US income inequality at record high

[fdeck]

I think we're pretty much establishing two camps here. One camp thinks we should regulate away any possibility of hurting oneself financially so that even the dumbest among us are protected. And the other thinks we should lean more towards the buyer beware days when we actually used to READ contracts or have an ATTORNEY look them over if we didn't understand them. (By the way, if you can't afford an attorney fee then you can't afford a house, a credit card or a new car.)

No, I don't think that's happening here at all. I think that you are establishing two camps: One camp is your opinion, and the other is a straw man that you've created.

 

[two fingers]

I gotcha. The point I was trying to make was that certain people here (not you, mind you) are complaining how people are a burden to the system, when they are just as guilty of it. Meanwhile, they get to write off a lot of their income while the middle class (which apparently isn't shrinking) are a bunch of lazy whiners.

Meh. I think the middle class are a bunch of hard working whiners. Again, they have every opportunity I did (because I myself came from lower-middle class) to better their situation. So, sure, it is hard. And it required RISK, TIME and more effort than most are willing to put forth. And they whine about others having more than they do. So, I agree with the whiners part, but I do think many of them work very hard (at all the wrong things..... but very hard).

 

[HolmeBass]

I personally am not whining about the rich being so much richer. I am whining about them paying a much lower effective tax rate! The US tax code is horribly regressive, and that does hurt and greatly impede upward mobility.

 

[two fingers]

+1 on both parts.

Call me naive, but I hold higher expectations on a lending institution to determine an appropriate ability to repay more than on a mariachi musician.

Check back in with me when the lending institutions are butchering "Guantanamera" after having been cleared for guitarron duty by the mariachi musician.

You are naive.

Call me insane if I think that one should not buy a house without being able to afford it...... or thinking that it is the responsibility of anyone taking on that much responsibility to have an attorney read it over and perhaps SLEEP ON IT a few days before signing on the bottom line rather than going for the instant gratification of home ownership..... or for thinking that it is too much to ask for anyone getting ready to buy a house to stop and think "I make $20K a year. Is buying a $300K house a GOOD IDEA AT THIS TIME?????" Clearly I need some free mental healthcare.

And the main difference between the lender and the musician is that the VERY MOMENT the musician handed the lender a quitarron and said "You are now clear to butcher Guantanamera", the lender wouldn't even BLINK before saying "No way. I can't do that. I don't play guitar(ron). And to attempt it would be silly." So why didn't the MUSICIAN say that when the freakin LENDER handed him a PEN and said SIGN HERE at the bottom of your new THREE HUNDRED THOUSAND DOLLAR MORTGAGE????? Even if the fine print wasn't spelled out for the idiot MUSICIAN, perhaps he could have THOUGHT THIS ONE THROUGH a little bit! Too much to ask I guess.

Yep. Yer right. Totally the lender's fault for not completely explaining variable interest rates and handing him the pen. :scowl: At no point should it have crossed the collective minds of the thousands of idiots who took out loans they couldn't afford to perhaps ...... oh I don't know...... NOT DO IT.

 

[two fingers]

I personally am not whining about the rich being so much richer. I am whining about them paying a much lower effective tax rate! The US tax code is horribly regressive, and that does hurt and greatly impede upward mobility.

My wife and I work until late July every year to pay our taxes between state, federal, property, capital gains, and a laundry list of others. The government is kind enough to allow us to keep everything we make for not quite the second HALF OF THE YEAR. Is that fair?

Millions of people in this country pay none. Is that fair?

The poorest among us pay none. So how are "regressive tax rates" keeping them from moving upwards? Just curious.

 

[jasper383]

The rule of thumb for investment used to be that it was reasonable to expect a long-term (non-volatile) investment to double its value in 12 years.

So, an investor starting off with a 401K portfolio valued @ $300k at its inception, should reasonably expect it value to be near $600k in 12 years.
A $300k 401K started in 2001 would likely be valued at $180k - $200k today.
That really left a bad taste in many mouths.

Investors should understand that stocks carry risk, and expecting a 6% or so chugging away every single year isn't realistic. Sometimes the risk of stocks shows up.

Stocks went absolutely nowhere from 1966-1982. Then we went on a 20 year tear.

Your example is also an absolute worst case scenario; someone who put their money in at the absolute top and hasn't added any more contributions. Very few investors fit that.

