, but not as a distribution mechanism.

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Redistribution remains the dream. By any means necessary, it takes cash from those who have it, to give to those without who continue to be unemployed. There are a few new ways of trying this version of smash- and-grab. However, the ideal plan involves lies, guilt, and intimidation against a poor economic backdrop.

Household Wealth

The percentage of household net worth as a percent of the GDP is within striking distance of an all-time high, paced largely by a rebound in the stock market.

The pace of this wealth varies at different levels, but it echoes something a friend of mine told me years ago. With nothing but the clothes on their back, he came to America from China with his dad.

I asked him how hard it was to become a millionaire and he told me: “Charles, the first stick is the hardest." A 'stick' being one million dollars and, apparently, that's still true. He continued, “Once you've crossed that hurdle, the money flows quicker.”

2014 High Net Worth Household Trends
$5,000,000 +1.31 million+5.6%
$1,000,000+10.1 million+4.9%
$500,00015.9 million+3.9%
$100,00039.6 million+2.5%

The super rich are different than you and me because of the following:

  • They have business interest
  • Investments
  • Their home isn't the bulk of their assets
  • Pensions aren't such a large portion of their wealth that can be held hostage
  • Debt is low versus income
  • And interestingly, the top 1% don't need a lot of liquid cash...they want their money working at all times
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Income Inequality

Don't look now, but the progressives have lined up a series of books, leading up to the 2016 election. All of the books focus on the unfair nature of capitalism. On the heels of Thomas Piketty's "Capital" and Michael Lewis’ take on high-frequency trading, there's still the hope of Robert Putnam's "Our Kids: The American Dream in Crisis," which will say the good old days were fair and there wasn't a big gap between the rich and the poor.

The problem is that the solution is to focus on income inequality. It is a false notion that higher taxes are the fix; it's more of a punishment. If you tax someone earning $2 million a year 50%, they will net $1 million; their income will not change, nor will the income of someone earning $40,000.

By using the Gini Coefficient (or Gini ratio) method to measure income inequality, here are the worst places in America:
  • 0.532 Washington, DC
  • 0.499 New York
  • 0.486 Connecticut
  • 0.475 Massachusetts

Perhaps, this explains why Washington, DC has by far the highest (average student debt) loan per person at $40,855, which is ten thousand dollars above number two, Georgia.

Yet, DC sports the highest unemployment of any state at 7.7%. That is significantly above the less- educated and the chronically poor state of Mississippi.

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This is a classic result of Progressive-led states and cities where things keep getting more unfair by the moment.

America should focus on the same tide that lifts all ships instead of trying to torpedo the most seaworthy ships out of envy or misguided notions; it's the only solution for leaky, sinking ships.

If the twist on this is to first hike taxes on income and assets, followed by even more drastic measures, people should know the facts; high taxes are a main ingredient in a rampant income inequality.

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