Better For You, Or Better For The Country?

If you had a choice between two options, either (1) helping yourself out (financially, socially, politically or whatever) or (2) helping out your country as a whole (financially, socially, politically or whatever), which choice would you make?

Sure, life isn't as simple as my hypothesis, but I really believe that, in a way, that's what this year's presidential election will boil down to. Now, let me explain, and I will use the general tenets of the two parties to explain this point.

First, we'll start with a traditional understanding of the Republican party (tax less and have fewer social progams) compared to the Democratic party (tax the rich to pay for social programs for the lower class). The GOP believes that people should help themselves - sure, the government should help the super needy and it should create good programs, but the idea is that the government will focus on larger societal issues and then the lower class will slowly improve as society as a whole improves. The Dems are more of the opinion that you need to give a special hand to the lower class and that by building them up, society as a whole will improve. To oversimplify things, if America were a train with the upper class being up front and the lower class acting as the caboose, the Republicans want to hook the engine onto the front and pull everyone at once while the Democrats want to put the engine on the rear to push the lower class which will in turn push everyone else.

Now, let's take a very brief economics lesson: the economy improves when money is continually spent. Think about this year's Economic Stimulus Plan - the idea is that when people have some disposable income they will spend it which will help other industries which in turn will spend money which in turn will help other industries and so on. It's like the starter motor of an engine - once it's going, you no longer need the starter because the engine, with each firing of a cylinder, progresses the cycle, continually readying the next cycle. But, you might say, an engine will run out of gas if we keep going. That's true, but economic gas is natural resources and manpower - as long as we have somewhere to build and labor to build, we potentially could run forever. This year's stimulus plan is just trying to speed the spending process up a little bit. In fact, let's look at a great quote from Hello, Dolly that really sums things up, "Money, pardon the expression, is like manure. It's not worth a thing unless it's spread around, encouraging young things to grow." When money sits in a pillowcase it does nothing, but if it's in a savings account it can be used to as loans for other people or if it's in a mutual fund it can be used as capital for businesses. The key is that the flow of money is essential for our country to stay economically stable and politically powerful - the more money we spend, the more services we require and the more gas (primarily labor) we consume. Money moving from hand to hand is a good thing.

Theoretically, if everyone had the same amount of money, then each person would do some job which would create something valuable for another person. Bob pays $ to John for a loaf of bread that John made, John pays that same $ to Stacy to get his hair cut and Stacy pays that same $ to Bob to fix her car. At the end of the day, everybody has pretty much the same amount of money, and the cycle of spending continues and encourages people to work and produce. If Bob stops buying bread (think Great Depression), then John doesn't have $ for his haircut and Stacy can't afford to get her car fixed. Eventually, if nobody is spending money, the economy as a whole slows down. Since we all like the economy going forward (we'd all rather work and spend money than sit at home and never have any money to spend), the idea is to encourage spending.

Unfortunately for our theoretical situation, at the end of the day, not everybody has the same amount of money. In our modern mentality, the person who is the best at creating should be able to make more money. John, for example, might learn to make bread twice as fast as he used to while Stacy still cuts hair at the same rate - after a year, John might have twice as much money as Stacy. Over the course of very little time, people establish themselves in different classes - those that have and those that don't have as much. The wonderful thing about being a have is that you can pretty much do what you want - you can do what you want for work, you can buy what you want, you can live where you want, etc. If you are a have not, you have fewer options, though you still have the option of working yourself up to having a little more. Now, though, there is this big issue of the op 1% in America. According to the University of California at Santa Cruz, in 2001 the top 1% of Americans controlled 33.4% of the wealth of the country and the bottom 80% of the population only controls 15.5%. Thus, if the country were composed of 100 people, the top person would have twice as much money as the bottom 80 people combined. This means that the top 1% pretty much has it made and they are fine to keep it that way.

For people to maintain wealth, they quickly learn to invest it into things that will produce more wealth such as businesses, stocks, educations or the like. Additionally, you need a lot of fuel (remember the manpower I mentioned earlier) to keep your big engine going. According the the US Census Bureau, in 2006, 12.3% of Americans were below the poverty line. That means that for every "1 percenter", there are 12 Americans below the poverty line (less than $10,400 a year for an individual or less than $17,600 for a family of three - stats from here). The fuel to drive the lifestyles of the 1 percenters comes from the daily labors of lots of the lower class. If the lower class simply stopped working to support the 1 percenters (such as by only dealing locally with each other and skipping the large corporations), the 1 percenters would start to spend more money than they made and eventually their net worth would drop them down a percentage point or two. Obviously, this is the last thing the 1 percenters want. It's also the exact problem the 1 percenters faced during the late 1800s and early 1900s.

