The super rich are becoming poorer with little hope in the future of their regaining previous pinnacles of wealth. This has grave implications for the economy.
Firstly it will make life complicated for the top universities, museums and other prestigious institutions that rely on the donations of the wealthy. Secondly the governments at federal and state levels will suffer because of drop in taxes. Last but not least the greatest impact will be its impact on the middle and poor class.
The best data on the wealth issue can be had from the IRS (Internal Revenue System) as analyzed by economists Thomas Piketty and Emmanuel Saez. According to them during the latter part of the 70′s it required $2 million to qualify for a position in the category of the super rich. In 2007 it had shot up to $11.5 million. While the gains of the super rich doubled from 1970, the income of the others increased by 20% and sometimes by a mere 12%.
Some economists contend that if the wealthy have problems it will adversely affect those in the lower rungs of the ladder because it will mean less charity and a reduced amount of spending. The rich suffered the worst during the 30′s and this was one of the core reasons for the Great Depression.
Not all are willing to agree with this. Other experts say that the concentration of money and consequently power in the hands of few has adversely affected the majority. Lawrence Katz of Harvard said, “I think incredibly high incomes can have a pernicious effect on the polity and the economy.”
The technological innovation and other market forces were responsible for this power concentration. It also led to the wealthy exercising enormous clout in winning government contracts, managing to enjoy low taxes aided by dubitable financial regulations.
Although IRS has not released the data for either 2008 or 2009, Professor Saez of University of California, Berkeley said in all probability the rich had become relatively poorer. He said that the cut off amount for qualifying to be super rich had dropped from $8 million to $6 million. Unless a miracle of a bubble occurs once more the figure is not likely to climb again quickly to $11 million.
In the recent past the country has experienced two of these bubbles – in stocks and in real estate. It is unlikely that this will be allowed to happen again.
Kevin Simpson, has been working on USRepos.com studying the foreclosures market, helping buyers on the finer points of California. Try to visit USRepos.com and find all related information about Repo homes.
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