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Reaganomics Proven False in Practice

The middle class only happens by intelligent design through human ingenuity.

The world is too complex and random for Reaganomics to work.  9/11, Irene, Katrina, Sandy, Global Economics, and The Great Recession of 2007 are all examples of this randmoness and complexity at work.  

Most importantly, the whole idea is based on the idea that people are rational actors.  Neuroscience over the last four decades have shown that to be false.  People are not rational and they are even less rational in periods of stress and disaster.

In the meantime, corporate profits are at a record high.  The stock market is near a record high.  The tax rates are at record lows.  The gap in wealth between the top 1% and everyone else has not been this large since right before the Great Depression almost 100 years ago.

To be sure, there is no freedom without capitalism.  From top to bottom, people have a right to capitalize on their thoughts, ideas, energies, and labor.  That right stops at causing undo harm to other human beings.  That is where capitalism has to get off the bus and a government of the people, by the people gets on.

In short, capitalism is good for setting prices on goods and services.  It is excellent at balancing supply and demand, but it is woefully inadequate at determining right and wrong.  

For right and wrong, it is completely up to us to educate ourselves and govern ourselves in times of relative calm and peace to help guide us through times of randomness, uncertainty, and the resulting irrational behavior.

The bottom line is that if you value the middle class, the first thing you have to admit is that the middle class not happen by accident.  The middle class does not "trickle down."  

The middle class is a purposeful human creation.  The middle class is not the natural consequence of half-baked trickle-down economic theory based on a provably false basis of human rationality.

The middle class only happens by intelligent design through human ingenuity.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

