Rand Foundation was wrong. Virtually, no wealth transferred from the bottom to the top 1 percent. Wealth transfer only occurs when someone physically gives their wealth to someone else or the government seizes it to redistribute it.
What was happening was that people were consuming their savings and so their wealth was shrinking. When someone goes out and spends $1000 on an iPhone, they are not transfering a $1000 of their wealth to Apple, they are exchanging $1000 for a phone they feel is worth at least $1000. But over time the value of their iPhone is "consumed" with use and depreciates.
Language is important and it is simply lazy to use the word transfer when one means "spent" or "consumed". Governments transfer wealth through taxes and entitlement programs. The private sector sells stuff.
Meanwhile, the shrinking wealth of the middle class was not a product of the middle class needing to spend their savings to maintain their standard of living, income on an inflation adjusted basis has been relatively stable across the middle class. Over time, people were saving less of their income and so they are not enjoying the benefits of compounding interest, but were enjoying the benefits of incremental consumption.
Meanwhile, it is true the wealthy are getting wealthier. Unlike the poor and middle class, they have enjoyed real income growth and have not consumed the income but invested it creating a compounding effect. One can argue whether that is good or bad for society, but let's be fair, they did not steal the money, people handed it to them because they liked the stuff these people created... Google, Facebook, Apple, Microsoft, Tesla, etc.
The US does suffer from an insatiable desire to consume. All those people living paycheck to paycheck, the truth is over a ten year period most people will get three or more promotions and see a rise in income. That rise go immediately into more consumption rather than splitting it between savings and consumption.
When you read studies that average income rose at about the rate of inflation, they are not talking about the individual, they are talking about the job. The rate of pay for a specific job tends to track with inflation across the economy.
If you did the same job for 10 years, then you might be one of those people that saw almost no increase in income after adjusting for inflation. But if you are like most people, at the end of 10 years, you are three rungs up the ladder from where you started.
A recent study put the average promotion raise at between 10-20%. So most people, over ten years will see their income rise three times more than inflation, but how much of that incremental income did they save... almost nothing.
If every American took 50% of any "promotion" raise they got at work above the rate of inflation and put it in an IRA or 401K (especially if the employer matches), within 10 years most would be saving 20% of their gross pay. That would quickly accumulate wealth, that is how the wealthy become wealthy. Not everyone is a Sylvia Bloom, but everyone has the potential to be.
Wealth Redistribution lie...
Now let's go to the next big lie. People like Bernie Sanders don't want to redistribute wealth, they want to confiscate wealth from the wealthy and give it to others to consume. That is the formula for an economic disaster.
True wealth redistribution would entail taxing the wealthy and using the taxes to fund a 401(K) for lower income individuals that they would be prohibited from touching no matter what until they were 65.
See the difference... what I just described is wealth redistribution, what Sanders is promoting is wealth liquidation.
Without those savings staying invested in our economy we are gutting the goose that lays the golden eggs... so we can have a little more meat this week. And that is why socialism among other reasons fails every time.
Socialism has two major flaws. It discourages people from investing and it discourages people from working. People might like how it distributes the stuff that is made, but without the incentives to make more and more stuff, standards of living collapse once the wealth is consumed on imports.
In order for us to enjoy "stuff" someone has to make it... otherwise all the money in the world is worthless. To make stuff, you need people working and investors investors investing... people want wages and investors want profits. It really is that simple. Take away investors profits or overtax people's income and no one makes stuff.
