For Richer or Poorer
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For Richer or Poorer

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With all of the negative economic news you may not realize that the American economy continues to generate wealth and profits. The following slideshow takes a look at why this surplus is not being ...

With all of the negative economic news you may not realize that the American economy continues to generate wealth and profits. The following slideshow takes a look at why this surplus is not being invested to stimulate demand or create jobs.

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For Richer or Poorer Presentation Transcript

  • 1. For Richer or Poorer: Concentrating Wealthin the American EconomyJerry Paytas, Ph.D.
  • 2. Every day we hear about how taxes,regulations and Obamacare are killingjobs and stifling growth in the Americaneconomy. The prescription is to cutgovernment, stop whining about thewinners and pull up your own bootstraps!GOVERNMENT IS KILLINGJOBS
  • 3. If regulation kills jobs, then how do youexplain the growth of a heavily regulatedindustry life Life Sciences?Life Science Jobs Life Science Wages ($B)14,500,000 $80014,000,000 $70013,500,000 $60013,000,000 $50012,500,000 $40012,000,000 $30011,500,000 $20011,000,000 $10010,500,000 $- 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
  • 4. So why were 3.5 million domestic jobswere lost from 2005-2010 – two of the topthree declines since 1945! 3rd largest percentage2nd largest absolute loss loss Domestic Employment, 1945 Percent Change - 2010 20.0%160,000,000 15.0%140,000,000 2120,000,000 10.0%100,000,000 1 80,000,000 5.0% 60,000,000 2 1 3 40,000,000 3 0.0% 20,000,000 - -5.0% 1945-1950 1950-1955 1955-1960 1960-1965 1965-1970 1970-1975 1975-1980 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 -10.0% Source: National Income and Product Source: National Income and Product Acconts, Bureau of Economic Analysis Acconts, Bureau of Economic Analysis
  • 5. Two of the largest employment reversalsin the past 65 years have occurred in thepast 20 years? Why are we getting suchsevere events with increasing frequency?THERE MUST BE MOREGOING ON
  • 6. 1950 to 1990 we had a run of job growthinterrupted by only minor reversals Domestic Employment, 1945 - 2010160,000,000140,000,000120,000,000100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 - 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: National Income and Product Acconts, Bureau of Economic Analysis
  • 7. The profits of American corporations, evenafter we adjust for inflation, have continuedto rise, even now while jobs are vanishing Adjusted Domestic Profits ($1 M) Jobs (1,000)$1,600,000$1,400,000$1,200,000$1,000,000 $800,000 $600,000 $400,000 $200,000 $- 1945 1955 1965 1975 1985 1995 2005 2010 2011 Source: National Income and Product Accounts, Bureau of Economic Analysis
  • 8. The gap becomes even more stark if weindex profits and jobs to 1945 levels Domestic Profit (Adjusted) Domestic Employment 7.00 6.00 5.00Index (1945 = 1.0) 4.00 3.00 2.00 1.00 - 1945 1955 1965 1975 1985 1995 2005 2010 2011Q2
  • 9. U.S. Corporations are using some of themoney to create jobs outside the U.S.Source: http://online.wsj.com/article/SB10001424052970203710704577052220096932832.html
  • 10. Companies are also sitting on record amountsof cash. Microsoft held $53 billion in cash inJune 2011, up from $21 billion in December2008.Money has to flow to stimulate demand, butwhen it is stuffed in corporate mattresses itreduces the liquidity that oils the gears of oureconomy until the engine locks upWHAT COULD YOU DOWITH $53 BILLION
  • 11. Profits are not creating jobs for Americans
  • 12. If profits have continued to rise, despitetaxes, regulations and Obamacare… andU.S. Corporations added jobs in hightax, high regulation nations like Franceand Germany, why can’t they invest here?WHERE HAS THE MONEYGONE?
  • 13. It has gone to the 1%. The only group toincrease its share of Market Income.45.040.035.030.025.020.0 Share of Market Income 1979 Share of Market Income 200715.010.0 5.0 0.0 Lowest Quintile Second Quintile Middle Quintile Fourth Quintile 81st - 99th Top 1 Percent Percentiles Source: Office of Management and Budget
  • 14. But isn’t it true that the rich pay almost40% of all federal taxes? If we cuttaxes, then we should have moreinvestment that creates jobs.REDISTRIBUTIONPREVENTS WEALTH FROMCREATING JOBS
  • 15. But after taxes and transfers, the richest20 percent (actually the top 1%) still got allthe marbles! Adjusted Income 1979-200712.010.0 8.0 6.0 4.0 Adjusted Income 1979-2007 2.0 0.0 Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Fifth Quintile-2.0-4.0
  • 16. When we look at income distributionbetween the top and bottom, we can’tforget that population growth changeshow many people are affected -QUINTILES DISTORT
  • 17. Each quintile added 15.3 million peoplefrom 1979 to 2007, but only one increasedits share of income Income Change Relative to Population Change0.700.600.500.400.300.200.10 - Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Fifth Quintile(0.10)(0.20)(0.30)
  • 18. Severe inequality kills jobs. When wealthis highly concentrated, the market forgoods and services dries up. $1M spenton luxury goods has the same impact onGDP as $1M spent on necessities, but thejob impacts are very different.GDP DOES NOT EQUALJOBS
  • 19. The Maybach Landaulet model costs $1million
  • 20. Ford employs more than 30 people forevery car sold versus less than 12 forluxury maker Mercedes-Benz, which makesthe Maybach Jobs per Car Mercedes-Benz sold 1.1M vehicles with 96,000 employees in 2010Mercedes-Benz $1M to buy 40 Fords sustains 100 times the jobs of Ford sold 5M vehicles with one Maybach 164,000 employees in 2010 Ford 0 5 10 15 20 25 30 35
  • 21. Productivity gains reduce employment onlyin the short term. But shifting productionfrom mass market goods to luxury itemsmight not affect GDP but it does impact jobs.The question is whether the concentration ofwealth has short-circuited the link betweenrising productivity and job creation….YOU CAN BE TOO RICH!