The Gross National
income of the US in 2014 is $17,601,119,000,000.
The gross
national income (GNI) is the total domestic and foreign
output claimed by residents of a country, consisting of gross
domestic product (GDP)
plus factor
incomes earned by foreign residents, minus income earned in the
domestic economy by nonresidents. (Wikipedia).
One does not have to
a brain surgeon like Ben Carson to understand why supply side
economics will never work in the United States. The top quintile or
20 per cent of Americans now earn half the income. The the top one
per cent rake in 23 per cent of the GNI.
Admittedly the
affluent live in better home and drive better cars, travel more and
take international vacations, but most of their income is surplus.
Indeed, the affluent can take some of this surplus income and
convert it to capital by buying stock, bonds and mutual
funds. However, the top 10 per cent of Americans own more than 80 per
cent of this market already. The top one per cent own more than 38
per cent of he stock and bond market.
As the Motley Fool
points out:
Wealthy people
don't own stocks because they're wealthy; they're wealthy because
they own stocks.
The size of the U.S. bond market is just under $37 trillion, finance
professor Torben Anderson at the Kellogg School of Management says in
“Volatile Assets” in July 2012. In comparison, the market
capitalization of the U.S. stock market is about $21 trillion.
The
top decile (10 per cent) of
income has a direct participation rate of 47.5% and an indirect
participation rate in the form of retirement accounts of 89.6% in
the stock and bond market. In the top decile, mean value of
all holdings fell from $982,000 to $969,300 in 2007
Data compiled by Bloomberg. Internet commerce company Alibaba Group Holding Ltd. which sold $8 billion in bonds in one month, helping push this year’s bond volume past the previous high of $1.494 trillion set in 2013.
In 2014 a lot of mutual funds were converted to bonds and bond sale outpaced stock sales. The point here is that many stock, bond and mutual fund sales are conversions rather than new purchases.
The top 1 per cent
of Americans earned $76,526,604,347,826
in 2014. Even if the one per cent purchased $ 5 trillion in stocks,
bonds and mutual funds, which represents most of the US securities
market in 2014, such a capital investment would represent a trivial
amount of the income the 1 per cent received that year.
This is why tax
breaks for the 1 per cent or even the top 10 per cent are pointless.
Such tax breaks will do little for the economy. These tax break would
at best provide packet change to the one per cent. The per cent of
annual income the affluent invest in the stock market is not large
enough to be stimulative.
The Democratic party
uses a more direct approach to stimulate the economy. Programs like
unemployment compensation food stamps (Supplemental
Nutrition Assistance Program) and school lunches
for women, Infants and children (WIC) provide direct aid to the
middle class and the working poor.
Any funds these
program provide are usually quickly spent. The funds do not sit in US
or foreign bank accounts as is the case for many upper income
Americans.
The middle calls is
the basis of the US economic engine, not the one per cent. As the
AFL-CiO noted:
The middle class
is the great engine of the American economy, but that engine is
sputtering.
As one business man explained it, tax breaks at the end of the years
are great, but it's customers that make or break a company. The
middle class provides the customers to small and larger businesses
that drives the US economy.
Supply side economics is blind to the middle class economic engine
with its top down approach. Unfortunately America is hearing that
same old supply side song from most the Republican candidates for
president.
Sources:
https://en.wikipedia.org/wiki/Gross_national_income
http://www.aflcio.org/Blog/Economy/10-Ways-to-Rebuild-the-Middle-Class
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