 

[two fingers]

No, I don't think that's happening here at all. I think that you are establishing two camps: One camp is your opinion, and the other is a straw man that you've created.

Fair enough. I suppose nobody here leans upon the "rich fat cat cheating bastards not paying their fair share and stealing the wealth of the entire nation so as to starve the poor and kill the weak" as their straw man either.

(Perhaps blown out of proportion, but you get the point.)

 

[fdeck]

Meh. I think the middle class are a bunch of hard working whiners. Again, they have every opportunity I did (because I myself came from lower-middle class) to better their situation. So, sure, it is hard. And it required RISK, TIME and more effort than most are willing to put forth. And they whine about others having more than they do. So, I agree with the whiners part, but I do think many of them work very hard (at all the wrong things..... but very hard).

Time and effort, yes. Risk, no. The "risk taker" is mythical. While all business activity involves risk, most successful entrepreneurs are actually risk-averse. Rather than simply throwing our money at risky ventures, we tend to identify business opportunities where we can drive the risks to a low level through a combination of:

1. Our own abilities, such as technical expertise, salesmanship, whatever. This is how education drives upward mobility. "Chance favors the prepared mind."

2. Access to knowledge, such as market needs or new technical developments. This is why high tech start-ups tend to cluster around major research universities, and why a lot of entrepreneurs start businesses that seem like spin-offs of their day jobs.

3. Innovation, i.e., creating a new way of solving a problem. "Build a better mousetrap."

4. Safety net, i.e., being able to ensure that the downside of a business venture doesn't affect our ability to provide a basic level of subsistence to our families. Most entrepreneurs I know have income and assets that are sheltered from their businesses.

As for effort, I'll agree, so long as we're talking about the dollar value of effort, not merely the number of hours spent or the number of calories burned. I prefer my work to be measured in dollars, not Joules.

 

[two fingers]

I hope when you get out of school you get the success you so desire. I really mean that. But don't be surprised when you get out into the real world, life isn't exactly as it looks from behind your textbooks.

I'm a 42 year old father of two. I spent many years out from behind the textbooks. I sold one of my businesses and went back because I wanted to try something different. I also run a couple of side businesses while I am in school as well as gigging. So I am already real world compatible. But thank you for your well wishes anyway.

 

[fdeck]

Fair enough. I suppose nobody here leans upon the "rich fat cat cheating bastards not paying their fair share and stealing the wealth of the entire nation so as to starve the poor and kill the weak" as their straw man either.

(Perhaps blown out of proportion, but you get the point.)

That's your straw man characterization of the arguments that you're reading here. I haven't suggested such an idea.

The idea of a straw man argument is that you are creating a caricature of your opponents, and then attacking that caricature, rather than responding directly to their arguments.

 

[Unrepresented]

You are naive.

Call me insane if I think that one should not buy a house without being able to afford it...... or thinking that it is the responsibility of anyone taking on that much responsibility to have an attorney read it over and perhaps SLEEP ON IT a few days before signing on the bottom line rather than going for the instant gratification of home ownership..... or for thinking that it is too much to ask for anyone getting ready to buy a house to stop and think "I make $20K a year. Is buying a $300K house a GOOD IDEA AT THIS TIME?????" Clearly I need some free mental healthcare.

And the main difference between the lender and the musician is that the VERY MOMENT the musician handed the lender a quitarron and said "You are now clear to butcher Guantanamera", the lender wouldn't even BLINK before saying "No way. I can't do that. I don't play guitar(ron). And to attempt it would be silly." So why didn't the MUSICIAN say that when the freakin LENDER handed him a PEN and said SIGN HERE at the bottom of your new THREE HUNDRED THOUSAND DOLLAR MORTGAGE????? Even if the fine print wasn't spelled out for the idiot MUSICIAN, perhaps he could have THOUGHT THIS ONE THROUGH a little bit! Too much to ask I guess.

Yep. Yer right. Totally the lender's fault for not completely explaining variable interest rates and handing him the pen. :scowl: At no point should it have crossed the collective minds of the thousands of idiots who took out loans they couldn't afford to perhaps ...... oh I don't know...... NOT DO IT.

You live in a socioeconomic world that involves a lot more attorney consultations than I do, I don't know whether to consider myself lucky or overdue for a serious legal beatdown.

