America Splitting in Two

The American economy is splitting in two. Opportunity is plentiful for the wealthy and well-educated, but it is drying up for the bottom half. What can Washington do? The good news is not much. ‘The poor are being left behind because they deserve it’, says expert. ‘They have poor work ethic, poor impulse control, and low IQs.’ Economists predict a 5% yearly growth rate of net worth and income for the top 10% of existing income earners and stagnation for the bottom 50%. Over the last seven years, in inflation adjusted terms, the bottom half has stayed stagnant or lost purchasing power. From March 2009 until now, the stock market has surged 150% and still keeps going up with no end in sight. To reward the rich for the economic value they create, the top 10% of richest Americans have realized 80% of those gains. Since that time, foodstamp usage has surged 50% from 33 million to 50 million people. 1/6 Americans have become parasites, depending on the government, (tax payers) for food and other services. The labor force participation rate is at the lowest levels since the early 1970’s.

These are not as big of a deal as the liberal media tries to make it seem. The economic impact of low labor force participation and poverty is pretty much nil as far as consumer spending, exports, web 2.0, stocks, Bay Area real estate and profits & earnings are concerned. The top income earners are able to compensate for any weakness on the bottom, which is why we need pro-growth policy that will benefit the rich, so that the rich can continue to expand the economy and improve living standards through their innovations.

The elites will always win. Radio Derb, in a recent podcast, is right about globalization and financialization being good for the economy and improving living standards. As evidenced by the militarization of the police, a high national incarceration rate, and long mandatory minimum sentences, he’s wrong to assume that globalization, more immigration and free trade will weaken the rule of law.

Since 2008, not much has been lost but the overpaid/useless jobs that are being outsourced, eliminated, or automated anyway.

Bill Gates is right: tax my consumption, not my income.

In a meritocracy such as America, talent development depends on not pretending everyone can achieve equally. Liberals think that the only reason some kids fall behind on the hard material is because teachers don’t teach it well enough, not because some kids simply aren’t smart enough.

IQ scores are a robust predictor of how well an individual performs in the modern economy. IQ predicts 25% of variance in income and 29% of variance in job performance. IQ is the best predictor of job performance that we have (see Schmidt & Hunter 1998 or any other meta-analyses you care to look at, like (I think) Catano 2005), and it’s predictive powers grow with job complexity. Besides we’re not very good at measuring performance, so you have to account for error in the variance of job performance.

Recommend going long healthcare: my favorite is XLV which is an ETF

Keep buying the dips. As long as America remains a meritocracy, stocks will go much higher. Dow 20,000 soon.

Tomorrow’s post: Charles Murray and American Exceptionalism