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Only the formula used benefits the low earner. He gets a greater return on his paid in taxes than the high earner.
But it is even more complicated than that.

Does Social Security Redistribute to Low Income Groups? | NBER

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The real elephant in the room with regard to public debt is the acceleration of income inequality and social unrest. Why? Because of the enormity of the debt, the FED is forced to suppress i-rates so that the Treasury can service its debt payments. The combination of historically low i-rates and endless FED liquidity injections and FOMO operations, combined with government “stimulus” forces big money to chase yield in the equity markets, pushing them into bubble territory, helping the rich get richer, and leaving the poor and middle class behind to deal with higher prices, when inflation inevitably returns, without the benefit of huge capital gains.

What is most striking to me is the irony of the “progressives” that whine out of one side of their mouths about income inequality and then fiercely advocate out of the other for endless stimulus, debt forgiveness, and MMT.

Where does this all go? Well, first and foremost, the deflation/inflation cycles will be more violent, as we are now seeing in the stock market. The FED will be forced to do anything it can to prop the stock market up, lest the market collapse and they lose their precious tax receipts. If all goes as planned, the market will eventually power into a higher degree and debt will be inflated away, and we will all be paying much more for a gallon of gas and a loaf of bread. If not, we are headed for a deflationary bust rivaling the great depression.

Eventually, those in this thread calling for higher taxes on the rich will get their way. But, it won’t be enough to service the debt and ballooning entitlement programs and blue state bailouts, so the middle class will receive their haircut as well.

The rich will get richer, the poor will get poorer, and the cycle will continue.

2 Likes
63

So the formula attempts to benefit a lower earner, but it turns out that in reality higher earners get the bigger benefit.

And overall the differences are small (authors qualification of small)

The generational transfer seems to me to be the most unfair aspect.

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Yes, because as we all know what we are seeing in the stock market is based on reality and not on manipulation. Not at all.

“It’s always important to remember that the stock market is not the economy. Stocks are meant to reflect the future value of a given company’s stock, not the state of Main Street today.”

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I appreciate and agree with the sentiment in this sarcastic reply, though I’m at a loss to the point you are trying to make given the context of my post.

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I am asking you to expand on why your original reply. Are you trying to make the case that the volatility in the market has nothing to do with the actions by the FED?

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My financial adviser says so much of the Market today is all about the Fed.

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Which market would that be? The FED has been propping up the stock market, not the other way around.

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That’s what I said.

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Is it? The FED is all about the market would be more accurate, imo.

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When it pops like it did in March I am afraid it will be dramatic. What is that old saying the bigger they are the harder they fall.

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Sold my last business a little over a decade ago. Put the money in the market while I decided what I wanted to do next. It never came back out, the profit has been just too good. Which means I never started another one and I did not create jobs for middle or low income people.

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Have you noticed the spike in the M1 money supply? Anyone with common sense will start converting their Federal Reserve Notes [monopoly money] into real material wealth.

Those who do not recall HISTORY are doomed to suffer the evils of paper money.

JWK

“Of all the contrivances for cheating the laboring class of mankind, none have been more effectual than that which deludes them with paper money. This is the most effectual of inventions to fertilize the rich man’s field by the sweat of the poor man’s brow.”_____ Daniel Webster.

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Oh ya I remember. I have been parking money into the Yen as well as a 1/4 of my portfolio in Bitcoin and physical gold. I am surprised Bitcoin has done what it has I thought I got into it way to late and then it went ballistic.

I am worried there will be a rush to get out of the dollar, no one says it can happen I don’t think we are indestructible.

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Bitcoins, which you mention are an imaginary representation of wealth in which people trade in the shadow and not the substance, very much like Federal Reserve Notes.

A rush to get out of the “dollar”?

There is a vast deference between a “dollar and a Federal Reserve Note

I believe you meant to write:

I am worried there will be a rush to get out of the Federal Reserve Note

JWK

“We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it”. — Congressman Louis T. McFadden in 1932 (Rep. Pa)