In thinking about economic theory, I recognized one of the key obstacles to growth. The wealthier people become, the lower the percentage of their income and net worth they are likely to spend. This is because the poor and, to a lesser extent, the middle class are forced to spend their money on necessities. Ironically, therefore, the very luxury spending for which the wealthy are so criticized is beneficial to the economy, while their savings put a fundamental limit on economic growth. However, I recognize that any government measures attempting to change this pattern would be extremely inflationary. I appreciate all input on this subject. Thank you very much.

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"I am a Tory Anarchist. I should like every one to go about doing just as he pleased- short of altering any of the things to which I have grown accustomed." (Max Beerbohm)

You forgot about investments, Force. Rich people usually don't keep their spare change in their mattress.

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"Government exists to protect us from each other. Where government has gone beyond its limits is in deciding to protect us from ourselves." ~Ronald Reagan

In terms of benefits to the economy, don't stock market investments have a much greater contingency on future investments than consumer spending?

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"I am a Tory Anarchist. I should like every one to go about doing just as he pleased- short of altering any of the things to which I have grown accustomed." (Max Beerbohm)

True; the poor spend a bigger percentage of their income on necessities, but the rich spend a lot of money. Don't kid yourself on that one. And everytime the rich goes out to a high-end restaurant, a play, or takes a vacation somewhere....they are helping to pay someone else's salary and benefits. All that is beneficial to the economy. Plus, they invest in the stock market. What is the stock market, but investment in companies...large AND small.

So, I don't agree with your analysis of economic theory.

Several years ago, the Congress legislated a "luxury tax" for things like cars over a certain price and Yachts and boats over a certain price. They soon discovered that while they were trying to "hurt the rich"....all they did was "hurt the working man." Many jobs in the yacht industry were lost.....everything from salesmen to the men who built them.
It's now been reversed.

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"What exactly is this foreign policy experience?" Obama said mockingly of the New York senator. "Was she negotiating treaties? Was she handling crises? The answer is no."

If I'm understanding what you're asking: no. Consumer spending means a company makes more product. When they make more product, they grow and invest more in their company. All that makes their stock more attractive to an investor. Not to mention, the jobs it creates.

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"What exactly is this foreign policy experience?" Obama said mockingly of the New York senator. "Was she negotiating treaties? Was she handling crises? The answer is no."

Actually, JP5, I wasn't complaining about the wealthy spending money on luxuries. On the contrary, I was stating that, ironically, more of this spending is needed. In the second post, I meant that $100 in consumer spending, as I understand it, has a greater positive economic influence than $100 invested in the stock market.

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"I am a Tory Anarchist. I should like every one to go about doing just as he pleased- short of altering any of the things to which I have grown accustomed." (Max Beerbohm)

believe JP5 is a bit sketchy on the facts where yachts are concerned. Alot of boat builders went bust about 10-15 years ago because they over expanded, became over leveraged and failed to forsee the overproduction in modest sized boats: Cape Dory, Pearson, Bristol. All of the usual suspects doomed these businesses. Some work was lost in the megayacht industry because of a tax imposed by Reagan (I think) but yards like Palmer Johnson and Hinkley not only continue to thrive but are doing exceedingly well. Politicians who do not want to appear to be raising taxes love to resort to "fees" as an alternative. User fees strike me as reasonable however....the wealthy are always in a better position to avoid taxes either by buying things elsewhere, registering things elsewhere etc. Better to tax at the source, I.M.O.

There are implications to the fact that increasingly the wealthy have most of the disposable income: They are more likely to spend and invest in other countries and multinational companies which do not pay U.S. taxes. They have a major inflationary affect on prime real estate. When a critical mass of wealthy people move to an area they tend to demand alot of expensive town services. Rents, land, taxes become too high for local people. On the other hand they bring money and investment into a community -its a double edged sword, really. Healthy societies have a large middle class I.M.O.

JP5 is right. She is referring to the luxury tax implemented in 1991.

http://www.ncpa.org/ea/eama92/eama92k.htm

The 1990 budget agreement included federal excise taxes on boats, aircraft and jewelry. The Joint Committee on Taxation (JCT) projected that the luxury taxes on those three classes of goods would raise $31 million in fiscal 1991. In fact, the actual revenue for 1991 was just over half that amount ($16.6 million). But the taxes did have other effects.

* They cost 7,600 jobs in the boating industry, 1,470 in the aircaft industry and 330 in jewelry manufacturing.

* These figures do not include job losses that could be attributed to any other factor such as the recession.

* The lost jobs cost $24.2 million in unemployment benefits plus income tax revenue the government didn't get, so taking into account the $16.6 million collected, the net effect of the taxes was a loss of $7.6 million in fiscal 1991.

It's been a part of Economics 101 ever since.

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"Government exists to protect us from each other. Where government has gone beyond its limits is in deciding to protect us from ourselves." ~Ronald Reagan

In order for the economy to expand money has got to be made available for business creation and expansion. There are two ways to get that money: Equity and debt. Both require someone to provide the money. The poor cannot spend money on goods if there is no one making the goods. Further, they don't have jobs unless someone provides them. The money necessary to do these things comes from the debt and equity markets, both of which rely on people with excess money. Investing in the economy is what creates the goods people spend money on. To have one you need the other.

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I wasn't born with enough middle fingers.

There is no real contradiction, here; I said J.P's info was "sketchy"not completely wrong: There was a major restructuring in the boating industry in the early '90s. As I said, I am aware that people with the funds to buy boats costing 100,000 and up, took some of their business elsewhere and I agreed that luxury taxes are not the way to go. What I dispute is the notion that the huge slump in the boating industry at the time was largely attributable to the luxury tax. All the boat manufacturers that I can think of which went out of business in the early 90's were catering to customers in the below $100,000 range. There are a number of factors that affect boat sales beside taxes and the economic climate: the long life of relatively new boat building techniques meant a huge supply of used boats, overcrowding (long waiting lists for moorings and slips) Signs of softening in the industry were evident by the mid '80's.

I know nothing about the other industrries you mention, but the job loss numbers look pretty insignificant.