PaulRevere November 02, 2012 at 05:59 PM
Stop using "code" middle-class. How about you answering first--- Who is this middle-class? What job would a typical middle-class worker have? Please de-code.
Karl Frank Jr. November 02, 2012 at 07:09 PM
The Middle class has levels. Lower middle class being one that makes enough money not to qualify for direct government financial aid for daily sustenance and shelter and has enough money to pay their basic bills every month and maybe the occasional discretionary income. They may either rent or own property. Middle-class being person or family that has an annual income in the $100,000 range, give or take 20-30%. Has the money to pay their basic bills every month, usually owns property, depending on where they live, plus discretionary income for various items, including savings, extra retirement savings, vacationing, entertainment, etc. Upper middle-class being a person or family between $100,000 and $250,000 a year that can pay their bills and has double to triple the discretionary income than the middle-middle class to do as they please. They are generally professionals, usually with a tertiary education and are not primary manufacturers of goods. Like everything else, and like it is clearly stated in the article above, complexity and randomness reigns supreme, so there is obvious blurring between the lines like the blurring of weather between the seasons. For arguments sake, lower-upper class would still be salaried families or individuals making 1/4 million or more a year and makes a large amount of their money on capital gains...and then upper class being those over 1/4 mill. to 1 mill primarily on labor of others and capital gains, and then up form there.
Karl Frank Jr. November 02, 2012 at 07:09 PM
I would also add that all levels are dependent on government with "government" being the "code" for civilization.
PaulRevere November 04, 2012 at 08:41 PM
Your definition is as I expected. That's because Liberals use "Living" costs as a barometer of class-labels. You totally ignore what society is actually experiencing. Here is Missouri's Numbers. Be prepared to be shocked! Year 2010--Number of Individual Tax returns (Having W-2 Wages) filed in Missouri 2.230,000. (that's 2.2mil returns) 1,446,000 returns showed under $32,000 wages. 328,000 returns showed under $55,000 wages 198,000 returns showed under $75,000 wages 207,000 returns showed under $110,000 wages 41,000 returns showed under $215,000 wages 6,546 returns showed under $415,000 wages 2,900 returns showed over $1mil Therefore, Over 1.7 million Missourians (76% of all Missourians) earned wages under $55,000 for year 2010. Karl, that is 76% of all Missouri taxpayers. Only 207,000 earned between $75K to $109K. That means your $100,000 Middle-Class number is absurd for Missouri. Any-one Earning over $75,000 in Missouri is in the top 10% of ALL INCOME earners. It is impossible to be middle-class when 90% of the people earn less than whatever number you want to pull out of thin air. When you consider that only 50,000 individuals (out of 2.2million individuals) earn over $110,000, that places your $100,000 wage earner in the RICHest class of missouri. (Far from any middle-class.)
Karl Frank Jr. November 05, 2012 at 01:20 PM
What you have done here is put my argument in numbers for me. My argument being the decimation of the middle-class since 1978 through a faulty theory of trickle-down economics. if you make $100,000 a year now, you have the same buying power as someone who made $30,000 in 1976. What you have done is put in numbers the fact that the gap between the 1% and everyone else is at record highs. The last time the gap was this high was right at the beginning of the Great Depression. Here are your numbers and my point in graph form: http://www.mybudget360.com/wp-content/uploads/2012/04/growth-in-income-inequality.jpg
Karl Frank Jr. November 05, 2012 at 01:21 PM
Here it is in a simpler form: http://modeledbehavior.files.wordpress.com/2010/07/image18.png
PaulRevere November 05, 2012 at 11:01 PM
Karl: Over 2 million (90%) Missourians Make LESS than $100,000. Only 240,00 Missourians make $100,000+. That represents the highest 10% wage earners in all of Missouri. The middle-class in Missouri would be in the Low $50K range. It is factually absurd to label a $100,000 Missouri Wage earner as middle-class, if that person actually earns more than 90% of his neighbors. $100,000 is considered RICH in Missouri (not N.Y. or Calif.). That is a numerical Fact. All of your charts & opinions cannot refute that. Now here is what middle-class should be. Total Missouri individual wage earners =2.2 mill divide by 3 =Middle-class. That is 743,000 Missourians. Go to the chart and you will see what all of Missouri's 743,000 middle earners get paid. It's about $50,000. You can create any arbitrary middle-class number you want but anyone earning $100,000 in Missouri Now or in the future will always be placed in the TOP 10% of income earners. Their living standards in Missouri are unmatched and that is what my chart proves. "union styled taxation for public employees" creates the most highly paid employee-Class in Missouri. There is a real re-distribution of poor working person wealth to this upper 10% class in Missouri. I hope to educate our Missouri Representatives. 1.7 million Missourians earning under $55,000 are way too many to disregard. Either the employers should double all payroll, or our public employees should get substantial pay-cuts.
Karl Frank Jr. November 05, 2012 at 11:14 PM
All you are showing is that wages have not kept pace with inflation, again, that supports my argument that it doesn't trickle down. Costco is an example if a company who had done there best to keep wages in lines with inflation. That's why their cashiers make $50,000 a year after 4 years. The middle-class has been decimated and your salary numbers prove it. 1950s era tax numbers, union strength, and government infrastructure investment. That's how we rebuild the middle class. Well paid public employees help prevent crashes and collapses because it keeps people in the market when the private market fails.
