Wednesday, April 27, 2011

15 Reasons why Redistribution of Wealth is Poor Politics

Click on Picture for Story

Politicians are always citing statistics in regards to earned income gaps between the rich and the poor to justify their claim for the need for redistribution of wealth. That in itself should reveal the foolishness of the concept. A person's wealth is not determined by his earned income but by the accumulation of assets. And the question a person should be asking is how do you accumulate assets?

When you get right down to the nuts and bolts of the issue a person should realize that it isn't about how much money a person earns but how a person spends the money that he earns that is the biggest factor between the rich and the poor. A person can spend that earned income accumulating debts or he can spend his earned income accumulating assets. And how a person spends his earned income is a choice that only he can make. His own decisions in life will determine whether or not he ends up rich or poor.

20 comments:

Stogie said...

Griper, I have noticed, over my long life, that some of the most financially secure people are those who worked at a job and stuck with a company for many years. They weren't rich and didn't go for the home run in the game of life, but were happy producing a steady stream of base hits...and in so doing, won the game.

These folks lived well and retired with a secure pension.

They earned their way and no one gave them a free ride.

nbrsspot.blogspot.com said...

Griper we are so far behind it feels like we will never have any assets. I mean since you were here this last summer/fall its been a ride for us.. I was laid off and jeff is working but its hard here. Esp now since the State is taking 15% of his checks to pay off something they should have charged us with 5 years ago.

BB-Idaho said...

"His own decisions in life will determine whether or not he ends up rich or poor."
..that, luck and a healthy
inheritance!

The Griper said...

luck and a healthy inheritance?

take a good look at the gallery, BB. every one of them could have been called millionaires with the money they earned. they did not inherit their money.

and all they would have had to do is put that money in an ordinary savings account and lived pretty for the rest of their lives even after paying taxes.

now, you tell me, was it luck or bad decisions that got them into financial bind?

and when you consider that 60% of all nba players go broke within 5 years of retirement. can you say that is luck or is it bad financial decision making on their part?

now, granted, my examples are exaggerated but the exaggeration is in the amount of money they earned not in the decision making about how the money is spent or invested.

BB-Idaho said...

Sports figures are way overpaid. Kind of interested, I did a little study; two theoretical families living in Casper, WY..2 parents, two children. Given the cost of living breakout for that area, both families are faced with $2607/mo
bills. The usual, food-housing-childcare-health.
Let family #1 have two jobs, one at $25K, the other at $16K. They can
save $9.7K per year on a very strict budget. They invest wisely, so at compound interest of 6%,
they will have $152K in 10 years.
Let family #2 have just one job (a dentist) who
makes $110K/yr, so the Mrs. stays home and takes care of the kids, saving
7140 per year. Family #2
also follows a strict budget, so they save $86K
per year. But, the dentist,
while good at drilling is dumb investor. He only gets a return of 4%. Compounded annually after
10 years, family #2 has
$1,2014,127. Other than
moving to Casper and going to dental school, there is no moral to the story, just
fun math...and the convenience of a larger income stream. :)

Lista said...

There are many Factors that Contribute to a Person's Ability or Inability to Accumulate Assets. To Sight Only One is a Limited Perception. Sure Good and Bad Decisions Play a Part, but so does Income and even Luck, as BB has Suggested.

"A person can spend that earned income accumulating debts or he can spend his earned income accumulating assets."

Or a Person can Spend Every Cent of what he or she earns on the Necessities that are needed for Basic Survival and not have a Single Penny to Spare. Denying that such a Reality Exists does not Make it Cease to be so and Stressing Only Responsibility and nothing Else Produces Unnecessary Guilt Trips that do not Change the Realities that are Experienced by the Poor.

"And how a person spends his earned income is a choice that only he can make."

The Choices of a Person with Limited Income are Limited because a person can not Make the Choice to not Buy Food, Clothing, Shelter and Medicine. If there is Practically Nothing Left, then there is Practically Nothing Left and no Guilt Trip is going to Change this Reality.

Lista said...

I think the Moral to BB's Story is that Higher Income along with Poor Investment Created more Assets than Low Income and Good Investment. Even though the One with the Higher Income was a Poor Investor, he still Came Out ahead because of his High Income.

