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The Rich Get Richer With Government Help

(A Look at the Numbers)

How do the rich keep getting richer? Call me naive, but I believe it is primarily by providing products and services of real value, or by investing in companies that do the same. In other words, they create value. But this is not the only way they get richer, as you know if you have been following this series (see the page The Redistribution of Wealth to the Wealthy). Many maintain and increase their wealth in dishonest and unfair ways as well.

Here, after all the various pages and posts I have researched, are some of the numbers, as best as I can estimate them (I wrote this in late 2008, just prior to the hundreds of billions in corporate bailouts). These are some of the biggest transfers of wealth that are accomplished through government, in billions of dollars.

Billions of Dollars:

100 - Corporate Welfare (not including tax breaks)

500 - Social Security (the amount of this welfare going to those who don't need it)

100 - Real Estate Regulation (laws that benefit property owners at the expense of the poor)

100 - Bailouts of Companies (annual average)

500 - Federal Reserve System (interest on bonds they buy with printed money)

10 - Excess Property Tax (paid by renters)

This doesn't include the transfer of wealth by inflation resulting from the FED's issuance of currency and expansion of the money supply in general. This causes a reduction in the value of money. Given that a much higher percentage of the wealth of the poor and middle class is in the form of money, they are disproportionately affected by this, meaning they effectively pay for this cost of government more than the wealthy do. With at least one measure of money supply (there are several) showing 10 trillion at the moment, the 4% inflation last year ate up 400 billion of value.

It is hard to measure this as a "transfer" of wealth, because value of the the money is taken from all and used in ways that benefit some. Those who bought large amounts of gold a little while back when it was at $600 per ounce, for example, have done well from this inflation ($900 at the moment). Those with money in bank accounts yielding 1% or 3% have lost money to inflation. Sorting out how much this has reduced the wealth of the poor and middle class and how much it has reduced or increased the wealth of various wealthy people is difficult.

The other numbers above are easier to figure, but don't place too much faith in them as an overall measure of redistribution. Corporate welfare is certainly unfair, for example, but the taxes that pay for it come from poor, middle class, and rich alike, so it is not entirely a transfer from one group to the other (and many middle class people own corporations through shares of stock in their retirement account). In the end, the rich still have to pay for most of these "welfare for the wealthy" programs and systems, since that is where most of the taxable income is.

But it is still shocking to consider that while programs traditionally called "welfare" amount to 350 billion or so annually, the programs and laws and systems that give money to the wealthy add up to many times that. And whatever the numbers, it is still plainly unfair to take from the workers and small business people of the country to further enrich the wealthy with money they did not earn.

I am done for now with this series on how the rich get richer in unfair ways. But keep these numbers in mind the next time politicians (Republican and Democrat) who vote for these huge transfers to the wealthy go around calling others "socialist" for giving a little more tax relief to the poor and middle class. If I could vote for such things directly, I would vote to let the rich get as rich as they like as long as it was done the old-fashioned way: by earning it through value creation. I would vote against almost all redistribution of money from the wealthy to others as well.

But as long as the rich get richer with government help - and at the expense of others - can you blame people for wanting to raise their taxes or force them to "share the wealth" a bit? Some of that wealth is not rightfully theirs to begin with after all.

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Rich Get Richer