Martin Armstrong "It's Not the Rich – It's The Total Cost Of Government That Is Killing The Economy"

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Submitted by Martin Armstrong via Armstrong Economics,

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QUESTION: Do you believe in a fairer system where there is a minimum income cap and a maximum asset cap? We live in an age where productivity has risen through the roof due to technological advancement. Don’t you think humanity is at the stage where it can afford to offer basic income to people so better checks and balances can be set in place to thwart the exploitation of people (see the third world).

A maximum asset cap would also act as a  positive filter in business ownership, don’t you think? The businessmen interested mainly in greed won’t fill those positions, but those who are driven more by other means, hopefully positive ambitions, will fill those roles (CEO,COO, managers, etc.)

Can you form a good argument against an asset cap of, say, $20mm? Can you think of a situation where 1 individual NEEDS more than 20 million, aside from using it to exploit others? If a cap isn’t set, that leads to the development of a tycoon, i.e., exploiter, of an industry. Increased capital permits the further increasing of capital at the accelerated rate. When left unchecked, greed and self-serving goals create a net loss, rather than a net gain.

Remember Martin, everything is connected. You can’t think on an individual level and expect it to not hurt evolution. This is what life is about. Evolution.

We’re headed towards doom, and the enemy is not just socialism, political cronies, and economic mobsters.

ANSWER: The standard of living has collapsed and it now takes two incomes to survive not one. That isn’t because of wages are not high enough. Do not forget, if you raise the wages you raise the cost of production and the consumer will pay that higher level in the end. There is no one-sided solution – you cannot raise wages without prices also rising. People would have more disposable income and would bid up prices by demand. If there was no 30-year mortgage, the price of houses would decline sharply because if people had to PAY CASH for a house, then the price of a house would fall to the point where the average income could afford it. Roosevelt created the 30-year mortgage to try to give people LEVERAGE to buy real estate to raise the price. That LEVERAGE has now impacted prices over the course of decades.

Assbly-Line-Ford

The answer lies in the consumption of wealth not that someone has more assets than another. Eliminate taxation and you will reduce the cost of labor, bring back jobs, and you will also eliminate the lobbying to escape taxes. Henry Ford invented the assembly line and brought the cost of cars down to the middle class at $240. He made a lot of money and expanded his business with it. If there was a cap on assets, you would destroy job creation. It REQUIRED the concentration of wealth to create innovation. If wealth is evenly distributed, you will not get enough people to agree to risk it all. Most small businesses fail after start-up. Some make it while a few really strike it big. That is the risk reward.

Big corporations die because they become eventually run by lawyers not entrepreneurs. I have been called in to many board meetings and watched the process first hand. As soon as a new company becomes public, the bureaucrats enter and the creativity vanishes. This is why they pay huge money for start-ups because they create what the big companies cannot – innovation.

It is not what an individual needs that is the issue. Take all the money away from Bill Gates. How will this improve your life at all? The issue is HOW MUCH is government consuming. But as long as they point to the “rich” they get to waste your money.

Social Security has altered society in ways people do not respect. Previously, family units were stronger because the system was the young took care of the old. Introducing Social Security changed everything. What children today save to take care of their parents?  That’s the state’s job. Welfare altered the system by rewarding women not to get get married. New Zealand nearly went bust on its program that sounded nice that if a woman had no idea who the father of the child was, the state took care of everything and gave her a house. They ended up with the highest percentage of women who had NO IDEA who the father of their child was. What woman does not know that except victims of rape?

China’s one child rule has seriously altered society there as well. Couples are now offering their estate to females to come in from SE Asia if they will take care of them. You cannot create these types of changes without seriously impacting society.

IRS-REV

Pictured above at the beginning is the tax burden upon society back in 1988. Even currently, the top 1% pay about 33% of all income taxes. At the start of 2000, the total amount of revenue collected by federal and state government in the USA exceeded 40% of GDP. This is outrageous and this is why the economy is slowing declining. This has nothing to do if somebody earned $100 million or $50 million as a CEO. That has ZERO impact upon your life – but what government takes out of your pocket REDUCES your standard of living – DIRECTLY.

Taxes

The solution is NOT to raise taxes on the rich, for government will still spend more than it takes in regardless of who pays. This is like fining your wife because the guy next door did not sort his trash for recycling. This is indirect. It is taxes that we must address – not how much someone else makes.