Income Gap

LadyT said:
"That is probably due to the fact that we have become more service oriented as a country. We leave the manufacturing to those that can do it as efficiently as we can at a more economically viable price."

I still get a sense that we are economically cannabalizing ourselves. Yes. Returns are good at moment, but at what cost? And I've also been contemplating on whether or not economic success is a zero-sum gain. I'm starting to think that it is.
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It isn't. That's simply an obvious fact.

We aren't "Cannabilizing" ourselves. A growing nation will nearly always have some sort of trade deficit unless it manipulates its currency to artificially lower the price of its dollar - which really means the people are sending goods off to other countries and getting less of a profit off of it anyway, so in that case it isn't a good thing.
 
LadyT said:
Actually, my boyfriend had an interesting idea which I think is a good idea.

Here it is:

Basically, you know how the super-riche invest a $hit load in municipal bonds which we all know is tax-free? Well, he suggested putting a % income limit on how much of your income is tax-free. He suggested 90% but I'd personally be flexible to this idea. So if you've got $5M invested in municipal bonds that yield $250K a year tax free you'd only be allowed to have $25K of that tax-free and you'd have pay regular income taxes on the rest. This way you really wouldn't hurt the middle class.
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Well, then people would buy less bonds, and municipalities would be squished for money.
 
uscitizen said:
I don't think a high sustained trade deficit can be a good thing for any country.
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It isn't really that bad of a thing. Not as big a deal as people make it. The perception is that it's money "draining" out of the total economy, and the total economy has now been reduced by that. It really simply takes out of the GDP - which means that growth is being hurt. But a country could go on for thousands of years with a 100% trade deficit if it's GDP kept growing at 120%.
 
Watermark said:
It isn't really that bad of a thing. Not as big a deal as people make it. The perception is that it's money "draining" out of the total economy, and the total economy has now been reduced by that. It really simply takes out of the GDP - which means that growth is being hurt. But a country could go on for thousands of years with a 100% trade deficit if it's GDP kept growing at 120%.
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Not slamming you or anything, but I am curious as to how that scenario could happen.
How could your GDP keep growing at 120% with a 100% trade deficit ?

As spin is so fond of pointing out, I have no degree, so educate me.
 
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:)

It couldn't. It was an exageration. I just know that one of the factors in calculating the GDP is subtracting the trade deficit. If the US keeps growing fast enough the trade deficit should be irrelevant.
 
Watermark said:
:)

It couldn't. It was an exageration. I just know that one of the factors in calculating the GDP is subtracting the trade deficit. If the US keeps growing fast enough the trade deficit should be irrelevant.
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:) fair enough, I just dont feel it can continue for any real length of time without a decline of living standard in the USA. I suppose one way to keep growing the GDP would be to intentionally decrease our living standard ?
 
"How could your GDP keep growing at 120% with a 100% trade deficit ?

As spin is so fond of pointing out, I have no degree, so educate me."

Why wouldn't it? The trade deficit doesn't hurt future growth. It hurts now growth. A 100% trade deficit wouldn't mean that the GDP would stop growing in the future.
 
I don't think it's good either
I think most economist would say a surpluss it better
My issue is too many dems (my side) will identify a problem and go all chicken little with it.
The economy has been very good, great for the upper class.

The problem with hanging your hat on " oh well, it's not so great for the HS educated laborer making 34,000 and the laid off union guy".
Is this.
Where's the battle ground for the not far lefty or far righty.
Middle class familiy's two income 55,000 to 85,000
the over 125,000 clan has recently tended right though like me will go left due to the war mistake amonst others.
That 55,000 t0o 85,000 crowd has a lot of optimistic people looking to get a lot higher up the latter. They don't want a stratedgy of "fire, ready, aim" at their economic goals.:tongout:
 
"However, trade imbalances are not always indicative of the smooth operation of the market given differences in international productivity and intertemporal consumption preferences. Trade deficits have often been associated with a loss of international competitiveness, or unsustainable 'booms' in domestic demand. Similarly, trade surpluses have been associated with policies that inefficiently bias a country's economic activity towards external demand, resulting in lower living standards. An example of an economy in which a positive balance of payments was regarded as a bad thing by some was Japan in the 1990s. The positive balance was partly the result of protectionist measures that also caused the price of goods in Japan to be much higher than they would have been, had imports been freely allowed. The foreign currency Japanese companies earned overseas remained largely unconverted into yen in order to suppress the yen's value, further preventing Japanese consumers from benefiting from the trade surplus. In addition, the potential benefit from the trade surpluses were partly squandered by spending it on prestige real estate purchases in the United States that often proved unprofitable."