PaulRevere November 06, 2012 at 05:21 PM
You are a lost cause. When will you understand , it is the under $50,000 class providing ALL the wages to the public workers. Costco does not Define middle-class---You did. 1.7 Missourians earn less than $55,000. You nor I can change that. That is a Real number. It is not made up. It is not arbitrary. You can hope that private employers could come up in wages. Until they do, any definition that $100,000 represents middle-class is currently non-existing. I would think no logical person could conclude that if 90% of missourians earn less than $100,000 those in the 10% class would be considered "middle-class". Suggesting the private sector has control over meeting your arbitrary $100,000 figure is absurd. This is proof that the public sectors wage demands are NOT what the private sector can support. Your insistance that Private employers are running behind in wages is very telling of your arbitrary definition of middle-class. In numbers, There are very few Missourians earning more than $100,000. That's fine, but please don't make that middle-class. They are RICH.
Karl Frank Jr. November 06, 2012 at 05:33 PM
If you read closely, I defined middle class by levels of discretionary income. I am not suggesting that the private sector has control over meeting the "arbitrary" $100,000 figure. I am arguing exactly the opposite. That if left solely up to the private market, the gap between the top 1% and everyone else will continue to increase until all that is left is poor and wealthy. My article and your numbers paint the perfect picture of what I am saying. I would have used the same numbers as you to make my point, but I wanted to keep it simple. That's why instead of causing people's eyes to glaze over with subjective numbers, I used end result statements like: "In the meantime, corporate profits are at a record high. The stock market is near a record high. The tax rates are at record lows. The gap in wealth between the top 1% and everyone else has not been this large since right before the Great Depression almost 100 years ago." Those are basic facts that you have have to understand first. If you want to dig deeper, go ahead.
PaulRevere November 07, 2012 at 12:47 AM
KarL: The Gap in wealth is created from Public sector Tax demands. Private industry wages are stagnant. Only 50,000 Missourians, earn over $100,000 or more, it is time to stop that 1% warfare. 1% (of 2.2 mil) is 22,000 individuals and the Missouri numbers show that only 9,446 individuals earned over $110,000. That puts 12,554 Indiv- $100,000 earners in the 1% wage earners class in Missouri. The middle-class described as $100,000 is a farce and simply not true. You are pulling from the wrong end. Corporate profits have been higher because Interest rates are nearly ZERO. The big layoffs and decreased wages of private workers have been necessary just to stay in business. (That means the unemployed and underemployed have taken all the financial brunt.). Off subject- Businesses will continue to survive by "CUTTING" wages , not raising wages. Therefore they will earn more profits to prepare for the onslaught of higher and higher taxes coming in 2013 and 2014. (Just the payoll tax cuts gave business over $150Bil of profits that will disappear on Jan 1st 2013. My chart shows that clearly---Over 1.7 mil Workers have paid the price in decreased and unemployment wages. Enough to make all $100,000 earners NOW 1%-ers. $50,000 is middle-class. Our public workers are in a class all by themselves. Match Costco Benefits to public worker pension benefits and you see larger GAPS. Karl: You should hire a couple of workers to experience Private industry.
Karl Frank Jr. November 07, 2012 at 12:51 AM
Well. We disagree on that point. Public sector tax demands not only provide essential services, but they keep people in the market buying goods that would otherwise be eliminated from a private market. I think this is a point we are not going to agree on as a matter of principle. Yet, we still have record high corporate profits, near record high stock prices, record high gap in wealth between top 1% and everyone else and record low tax rates. I think your argument is a cop-out...and a very weak one.
PaulRevere November 07, 2012 at 01:01 AM
Forcing individuals by taxation to PAY a self-imposed MIDDLE CLASS WAGE is self destructing. It is financially not sustainable. Private sales and practices determine the VALUE of any Public worker. Public workers cannot make more than the "Original wage earners". It is simply impossible from an annual earning standpoint. It is possible to do from a "wealth Tax". And that is exactly what a Real Estate tax is. It is A Tax that "Steals the wealth" of our homes. Home paid from Private earnings. A Real estate tax is a "hidden-re-distribution of Wealth". Eventually there will only be one-class. "THE TAKERS" Everyone else becomes Slaves. Proof!??? 75 cents of every Public school budget goes for Wages-Benefits. I challenge you to find any Private business in America that has employees showing a 75% Payroll Expense. No business could operate with such Labor cost. Public and Government workers earnig $75,000-$100,000 are the most overpriced workers on earth. If they are fairly priced, why don't they go out and start their own schools. Pay for the buildings and maintenance and try to earn their $100,000 wage structures. Let's see if even $20,000 tuitions would cover the costs.
Karl Frank Jr. November 07, 2012 at 01:07 AM
