The International Monetary Fund reported an unpleasant outlook for the U.S. economy on Wednesday. The IMF, as part of its annual review, believes the U.S. economic model isn’t working as well as it could to generate shared income growth.
On the same day, in an unrelated interview on PBS Newshour, billionaire investor Warren Buffett offered a similar outlook:
“The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people.
“If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one. This has been a prosperity that’s been disproportionately rewarding to the people on top.”
No doubt, U.S. wealth has become exceedingly concentrated into a very small number of hands over the last 40 years. At the same time the middle class has been hollowed out into a shell of its former self. Wages have stagnated. Well-paying jobs that could support a family on a single income have disappeared.
On the other hand, asset prices, like stocks and real estate, have gone sky high. These increases in asset price have served to magnify wealth at the upper end of the wealth spectrum while pricing out everyone else, particularly millennials with entry level incomes and massive student loan debt.
Certainly, asset prices will again crash like in 2000-02 and 2007-09. But this won’t do anything to balance out middle class incomes. What to do about it?
Both the IMF and Buffett offer several recommendations…
Insider Claims to the Pie
The clever fellows at the IMF identified with careful detail and delicate precision how to go about fixing the U.S. economy to “ensure a broad-based improvement in living standards.” Their recommendations even include the “need to incorporate reforms on multiple, macro-critical fronts.”
We’re not quite sure what that all means. Yet, fortunately, the IMF dumbed it down for us into a single sentence synopsis of what’s needed to improve living standards across the income spectrum:
“[B]uilding a more efficient tax system, improving education and developing skills, reprioritizing federal spending, improving the effectiveness of the regulatory system, and reforming the immigration and welfare systems.”
Piece of cake, right? A splash of this. A dash of that. Before you can say Jack Robinson the policy makers have mixed up just the right policy elixir. Higher living standards for all are attainable in our time.
Yet this makes the erroneous assumption that Congress will snub its individual commitments to lobbyists and special interests. These commitments, remember, include applications of massive amounts of lard to all efforts at tax reform, education improvements, regulations, spending allocations, and immigration and welfare policy. For every reform effort, there are armies of special interests that have already bought a claim to a piece of the pie.
Instead of streamlining persistent drags on the economy, government reforms increase them. The insiders get their bread buttered on both sides and the politicians get their campaigns financed. The broad populace – that’s you – is left paying for programs that don’t work, which the country can’t afford.
The reality is, the recommendations offered by the IMF are impossible for the U.S. government of the early 21st century to execute. And, as elaborated below, they are also pointless.
Work is for Idiots
Buffett’s recommendations, on the other hand, are more lofty. Specifically, Buffett wants rich people to give their money away. In fact, that’s what he and fellow billionaire Bill Gates are doing. They even co-founded the GivingPledge so that rich people can make a voluntary commitment to give away at least half of their wealth.
The goal of the GivingPledge, you see, is not only to help those in need. But to encourage others to do the same. They call it a commitment to philanthropy.
Surely, this is a noble cause. Certainly, if you are super rich, it helps flatter your ego. But what good is it, really?
Does giving people money for nothing help them or handicap them? Moreover, does it correct the inherent injustice perpetrated by misguided, or perhaps sinister, monetary policies which inhibit people from being self-supporting through their own contributions?
When it comes down to it, the IMF’s and Buffett’s recommendations merely rearrange the deck chairs as the Titanic takes on water. Even if they’re executed with flawless perfection these recommendations won’t stop the ship’s hull from filling up and sinking.
As far as we can tell, a trifecta of offenses has over taken the U.S. economy that debase the rewards of hard work, saving money, and paying one’s way. Plain and simple, central bank fiat money creation, multiplied by commercial banks through fractional-reserve banking, propagates financial and economic chaos.
For each new digital monetary credit the banking system creates, value’s subtracted from the existing money stock. This has the ill effect of covertly confiscating wealth from people’s wages and savings while inflating asset prices. It also has the ill effect of reducing the idea of ‘an honest day’s work for an honest day’s pay’ to a fool’s tale.
Thanks to the Fed, hard work is now for idiots. The dole pays better for more and more people. After that, gambling and gaming schemes offer more opportunity.
Until the Fed’s mischiefs are stopped, and Federal Reserve Notes are replaced with honest money, no IMF policy recommendation, philanthropic commitment, or silly minimum wage increase, will do a lick for rewarding hard work with equitable pay. All efforts otherwise are merely noise.
for Economic Prism
Of course Buffett should give his money to philanthropy. But is it his money or did he concentrate the shares in B-H early on and then not pay dividends on 50 years of profits? In which case where are the shareholders’ yachts? If B-H keeps the profits and generates annual excuses as to why there have no dividends for 50 years, whose money is Buffett giving to charity? What does such behavior say about the attitude toward the B-H owners (shareholders) and fellow countrymen? Perhaps these are attitudes that should not be applauded.
If the middle class suffers, and the economy has the dwindles, it is not hard to begin to determine why. Extend this view to Microsoft, and Google, and…..
If you weren’t required to pay Federal income taxes, do you think you’d ever hear about it? It’s arguably the most censored topic in the world because their entire plan depends on it.
“Internal Revenue Service” internal originally meant inside the Federal govt.(federal jurisdiction) in 1913. Nowadays people in the US are legally presumed to be under federal jurisdiction. Because they sign Federal forms(contracts), collect Federal benefits and are Federal Citizens… Getting the picture?