TAKING STOCK: American capitalism, wherein the rich get richer and the poor break even

Dear Mr. Berko: I'm amazed at the trillions of dollars that seem to pass among the Treasury, the banks and the Federal Reserve. I've been working like a dog in my accounting business for the last 23 years, and none of that money has benefited my 250 or so clients or found its way into my pocket. While the national debt and deficit continue to grow bigger and bigger every year, all of that money has to end up somewhere because it just can't disappear. Several of my clients, who also read your column, have wondered the same thing. I told them that I would write you. And so I have. Is there a simple answer that we can understand? CL, Cincinnati Dear CL: Oh yes, there's a very simple answer: The rich get richer and the poor get poorer. Today the richest 10 percent of American families own 80 percent of all the wealth, and that number has probably doubled in the past dozen years. And for all of this beneficence, we can thank a privileged, elite and very special class of people known as Members of Congress -- the MOC. On their way to helping the poor become poorer, the MOC will retire with hugely generous pensions and health care plans designed for kings and queens, plus myriad other perks euchred from the pockets of the poor. The MOC know who butters their bagels; they know that business activity cannot be sustained unless the rich get richer. They know that the most acceptable way for this to happen is to give more money to the poor so that the rich can, at their leisure, take it back from them. In this manner, Uncle Sam appears to be a modern-day Robin Hood, as increasing numbers of poor become more indentured and dependent on government handouts. Here's how it works. Uncle Sam borrows money from the rich so that it can be given to the poor, who can then continue losing it to the rich. This is the reason why there will always be a budget deficit and an increasing national debt. To illustrate, let's assume that there are two classes of people: the rich and the poor! Rich folks are those with above-median incomes, and the poor folks are everyone below. And the simple reason the rich must get richer is that they must make an after-tax profit if they wish to continue employing the poor to produce goods and services. The rich cannot profit from traditional trading among themselves. For example, if there are 10 rich people in a closed room, and they have a total of $1 million in cash, they can wheel and deal and trade amongst themselves to their heart's content. But at year's end, they still only have $10 million dollars altogether. The value of their real estate, paintings, jewels or stocks may rise or fall, but that $10 million dollars won't increase unless another group loses money to them. Think about it. Capitalism is like a game of poker. The strong players win from the weak, or the rich win from the poor. However, only the poor have a finite amount of money to lose, which means our poker game would grind to a halt unless a designated patsy could be found. And that designated patsy is the Congress, which funds the U.S. government. I know this may sound far-fetched, but listen up and watch the bouncing ball. Economists who follow money transfers tell us that in 2010 (for example), the poor paid approximately $1.6 billion more to the rich for rent, food, health care, cars, tools, beer, clothes, etc., than they received for their labor as carpenters, mechanics, clerks, burger flippers or clothing retailers. And in order to keep the poor from growing completely broke, the government, through taxes, took $600 million from the rich and returned it to the poor via welfare programs, Social Security and other subsidies. Then, to return the additional $1trillion to the poor and ensure that their purchasing power remains intact, the government borrows $1 trillion from the rich by issuing new Treasury bonds. So after taxes and transfer payments were complete in 2010, the rich made $1 trillion, the government lost $1 trillion (which was the deficit) and the poor broke even. In effect, the budget deficit equals what the rich keep after taxes. And if the rich can't make more money, their incentive to produce will falter, unemployment will skyrocket and the economy will collapse. Just ask Mr. Bernanke. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2012 Creators Syndicate Inc. Published: Mon, Mar 5, 2012