The key part of my argument here, besides: "Yet, we still have record high corporate profits, near record high stock prices, record high gap in wealth between top 1% and everyone else and record low tax rates." Is that the public sector is an essential part and only possibility of a vibrant middle class. We obviously disagree here, but I'll give you the last word. The public sector is not as susceptible to the whims of the market and they keep their salaries in the market. So there is a multiplier effect that overcomes the cost that you speak of. For instance, of Mehlville's $100 million budget, 80% of it is for salaries and benefits. 60% of that is local with a minimum of a 3x's multiplier. They shop at our grocery stores and gas stations and computer services etc. That money doesn't just disappear into a black hole. The teacher gets it, gives it to the gas station, who gives it to the grocery store, who give gives it to the guy who cuts grass, etc. and every time another transaction is made back to the government reaping back the investment for the people to keep the economy sustainable. Last word is yours.
PaulRevere November 08, 2012 at 07:23 PM
Thanks Karl: Whatever the Public sector earns is taken from the private sector. 10 ($50,000) Private sector earners =$500,000 spending.(Food ,shelter,education & clothing and transportation (All costs of living). Without any public sector tax, $500,000 is available to spend in our economy. Taking $100,000 TAX from that $500,000 to give to a public sector employee Makes only $400,000 available for the Private wage earner to spend. A public service class can only exist because of Private wages. (Teacher $'s just do not magically appear until TAXES are assessed.) If you cannot understand that ZERO "NEW" $spending comes from this $'s transfer, then your ideology is focused on the false notion that "creating more earners-workers" equate to more economic activity. That is not true. Ten private workers TAXED for the sole purpose to create 1 or more public wage earners could only "change the products desired" in our economy. The goal that a middle-class can be "Created" by Taxation is exactly why that middle-class (Defined as $100,000) are now in the 1% wage earners in Missouri. It is the TAXed valuation of public services without regard to the earnings of those paying the Tax that is creating a GAP in under $30,000 earners supporting your arbitrary $100,000 middle-class.
Karl Frank Jr. November 08, 2012 at 10:17 PM
Whew...my eyes glazed over a bit there. I will stop short of having an economics theory debate with you because we will likely not change each others mind. In my ideal society, we have classroom teachers and policemen and firefighters and marines and utility workers and engineers that all work on the public dime. In some of those positions, like engineers and teachers, intellectual quality and ability to teach matters. There is a market for good teachers. Good teachers cost money. There is a cost to paying teachers and there is a cost to not paying good teachers. It's the opportunity costs that you are not including in your eye-glazing calculations. For instance, for every tax dollar spent on early childhood education, an average of $12 tax dollars are saved in the future as a direct result. Either way, we are well off on a strawman branch of the general, overarching topic of this post and that is that there are record corporate profits, record stock market prices, record gap in wealth between the top 1% and everyone else and record LOW tax rates. Yet...still no trickle-down. I for one an thankful for teachers and firefighters and other public employees, besides for their service, because they are the ones calling me for tech support and paying their bills. Before you start talking about free phones, ranting anymore about classroom teachers, you might want to watch this: http://www.liveleak.com/view?i=4a2_1229470578
PaulRevere November 09, 2012 at 12:50 AM
Yes, I knew and heard Bush on CNN. He was not talking about "middle-class" employee definitions. Public Teachers DO have competition from the private industry. Their values are set by private Teachers, not by people's home values. THis is not about economics or what teachers add to society. That's baloney Public engineers Do have competition in private industry. They are paid by valuing what the private market engineers get. Sometimes less. Firemen serve/protect ALL of us.(Every day of our lives) You mention a "Good teacher Costs". So, does that mean a private school teacher is "way-underpaid"? Why not Tax for public "barbers". Haircuts, based on Home values. Should a public barber earn 3 times more than a private barber? Why should every child's parent pay different school support? An amount based on Home value, rather than equally. Karl: I can accept your valuing any Public worker into the "middle-class" defined at $100,000. BUT, you must acknowledge that No Professional private worker in America gets paid by TAXing for a service. Private earned $'s is NOT the same as TAXing for value. You can disagree and try to Justify values based on economics, but I base it on FACTS. Those facts show a Missourian earning W-2 $100,000 per year is in fact in the upper 1% of all Missourian wage earners. That sir: IS NOT MIDDLE-CLASS in Missouri. No such thing as "poor-middle-class" One day I will educate you on how corporate profits expand America's workers. TheEnd
Karl Frank Jr. November 09, 2012 at 02:52 AM
Ok. So, just to be clear. 1. Corporate Profits are at record highs 2. Stock market is near record highs 3. Gap in wealth between top 1% and everyone else is at record highs 4. Tax Rates are a record lows. Yet, the middle-class is disintegrating, and has been, as your numbers show, steadily since 1980. So you are saying there is a 5th piece missing for trickle-down economics/Reagonomics/Supply-Side economics to work. 5. Eliminate or privatize public sector workers. (Teachers, police officers, firefighters, marines, army, air force, sewer, water, Army Corps of Engineers, highway departments, roads departments, etc.) Is that correct? If we eliminated those things then the wealth would flow down? The $32 trillion held overseas in tax shelters would come back to the states?

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