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I've been watching the democratic debates as time allows lately, and though I find many positions I agree with and many others I do not, one seems confusing to me on a few levels. This could indicate I just misunderstand the context of these issues or meaning of the comments.

All of the major candidates have made various comments about those who are making money on 'wall street', which I interpret to mean those who own stocks or similar securities. In these comments they downplay any success of the market, and draw a contrast between those making money from market success and the 'average working American'.

I am aware that a large number of Americans do not own any stocks, mutual funds, or ETFs in personal accounts, but when you factor in 401ks and pensions it seems that the majority of Americans benefit from market success. But even if we assume that the majority of 'average working Americans' do not own stock, it seems obvious to me that the optimal solution is to encourage investing and not reduce profits from market success.

When stock ownership had barriers to entry (when I was a teenager I had to save up $2k to meet the TDA minimum) that created a serious class issue in my opinion. One I spoke out against strongly in my youth. But with the creation of services like Sharebuilder (that allowed you to invest $x weekly into fractional shares of any stock) or Robin Hood (that pushed every brokerage towards commission free trades) or Fidelity (who's credit card puts your cashback rewards into your investment account) it seems like even someone looking to invest the $10 they would have spent on fast food this week, or invest their spare change, or invest their free money, can do so easily. If there is a dearth of average working Americans enjoying returns from investing, it seems like this should be addressed as a public education issue to increase market participation.

However, when the politicians call out 'wall street' for making too much money, the crowds cheer and the commentators rarely disagree. Am I misunderstanding the target of the ire directed at 'Wall Street'? If not, why is there so much anger directed towards the market instead of effort being made to make the market work for more voters?

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    The problems with "why does a party say x" questions are multiple. It's opinion based. It requires mind reading. It involves the ideas of many people who may or may not agree on any part of it. It may or may not involve lies or self delusion or "cat on linoleum" covering of other purposes. And it will definitely generate a lot of heat and smoke. – puppetsock Feb 26 at 22:35
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    I mostly agree with @puppetsock, but I think that the body of the question is fairly solid - it's just the title that asks a too-broad question. The body could probably also be improved by instead asking for reasons that have been provided by candidates/think tanks/activists instead of asking an open-ended "why", but it's not a necessary change. – Bobson Feb 26 at 22:53
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    Separately, to address the "invest $10 a week" part, I'll refer back to this question from 2014, where some Democratic lawmakers were suggesting that minimum wage workers have roughly $77 per week to spend on all personal expenses (including food and transportation). Whether or not their numbers were (or still are) valid is a bit besides the point - if they think that people only have something in that ballpark available, then asking those people to invest $10 out of it is a huge hardship. – Bobson Feb 26 at 23:03
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    The closest thing I could find was Buttigieg saying ""Where I live, folks aren’t measuring the economy by how the Dow is looking. They’re measuring by how they’re doing," he said. "GDP went up, businesses boomed, the stock market grew for decades, but our paychecks didn't show it. Our incomes have basically stayed flat." realclearpolitics.com/video/2019/12/19/… That's not railing against anyone gaining in the sock market. – Fizz Feb 27 at 1:33
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    My understanding of "those who are making money on 'wall street'" is that it does not concern all investors but rather professional money managers and others who serve client investors. That is, it denotes the people who work in the financial industry, not everyone who makes money as a customer of that industry. – phoog Feb 27 at 8:21
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When candidates refer to 'Wall Street' they are not talking about stock holders or investors. They are talking about brokerages, banks, hedge funds, and other large-scale organizations that use the market to enrich themselves, often at the expense of small investors, productive businesses, and the health of the economy as a whole. Such organizations have special access, special tools, and an overwhelming capital advantage that makes for a decidedly titled market. These are the kind of people that can and sometimes will (say) raid the portfolio that backs up a union's retirement packages, costing a swath of middle-class workers benefits they've worked for and payed into; who will 'reorganize' a company, putting thousands of people out of work and driving an entire community into poverty; who created the sub-prime mortgage lending scheme that drove the 2008 market collapse and led to the evictions of who knows how many lower middle class people, and then happily accepted government bailouts in order to give themselves huge bonuses.

No one on the debate stage has any objection to the stock market per se, but they all recognize that Wall Street has wolves, and that those wolves need taming.