At the time of Big Oil and Big Steel, the 1 percenters knew that to keep their wealth they needed cheap fuel to burn. They decided the way to keep the fuel cheap was to take away any option that the laborers had of improving themselves - by blacklisting workers, requiring long hours and paying just enough to live, the big companies guaranteed that their employees would stick around forever. Unfortunately for Big Business, some of this "fuel" wanted to improve its lot in life. These few who had dreams of grandeur (or at least dreams of moving up in life) formed labor unions and with the aid of anti-trust and labor laws the whole situation led to the end of these huge corporations and coupled with the stock crash of 1929, the business tycoons crashed and burned.

After World War II, business boomed and the best businessmen and money managers once again got to the top of the pile and a new breed of 1 percenters were born. These, though, were a savvy lot and knew that there was no way to force an entire segment of society to remain as base laborers providing the cheap fuel necessary to drive their huge engines. The solution, whether they recognized it or not, was much simpler - how can you keep a large portion of the population content with what they have and keep them from striving for something more? Simple - you pay them.

Government programs throughout the New Deal gave Americans a new perspective on life - if the going got rough, just ask Uncle Sam. With such a great Uncle to fall back on, the entitlement mentality came to America and stuck. Welfare, social security, Medicare, Medicaid, Aid to Families with Dependent Children and the like all came calling and we opened the door wide open for them. Sure, these programs use massive amounts of our yearly budget, but they also do a very important thing - they funnel money to the top.

Income taxes are based solely on the amount of money someone earns, not how much they spend. If Richard has a billion dollars in the box under his bed in his apartment but only makes $1000 in 2007, he only is going to pay taxes on the $1000. Taxing the rich, then, really means taxing those that are making money, not those that have money. But, for those that invest their money and make large returns, they end up paying a lot. Remember, though, they are only paying a percentage (no matter how large of a percentage) of what they make and much of the money they make comes from existing investments - not from their own labor. But, the 1 percenters only pay 39.38% of the federal income taxes (23.3% of all the money they earn) and the rest is paid by people outside of the 1% (this does not include social security or any tax other, just income taxes). The secret, then, is to follow this money and see where it goes.

First off, let's start with the gimme-gimme money, the true social programs. Each dollar spent on welfare, social security or medicare ends up in a rich man's pocket. What's the first thing a welfare recipient does with a check? Pay the rent. All that money instantly goes to a property owner. Next off, the welfare family heads to Wal-Mart to line the wallets of the Waltons. Following that they make trips to Payless Shoes and Big Lots. Medicare and Medicaid dollars head right to hospitals and pharmaceutical companies. Social Security dollars never end up in a mutual fund. The result of these dollars being spent is that the social program dollars go directly to those who own stock in the big companies - the 1 percenters.

But, these social programs are only a small part of how we pay people to stay poor. In the last thirty years, our country has found a way to harvest the fuel of other countries and use cheap imports and cheap foreign labor to support our high demand. The 50th percentile of people might spend all their excess money on new clothes and electronics and they're okay with that. They are enjoying the fruits (in terms of labor costs) of another's labor - namely the foreign national. While the 50 percenter in America might not make much, they live like a 1% percenter lives in China and most people are content with that. Little do they realize, though, that by only spending rather than investing they are permanently limiting their options. If Chinese imports go up in price, what's a 50 year old 50 percenter going to do? It's simple - he will do without the new toys and stick with the same job (all he is qualified for) until he goes on social security and every dollar he makes between now and death will line the wallets of the rich.

On average, the bottom 50 percent of Americans only pay 2.98% of their incomes in income tax, but the rest goes to the same things the welfare family is buying - housing (often rent, sometimes to a mortgage), food, gas, clothes, toys and the like. All the 1 percenters need to do is convince the rest of America to spend their money rather than investing it and they are set - and lately, it's been as simple as saying "come and buy" and people do.

So, returning to my original question, if you could choose to help yourself or help your country, which will you do? I'm going to be a one percenter someday and I'm going to have lots of money invested in these corporations that the lower class will support. So, who do I support? Do I support the party who will encourage social programs and though they might tax me heavily they will make up for it by paying millions of people to further my investments. Or, should I support the party who will slow cash flow to the lowest classes by lowering taxes and limiting social programs which will eventually force people to make better decisions for themselves?

Unfortunately, the long term answer isn't as simple as selecting one presidential candidate or another. I'm convinced that something will happen just as it did a century ago to cripple the market and only then will true changes be (hopefully) made. Just as labor unions and labor laws allowed people to escape the grind of Big Business and enjoy the roaring twenties before the lights turned off when they realized they had spent their money on worthless investments, something will happen during the 21st century to remind us that we didn't learn our lessons well. My guess is that the next stock market crash will hit when 3rd world labor costs as much as American labor and our 50 percenters can't afford to live the Chinese dream with a new LCD and digital cable. At that point, costs of commodities will rise and the companies built on the backs of cheap labor will fail, resulting in a market crash to rival 1929.

Until then, I'm voting for the party that has the most promise of guiding Americans back towards self-reliance and long-term planning. On paper, that would be the Republicans, but in practice, I'm really not sure. Thirty years from now, I'll be voting for me. I hope the country can wait.