The Griper said...

they were both good investors. both came out ahead with their investments, moneywise.

the difference between them was that one put his money in riskier investments than the other. and his return on the dollar was greater.

in other words, while one person's earned income was greater in both moneywise and also percentagewise

the other person's unearned income was greater percentagewise.

and this is what a good economist looks for in regards to investments, what is the return on the dollar not the total amount of money that is returned?

The Griper said...

"Denying that such a Reality Exists does not Make it Cease to be so..."

one other thing, lista. declaring that such a reality does exist does not make it so either.

and i have worked with the poor in regards to their financial affairs and have helped show them how they can do it.

and in working with them i have learned that the poor are not as poor as people, as yourself, like to portray them as being.

so, excuse me for being very sceptical of your portrayal of the poor and seeing it as an exaggeration of the facts.

BB-Idaho said...

Most interesting concept"
"the difference between them was that one put his money in riskier investments than the other. and his return on the dollar was greater"
IMO, this holds over the longer term. Early on, as
a cautious invester, I noted that the high risk/return time curve was
erratic..up-down, up-down, while the low risk time curve was much smoother
(and comfortable for the cautious). The average
gain on a thirty year basis was higher for high risk, but not greatly so. The upside for us
fraidy-cats (or less greedy, perhaps) was the
advantage of stability:
I retired 8 years ago, while almost all my contemporaries in high
risk were at the bottom of a 'spike'..the recessionary period of
2002-3. Several panicked and sold low after buying high!? They are all still hard at work, trying to recover from from their losses so they can retire.
There is no right or wrong way, but we note that there are tortoises and hares, short-term and long term thinking...and folks
who sit and study graphs!

The Griper said...

BB,
granted i made a lot of assumptions when i responded on that. the most basic one was that all mitigating factors were the same for each family other than earned income and rate of return which is all that you gave us for purposes of analysis.

but like you said it was just a fun exercise of math. i did a lot of this a while back when i posted my views on Obamacare and was advocating the idea of self-insurance.

one more thought that you might ponder on is another personal concept of mine and that is;

money only has but one purpose, to be spent. it is only when we spend money that it has any recognized value. we spend it on immediate needs or desires or we'll spend it on future needs and desires which i call deferred spending.

staying along this same line of thought the terms savings, investments, retirement funds, emergency funds, etc. are just terms indicating the idea of deferred spending.

all property possessed can be placed in this catagory of deferred spending also because of the fact that can be sold at some time in the future, if necessary.

the one thing that we must consider here is risk. deferred spending carries a greater risk factor than immediate spending in terms of what it will buy or its value.

BB-Idaho said...

I think saving as a type of deferred spending is a fair assessment. The idea of risk, IMO includes the
possibility of inflation, one's own health and odd
financial fluctuation: know a guy bought up all sorts of rental units, properties and houses which I thought was a good idea. Then the real estate market goes sour.
Poor guy is sitting on
stagflated value, can't find buyers, even at a loss and yet trying to pay a ton of tax. Go figure....another thought:
it seems some of us are savers and some of us are spenders..kind of like fire in ice in a marriage
or business partnership!

The Griper said...

he grins, yup, there ya go, BB. those are all calculated terms of risk in my book and need consideration when it comes time to make what some call "informed decisions".

in fact, if you think about it, it is when there are factors involved that a person did not take into consideration but seen as an effect on the outcome, it is then they say it was determined by "luck", good or bad.

as an aside, i might add that what most people call "luck", science would call an "anomoly".

i don't call myself a scientist but i'd guess that science does this so as to eliminate the idea of superstition as a factor of any occurance or event. do you agree?

Lista said...

Griper,
"and this is what a good economist looks for in regards to investments, what is the return on the dollar, not the total amount of money that is returned?"

Yes, but in Real Life, the Actual Amount of Money Returned is what will Produce either a High or Low Standard of Living.

"the difference between them was that one put his money in riskier investments than the other."

That is an Interesting Point because the One with the Higher Income can Afford the Risk Better than the Other.

It is a Good Thing, Griper, that you Brought Up the Idea of the "Anomaly", because the Definition of that is "an Act or Instance of not Following the General Rule.", or in other words, that which the Odds are Against Happens anyway.