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  • I still upvoted, but I have a slight problem with this in that none of the candidates have said what they mean, so it's hard to say what exactly they mean. Unless of course they have and you just don't source it here. – Chipster Feb 28 at 22:25
  • @Chipster: no, you're right, they haven't said this directly. But it is clear from the way they talk about it. Their criticisms always crop up in contexts of big-money investors, financial irregularities, influence in politics... things that your average small investor is rarely if ever accused of. Gotta read between the lines a little bit. – Ted Wrigley Feb 28 at 23:52
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Because you can only invest in the stock market if you have income above your expenses or take out a loan . People barely making ends meet can't substantially increase their wealth by investing. There is also great risk of loss and an indefinite time until profit.

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  • For example, I'm sure many left-wing people (I don't know about Democrat politicians specifically) would rather just guarantee everyone a pension, funded by taxes, rather than telling everyone to invest a percentage of their income in the unpredictable stock market. The former would decrease the potential reward, sure, but also the risk. (If you really wanted to invest in the stock market, you could still do that with the money you have after the pension tax) – user253751 Feb 27 at 11:35
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    If the expected return on the stock market is significantly higher than the loan interest rate the lender would have put the money in the stock marked instead of making the loan. – Patricia Shanahan Feb 27 at 13:29
  • Or better yet, take out a high interest loan and default! – Clint Eastwood Feb 27 at 15:37
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    @PatriciaShanahan That's simply not true. The expected return on the stock market is indeed higher than what most banks will charge for a loan. That doesn't mean all lenders can or should stop giving loans and invest in stock instead. See money.stackexchange.com/questions/120858/… - lending and investing are different businesses, it's like saying a fruit stand would sell electronics if they were actually more profitable. – Nuclear Wang Feb 27 at 15:52
  • @NuclearWang I should have put more caveats in my comment to establish the context. This is about lending money to someone with no assets or surplus income so that they can invest it in the stock market. The risk to the lender and lack of liquidity is just as bad as it would be if the lender had invested directly. – Patricia Shanahan Feb 27 at 16:24
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In general, the perception that causes these attitudes is that those who "make money on wall street" are doing so at the expense of everyone else. Some people are jealous and hate that rich people have more stuff than they do, but in general, rich people are hated because of the perception that they take away stuff from others.

And now, a bunch of specific downsides to the investment retirement scheme. (Edit: I'm not sure where I got the idea that this question was about retirement. Some of these still apply)

  • It's tempting to think that if everyone has their own retirement account, they amount of stuff they get in retirement will depend on how much they save. That is, it's tempting to believe that if someone is poor in retirement, they have nobody to blame but themselves, because they didn't save enough.

    It's also tempting to believe that because people save for their own retirement, they won't put a burden on young people the way that they would if they directly received tax money from young people. (Here I use "young people" to mean everyone younger than retirement age)

    However, this is not actually true. Money can be transferred across time, but actual goods and services - that you can buy - cannot be. Maybe you want to have 100 tomatoes in your retirement, so you save money equivalent to 100 tomatoes. Great. But the tomatoes you buy in your retirement (60 years later) will not be tomatoes grown 60 years ago - they'll be tomatoes grown just now, by people younger than you. And because you bought 100 tomatoes, young people will have 100 fewer tomatoes. The retired people will take some tomatoes no matter what. This is true no matter whether retired people are funded directly from taxes, or from their own savings.

  • It's less stable. Inflation erodes the value of cash, so most people put their retirement savings in some type of investment. Not all investments are equal. What if you choose the wrong one? Retirement should not be a lottery.

    You can buy investments with low risks that try to average out the whole investment market. Generally that's a fund which buys lots of different investments, which you then invest into. This decreases your chance of losing everything. Retirement funds buy a lot of these investments.

  • Because of the above, there is basically an entire industry to keep asset prices stable or rising. It adds unhelpful "inertia" to society.

    If I live in a house and someone builds a factory next door, it's a mild to moderate annoyance. But it decreases the value of the house. If I own the house and live in it, maybe I don't care about its value. It could even be a good thing (lower property tax!).

