America Won’t Get Rich by Relying on the Permanent Poor
America is a land of class mobility. That’s what makes America a magnet destination for people all over the world: Come to America and make something of yourself. If you want great welfare benefits, try to bust into Europe; if you want to work for a living and get rich, come to the United States.
But for some Americans, there is no class mobility. There is a permanent economic underclass, and those who inhabit it have no ability to rise above their fiscal fate.
There is a reason for that: They make bad decisions.
Take, for example, prom night. A recent study from Visa shows that the average family spends a whopping $1,078 on their teenager’s prom night. But what’s more interesting is that there is an income breakdown. If you make more than $75,000 per year, you will spend somewhere between $700 and $1,000. If you are one of the unfortunates who earn between $20,000 and $29,999 per year, you will spend … $2,600. In other words, if you earn three times less, you’ll spend three times more.
This is not a recipe for financial success.
And yet President Obama believes it is. In fact, he thinks that if we distribute income to the lowest economic rung, we’ll somehow build our nation’s wealth. Thus spoke Obama last week: “In this country, prosperity has never trickled down from the wealthy few. Prosperity has always come from the bottom up, from a strong and growing middle class.”
Nothing could be further from the truth. Prosperity has never trickled from the bottom up. It has always come from the top down, in terms of investment. That’s because people at the top have money. Even in Obama’s vision of the universe — the vision where wealthy people subsidize poor people — the wealth is flowing top down. It’s just being forced to flow by the government.
True wealth comes from generating goods and services people want to buy at a price they want to pay. The only way such goods and services are generated is if somebody is willing to front the cash to do it. Henry Ford needed investors to get his Model-T up and running. It didn’t magically appear. And when enough rich people are competing to create the next great product, you get capitalism’s greatest achievement: thriving markets with choices for consumers.
And yet, the left does not want to see this. They proclaim that poor people spending money produce goods. This is insipid. It leaves the left in the unenviable position of having to argue that unemployment benefits help the economy because after all, people who are poor are spending more money.
If poverty generated wealth, Sudan would be a paradise.