We Have Seen the Enemy, and It Is... Tech?
It is well documented that wealth distribution in America is hitting extreme levels. A recent article from the Washington Post notes that the 400 richest Americans are now worth more than the 150 million poorest.
Yep, that's a big difference. Apparently the gap hasn't been this wide since the 1920s — the tail end of the Gilded Age, when robber barons were flush. We know how that ended...
Nature is funny like that — it seems to like balance, things in proportion. I'm tempted to expound on that balance thing and observe how the Fibonacci sequence describes a kind of universal balance that gets repeated to the point that it's likely no coincidence, but I know I can't do it justice, so I'm gonna leave that as a provocative suggestion for now.
Instead, I'm gonna use a way more blunt tool and say that in the past, when wealth distribution gets extreme, the poor people tend to just kill all the rich people and take their stuff. If those rich people have the same nationality, it's a revolution. If they are in another country, it's just an invasion.
So far as I know, no one in the U.S. has called for a revolution or an invasion of Canada or Mexico (which has me wondering if that five miles of border wall will end up like a Maginot Line). Today, we talk about "wealth redistribution."
TAKE the Opportunity
I will admit I'm a little surprised at some of the suggestions I've seen for how to "fix" this wealth disparity. The basic notion is to take more money from the super-wealthy and give it to... the government?
Because the federal government is so efficient and never wastes money at all.
There are some valid arguments for the super-wealthy to pay more in taxes. Like to help support the defense budget (see above comments about revolution). Then there's the fact that a certain number of people have to be unemployed for the U.S. economy to function. Sad! Very Unfair!
As a parent, hands down my favorite trite phrase to say to my kids is "Life's not fair." If my kids learned nothing else from me, please let them have this ingrained in their marrow. There aren't any participation trophies for simply getting through your years on this planet.
Maybe it's just me, but I've always found that nothing motivates my preparation and focuses my attention like the knowledge that I might lose.
Do my kids have advantages? Yes, yes they do. They've had a good upbringing, they have been "encouraged" to do well in math and science (even though I did not), they speak the language of business — I'm pretty confident there will be opportunity for them. I hope they take it, because opportunity isn't a passive thing. It still has to be taken...
And if you ask me, this is what is missing from the whole debate about wealth distribution. Where's the talk about opportunity? Because if you think there will be more opportunity for Americans because the government starts taking more money from the wealthy via higher taxes, you're outta your tree.
Any credible discussion about wealth in America has to focus on opportunity, not outcomes. Look around the world. Why do people want to move here? What country has more opportunity than America? I think we can also agree that opportunity is not distributed equally, so there is still work to do.
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You've Been Replaced by a Robot
Let's think about capitalism and what it is exactly...
Capitalism is about ownership. The essence is that you can own something and make money from it.
Now, I've heard that some politicians want to tax investments more. They want to make it more expensive for you to own a piece of America's great corporations because the rich get richer mainly because of their investments.
Again, let's think about opportunity here. Does raising capital gains taxes make investing more attractive? Does it make it easier?
Instead of punishing investors, shouldn't they be encouraged and rewarded? You know, so more people will do it? How about cutting capital gains taxes to zero for households with less than, say, $100K in assets?
My friend Kenny Polcari wrote a terrific piece last week asking why we don't tax robots and computers:
It is exactly those capital investments in TECHNOLOGY that is destroying American workers.
Just take a look at what TECHNOLOGY has done to the financial services industry – it has caused hundreds of thousands of job losses in this country – never mind what it has done to NYC and the surrounding suburbs. Look what technology has done to the banking business – oh right more job losses and look at what technology has done to manufacturing as robots do what? Oh right DESTROY MORE AMERICAN JOBS....and when minimum wage rose to $15/hr – what did MCD do? Oh – they installed ATM like kiosks and eliminated American jobs..... I go to the local Stop and Shop and use those ‘hand price guns' to make my time more efficient and check myself out at the ATM like kiosk without ever talking or interacting with another human being – because Stop and Shop made some CAPITAL INVESTMENTS that allow me to be more efficient while doing what? Oh right destroying American Jobs. Welcome to the future – so what WE need to do is tax the TECHNOLOGY that has eliminated jobs – if an employer wants to replace a worker with a ‘computer' then tax the damn computer!
That's just brilliant.
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.
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