People do not Make Decisions Based on what is Unlikely, they Make them Based on what is Likely and that is why when what is Unlikely Happens, it is Called Good or Bad Luck and not a Good or Bad Decision. Good Decision are Based on what is Likely, yet when what is not Likely Occurs Instead, this is Bad Luck, not a Bad Decision.

Likewise, when a Bad Decision is Made Based on the Fact that it does not Fit with what is Most Likely, and yet the Unlikely Happens, this is Called Good Luck, because the Person has Received Unexpected Grace in spite his Bad Decisions.

Getting Back to the Situation of the Poor, though, do you know that there have been Times in which I have Considered that a Poor Man or Women, who has Control Over his or her Money may be Richer than a Rich Man or Women whose Money is Mostly Controlled by someone Else? This is Probably the Biggest Reason Why Having a Job, rather than Relying on a Parent or Spouse is Quite Liberating.

Here's the Thing, though. Sometimes the Decision Between Financial Freedom and the Freedom of Time can be a Tough One.

The Griper said...

"Getting Back to the Situation of the Poor,..."

i couldn't agree more, lista. this is exactly why i consider the word "rich" as being a relative word and shouldn't be looked upon strictly from the point of view of money.

if ppl saw it in this manner there would be greater respect shown towards the poor rather than pity. there are many ways to measure how a person is rich.
-------
"Yes, but in Real Life, the Actual Amount of Money Returned is what will Produce either a High or Low Standard of Living."

lista, don't confuse the word money with the word dollars. a person can invest in such a way as to have a higher return of dollars but lose money.

to show you what i mean let's look at the man who invested at 4%. he earned a lot of dollars on that investment. but at the same time if inflation over the 10 years was 5% then he lost money on his investment while the man who invested less but earned 6% earned a profit on his investment.

a person's standard of living is determined by how much he spends, lista, not by how much he has.

Lista said...

My Words: "Getting Back to the Situation of the Poor,..."

Your Words: "i couldn't agree more."

I had no Idea, at First, what you were Agreeing with, Griper, cause you did not Quote Enough of what I said.

There are Times in which I am Most Definitely Talking about Money when I Use the Word Poor and well, You can not Assume that the Financially Poor are Rich in another Way, because that is not always so.

I Guess, though, that you were Agreeing with the Rest of the Paragraph that you Took that Quote From, in which Control Over Decisions was Wealth and not the Money itself. If Control is Wealth, though, then those who Choose to Control Others are Stealing away from them, their Wealth.

There are some Poor that do Require Pity and also Help.

"lista, don't confuse the word money with the word dollars. a person can invest in such a way as to have a higher return of dollars but lose money."

This is a Change in Subject, Griper. In any Given Time Period, the Number of Dollars is what will Produce either a High or Low Standard of Living, so if you want to Talk about something besides actual Dollars, then you have Changed the Subject Away from the Standard of Living.

The Comparisons that have been Made by BB were not about Inflation, but about the Return of One Family in Relation to another. The Only Way that the Inflation Factor would Relate to that Comparison is if the Two Families being Compared were from Two Different Time Periods, though no such Distinction was made.

I Guess you are just Trying to Educate me about Investments, yet I'm Thinking more about Politics, which is the Actual Subject of this Post.

"a person's standard of living is determined by how much he spends, lista, not by how much he has."

This is a True Statement, but it does not Include all of the Factors. The Amount that a Person can either Spend or Save is going to be Limited by his Income and therefore, what he has will be Limited by his Income and what he Spends will be Limited by his Income, so what he Spends and what he has are not the Only Factors to Consider.

Actually, when I Separate your Statements from the Context of the Discussion, what you say does Make Sense, yet I Wonder why you are Changing the Subject. The Subject is Politics and yet you are Trying to Educate me about Finances.

Even on a Perfect Budget, Griper, the Poor Still have less than the Rich. This is not About Investments and Budgeting. This is About Taxing the Rich. Let's not Get Off Subject.

The Griper said...