While I'm not entirely relinquishing the mariachi musician from some culpability on some level, it's the lending institution that's the one who has experience, training, and expertise. I generally go to experts in a field to be able to solve issues that I (as a layman) can't. I can clean my own teeth only so well, so I get them cleaned professionally by a dentist twice a year. I can add and multiply fairly well, but utilize tax software to make sure I'm doing it all correctly when my W2 comes. When I need financial advice I consult with an institution that specializes in that. It's absolutely fair to be skeptical of the advice, but that's why you pay an expert (like the lawyers you seem to be so fond of) to do the specialty work for you. Our mariachi friend did that.

I'm sorry that the bank was poorly investing its customers' money, and did not have the sense to correctly evaluate the market like it should have. I still put almost all the blame on the expert.

 

[Unrepresented]

My wife and I work until late July every year to pay our taxes between state, federal, property, capital gains, and a laundry list of others. The government is kind enough to allow us to keep everything we make for not quite the second HALF OF THE YEAR. Is that fair?

Millions of people in this country pay none. Is that fair?

The poorest among us pay none. So how are "regressive tax rates" keeping them from moving upwards? Just curious.

a) No one pays no taxes.

b) Those taxes are spent on things you probably will (and do) enjoy having, like national and local security, safe food and household products, public roads you can travel on, schools for your children to attend, etc.

 

[chuck norriss]

Hypothetical, just for fun, would a month without income tax boost te economy or devastate it? Let's say mid summer while school is out.

 

[two fingers]

Strike 1. Most people don't understand money. The calculations for the cost of owning a house are complicated enough that most people can't figure it out. There is no simple formula for figuring out what you can afford, because it involves estimates of risk, and because there is no risk-free option when you consider opportunity cost.

Strike 2. Most people didn't understand the role of the banker. We are told from childhood that a bank is a trustworthy, conservative institution that will protect its assets, and that the banker is an authority figure. We go to his office, he enters a bunch of information into his computer, and tells you how much you can "afford." The truth is that the banker has turned into a high pressure salesman, and the bank isn't lending any money. They will sell the mortgage onto the secondary market as quickly as possible. The bank is not running on interest, but on fees. That's what consumer banking has turned into.

Many valid points in your entire post. Two of the problems are mentioned here as well.

I was not reared to believe that the bank is trustworthy. I was taught that the only person you trust is an attorney that you, your family, or associates have known for years.... and is on retainer.... preferably a family friend. (And this was taught to me by my lower-middle class father and grandfather... so please don't give me the "working class can't afford an attorney" bit. Can they really afford a house then?) He has no dog in the fight and is sworn by law to look out for your best interests. And you never EVER just hand him the contract. You READ IT YOURSELF and highlight things you have questions about. This concept is more than lost on probably 90% of the population these days. And what is the funniest part is that most of the phrases in "legalese" (a foreign language to most) were put there as a result of legislation and regulation brought about to PROTECT the CONSUMER. (How'd that work out?)

As far as #1 goes I couldn't agree more. I took an early morning class in high school years ago that was called "consumer math". It should be required of every high school graduate. Just being able to figure interest (of all kinds) would open the eyes of many who are thinking of taking on debt, be it credit card, mortgage, car loan, whatever. For all the money we throw at education on useless attempts to release "well rounded" individuals into the world who are aware of the Impressionist Period and how to speak a foreign language, how much sense would it make to educate the little bastards on something they could actually use to protect themselves?

Not discounting your other points (although I don't buy the ringleader bit, but whatever) but those two stuck out as making sense.

 

[two fingers]

a) No one pays no taxes.

b) Those taxes are spent on things you probably will (and do) enjoy having, like national and local security, safe food and household products, public roads you can travel on, schools for your children to attend, etc.

OK so my working more than half the year to pay for those things is "fair". And the poor pay plenty of income taxes. Got it. Reality check I guess. Who knew?

 

[bolophonic]

I find it interesting that there are so many people who regard the mountain of court documents, financial filings, investigative reporting, etc. pointing to fraud and irregularities at the top of the banking and financial industry as questionable evidence suggesting nothing more than class-envy from the economic losers, but one made-up story about a mariachi singer with a dodgy mortgage is enough evidence to condemn every person who has ever foreclosed on a house as lazy and greedy. There is something really frightening to me about folks who pathologically direct their ire only at those who are further down the economic ladder than they are.

 

[Unrepresented]

OK so my working more than half the year to pay for those things is "fair". And the poor pay plenty of income taxes. Got it. Reality check I guess. Who knew?