This is partly true. A negative trade balance is not a good thing. It subtracts from GDP growth. It means the nation is getting less competitive, of course. But it doesn't mean the economy is shrinking. And the economy may very well grow just as much with one as without one.

Radicals will say that a trade imbalance is a good thing, but that's not true either.
 
And, of course, the government can usually do very little to stop a trade imbalance. An artificial trade surplus is worse than a trade deficit.

Now, US, I'm not saying you advocate that.
 
"I don't think it's good either
I think most economist would say a surpluss it better"

A surplus is better. It's just not as big a deal as some people make it.
 
WM the trade imbalance alone may not be that big of a deal, but I think combined with other indicators...well the future for the USA is not bright imnsho.
 
both views are valid
the reason I make a lot of money is I invest a lot regardless.
Good growht, slow growth, recession.
If you always think the sky is falling eventually you are right, so is a broken clock twice a day.
Invest in the greatest economy ever for the long time and you get wealthy.
 
Watermark said:
It isn't. That's simply an obvious fact.

We aren't "Cannabilizing" ourselves. A growing nation will nearly always have some sort of trade deficit unless it manipulates its currency to artificially lower the price of its dollar - which really means the people are sending goods off to other countries and getting less of a profit off of it anyway, so in that case it isn't a good thing.
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No it isn't a simple and obvious fact. The fact is there is a transference of wealth when operations are outsourced. Person A loses a job to Person B. That revenue source is out of country usually for good typically in exchange for fewer albeit higher paying jobs to manage the outsource. This is definitely a plus for management and the investing class, but for the working class they are out of a job. They've now got to either change industries or compete for the remaining positions in that field a lot of times for a lower salary or more work for hte same amount of money. As someone mentioned earlier, productivity is up but wages are essentially unchanged. If you're theory of income creation were true, wouldn't higher productivity lead to higher wages?
 
Ladyt your not counting insourcing.
How about Toyota putting up factories all over the country.
those are good jobs for the working class and the investors in Japan benefit not here.
 
Topspin said:
Ladyt your not counting insourcing.
How about Toyota putting up factories all over the country.
those are good jobs for the working class and the investors in Japan benefit not here.
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Okay. Lets play a game. I'll see how many instances I can come up with where US companies have outsourced and you give me (links) instances where companies have insourced. The one with the most wins.

But back to my point. I understand what ecomonists keep chiming in on about wealth creation and all that BS, but from what I've seen it is a zero sum game that's transfering jobs out to 3rd world countries enriching the investing class and the working class is pretty much screwed.
 
Wow it's refreshing to see that someone actually has a clue.
Now your zero sum point would be valid if we had zero growth.
We are growing faster than Europe, Asia is growing faster than the rest excluding Japan.
They all buy goods from US. The US outsourcing does help the foriegn economy more than ours directly, but the combined affect is you have growing companies with exploding middle classes that want american products. It's a win/ win.
 
Topspin said:
Wow it's refreshing to see that someone actually has a clue.
Now your zero sum point would be valid if we had zero growth.
We are growing faster than Europe, Asia is growing faster than the rest excluding Japan.
They all buy goods from US. The US outsourcing does help the foriegn economy more than ours directly, but the combined affect is you have growing companies with exploding middle classes that want american products. It's a win/ win.
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You're about 2/3 correct.

Its a win for the developing middle-class in the foreign country
Its a win for investors that are reaping the benefits of cheap outsourced labor

(win/win)

But you're leaving out an important piece of the equation

Its a loss for Joe Schmo who's job was outsourced. How does s/he make out in the deal?
 
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