"This is a Change in Subject, Griper. In any Given Time Period..."

no this was not a change in subject lista. i was addressing what you said in the quote and you used the word "money" instead of dollars. so i was addressing your remarks directly.
and my example was just to show you the difference in the two words.

in other words, lista you never get a return on "money" you get a return on the "dollar"

and no, what a person spends is not limited by his income. in fact if you understood this post you'd see that my examples are proof of the fact that spending is not limited to income. everyone of those persons spent far more than the income they had. that is what bankruptcy is all about.

Lista said...

Sometimes, Griper, the Defining of Words is a Change in Subject. The Actual Quote was not just Money, but "The Amount of Money" and I Meant in Actual Dollars Received. To Define Words in Response to this is to Get Caught up in a Technicality and it just so Happens that Inflation has Nothing to do with BB's Example, which is what we were Originally Talking About.

The Return that I was Talking about was not a Percentage, but an Actual Dollar Amount as Compared between Two Families. The Subject that I was Discussing was the Comparison between the Amount that One Family has in Comparison to the Amount that Another Family has. When you Change the Focus to how Investments Actually Work, you are Changing the Subject.

Now, if you Decide to Define the Word Return, you will again be Changing the Subject because What I Mean is the Actual Dollar Amount Received by One Family in Comparison to another and whether or not I am Using the Exact Correct Terminology According to Griper is Irrelevant to the Point that I am Trying to Make.

Ok, Change the Word Return to the Amount of Money Received. Gee! It's Hard Talking to you. If I Make even the Slightest Mistake, you will Turn the Discussion into One About Word Definitions instead of the Subject that is being Addressed.

Lista said...

"and no, what a person spends is not limited by his income. in fact, if you understood this post, you'd see that my examples are proof of the fact that spending is not limited to income. everyone of those persons spent far more than the income they had. that is what bankruptcy is all about."

See? You are Being Technical again and I just About Predicted that One. Let me Rephrase again.

The Amount that a Responsible Person can Spend or Save is going to be Limited by his Income and therefore, what he has will be Limited by his Income and what he Spends will be Limited by his Income, so what he Spends and what he has are not the Only Factors to Consider. I am Speaking of Responsible People, Griper, not those who Accumulate Debt.

Do me a Favor, Griper, and don't Turn this into a Word Definition Discussion. I am so Tired of that and I Consider it a Distraction and Change of Subject from what the Person who is Speaking is Actually Trying to say. I was Talking about BB’s Example and you Changed the Subject to the Definition of Words, Inflation and how Investments Work. That was not the Subject that I was Addressing and has nothing to do with the Point that I was Making about the Actual End Result in Actual Numbers of Dollars Received being Partly Dependent on Income and not just the Making of a Good Investment. If the Two Families that are being Compared are from the Same Time Period, then Inflation is not Relevant to that Example.

If you do not Know that you Changed the Subject, Griper, then you are a Very Poor Listener. What more can I say?

Let's Return now to the Subject of the Post, though. For you to Site Evidence that Irresponsibility Exists in no Way Proves that Redistribution of Wealth is Poor Politics, for not all People are Irresponsible. If anything, I could say that since Wealthy People are Irresponsible, Perhaps we should Give their Money to the Poor. That's a Poor Argument too, though, for not all of the Rich are Irresponsible.

What BB did Makes more Sense because he is Comparing Two Families that are at Least Responsible Enough to Avoid Bankruptcy.

The Griper said...

"If you do not Know that you Changed the Subject, Griper, then you are a Very Poor Listener. What more can I say?"

and apparently you are a poor reader, lista, what more can i say?

alright, let's go strictly by the analogy as written by BB. he also wrote these words;
"They can
save $9.7K per year on a very strict budget."

and these word;

"Family #2
also follows a strict budget,..."

so, if we are to go strictly by the words written the standard of living of each family was similar in spite of the difference in income.

in fact he clarifies this by stating that the one difference between the two families had to do with expenses. family #2 was able to save money on child care by allowing the wife to stay at home.

and you have always claimed to be a realist. i don't know how many times i have read you saying this. well, if you are the realist you claim then you must allow the factors of reality be a part of the argument and understanding of the outcome of any situation.

that is one problem you have, lista. you try to place limits on things when reality says different. this isn't the first time you have tried it.

and when someone else attempts to introduce the elements of reality you whine and complain that they are not listening and understanding you when in fact they do understand and are just adding necessary elements for greater understanding of the issue of discussion.

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