The poor typically don't pay as much income tax, but they're paying taxes in other ways such as the sales tax, which is going to be more costly to them than it is to you.

 

[spade2you]

I find it interesting that there are so many people who regard the mountain of court documents, financial filings, investigative reporting, etc. pointing to fraud and irregularities at the top of the banking and financial industry as questionable evidence suggesting nothing more than class-envy from the economic losers, but one made-up story about a mariachi singer with a dodgy mortgage is enough evidence to condemn every person who has ever foreclosed on a house as lazy and greedy. There is something really frightening to me about folks who pathologically direct their ire only at those who are further down the economic ladder than they are.

Nobody accuesed the mariachi singer of being lazy. Greed is a matter of opinion and perspective. Can anyone argue that someone probably making $20-30k per year made a wise decision to buy a $300k home? What does that sort of mortgage payment run per month? Probably more than his income.

 

[two fingers]

While I'm not entirely relinquishing the mariachi musician from some culpability on some level, it's the lending institution that's the one who has experience, training, and expertise. I generally go to experts in a field to be able to solve issues that I (as a layman) can't. I can clean my own teeth only so well, so I get them cleaned professionally by a dentist twice a year. I can add and multiply fairly well, but utilize tax software to make sure I'm doing it all correctly when my W2 comes. When I need financial advice I consult with an institution that specializes in that. It's absolutely fair to be skeptical of the advice, but that's why you pay an expert (like the lawyers you seem to be so fond of) to do the specialty work for you. Our mariachi friend did that.

I'm sorry that the bank was poorly investing its customers' money, and did not have the sense to correctly evaluate the market like it should have. I still put almost all the blame on the expert.

OK so I'm elitist because I use an attorney.

Let's break this down to "working class" terms, shall we? You get ready to buy a used car. Unless you are a dipstick, you don't just trust the slick sales guy to have the best advice on buying a car, or your best interests at heart. You take the dang car to a mechanic to have it looked over to make sure the slick sales guy isn't ripping you off. Fair enough? Now, let's say the mechanic charges $75 to look at the car. If you can't afford to pay the $75 then you can't afford the car. That has been my point all along. If you can't afford an attorney fee to have a contract looked over BEFORE you sign a mortgage for HUNDREDS of thousands of dollars, then you obviously (obvious to anyone with an IQ higher than that of a box of rocks anyway) can't afford the freakin HOUSE.

Too stupid to understand all the ins and outs of a mortgage contract is nothing unusual (I'm that guy too). Too stupid to take the thing to someone who DOES understand it is Darwin on parade.

Sorry. At SOME point, the guy had to know that $20K (or whatever) annually plus bills plus car plus gas plus food plus taxes plus healthcare plus everything else we all encounter as humans here on Earth and in the US will NEVER EVER EVER equal $300,000 plus even the SMALLEST of interest rates........ like...... ever. Didn't need a banker OR a lawyer to figure that out, now did we? I didn't pull out my calculator once... and even left my SHOES on. So how is it that THIS dipstick isn't more than just a LITTLE bit responsible for signing a mortgage that under NO CIRCUMSTANCES (short of winning the lottery) he would EVER be able to pay back, mo matter WHAT the banker did or didn't do? Like...... EVER. There IS NO REALITY in which the guy could have EVER paid back ANY lending institution THAT amount of money making THAT much money.

Seems like 50/50 responsibility to me. Being inexperienced in finance means nothing. You don't have to know a lot of math to figure out what will never add up.

 

[two fingers]

I find it interesting that there are so many people who regard the mountain of court documents, financial filings, investigative reporting, etc. pointing to fraud and irregularities at the top of the banking and financial industry as questionable evidence suggesting nothing more than class-envy from the economic losers, but one made-up story about a mariachi singer with a dodgy mortgage is enough evidence to condemn every person who has ever foreclosed on a house as lazy and greedy. There is something really frightening to me about folks who pathologically direct their ire only at those who are further down the economic ladder than they are.

Nope. Nice try melodramatic guy. My point has ALWAYS been that the borrower and the lender share EQUAL responsibility. Whereas most on the other side still claim that the borrower is "mostly a victim" of "wiser more experienced seemingly trustworthy" lenders. Lender was a cheat. Borrower was an idiot. And, again, you can't legislate away stupid. If you could, many of us would be strapped to padded chairs being fed healthy food through a straw and never allowed to leave the house.