    But if that house is part of someone's retirement fund (even just if I plan to sell it myself in my old age)... then they (or I) don't want that factory to get built. It doesn't even matter if the factory is making potato peelers that will make the world a better place to live. The factory will give me a small benefit (cheaper potato peeler) but also a huge downside (because of my house's value). Other people will see a small benefit (cheaper potato peelers) and no downside (because they don't live next to it).

    Even if my house is part of a retirement fund that also holds many other investments, then the fund will try to stop the factory from opening. But I don't think houses are usually owned by retirement funds. Often they are individual landlords who eventually want to sell the house to retire. See the previous bullet point.

  • Saving cash destabilizes the value of cash.

    Let's say that next year, 20% of the cash in existence gets hoarded for retirement. What effect does this have on the economy?

    Well, as long as the cash is not circulating and not invested (which makes it circulate), it's basically the same as if it was burnt in a fire. Prices drop, wages drop, etc.

    Then five years later, all those people spend the cash they saved. What effect does this have?

    Well, it's basically the same as if the money was just printed. Prices rise, wages rise, etc.

  • What if there's a catastrophe that wipes out everyone's retirement investments? Say I am 55, and my country enters a war, and loses, and the winners confiscate (steal) almost everything of value. All of my investments are worthless. But people are putting the economy back together again. Do I still deserve to retire?

And one upside:

  • Taxes are confined to one country, but you can invest in other countries. With direct tax-funded retirement, you get (say) 20% of your country's production - which is, say, 20% of the world's production, but it might be less or more when you retire!. With the investment approach, you would instead get 4% of the whole world's production. If you have overseas investment, even if your country's economy totally collapses, you could move overseas and they will provide for you instead.

And one perceived downside of Wall Street in general, not specifically to do with retirement:

  • Things are made when people do work. Building houses, baking biscuits, mining rocks, etc. These things create value. Creating value should be rewarded with money. Investors do not work, so why should they receive money? And why should they receive so much money?

  • If everyone invests in the stock market, will it create more wealth, or will it just change how the wealth is distributed? If it just changes how the wealth is distributed, will it be the same it would if nobody had invested in the stock market?

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  • I'm not sure where I got the idea that this question was about retirement. The last point is not retirement-specific. – user253751 Feb 27 at 17:47
  • I think you have to some extent confused cause and effect. That is, it's in large part the Democratic candidates who talk about this precisely to create the jealousy &c, and so ensure a large voting bloc in their favor. Just as certain Republicans try to create anti-immigrant sentiments &c. – jamesqf Feb 27 at 18:59
  • @jamesqf I still think the "jealousy" is the belief that they take away in order to have more, not just the belief that they have more. To rephrase: That it is not just the rich peoples' fault that they are rich, but also the rich peoples' fault that common people are poorer, instead of everyone being averagely wealthy. – user253751 Feb 27 at 19:04
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I can't speak as to the exact motivations of the candidates as I haven't watched much of those debates.

the optimal solution is to encourage investing and not reduce profits from market success.

As answered by others, if have you have very little money, you are out of the investing game, end of story.

why is there so much anger directed towards the market

Beyond the debate about the haves and have nots, there are other reasons for criticism of investment income:

In much of the Western world, not just the US, investment income is taxed at significantly lower rates than other incomes. See for example Buffet's pronouncements about that.

France for example has extremely high tax rates and a large component of them kick in as payroll taxes. Guess what? Not only is investment income preferentially taxed to start with, it also avoids the extra ding you get from payroll taxes.

The effective tax rate difference I would pay, given say $50K of income, and the next $10K being either employment or investment are significant in most cases and I really, really struggle to see either the moral or the economic justification for that.

IMHO, outside of specialized retirement investment vehicles, if I earned $x income I should be taxed at y% (depending on my tax bracket) without too much variation on how exactly that money was earned.

The question of risk wrt investments isn't that much of a justification - losses are often tax-deductible and compare that to the risks incurred by someone starting say a restaurant - where 60-70% failure rates are not uncommon.

The justification to date has been that investors could easily leave. I am not totally convinced myself by that argument and I tend to free markets - this is a skewed incentive system, in my opinion. Yes, people could leave their country, but would they? And, yes, they could take extra steps to evade taxes, but that brings legal risks.

Given more homogeneous rates, economic actors would adjust, as long as it wasn't just a tax grab.

Regardless of the actual merits or not of preferential tax treatment for investments, it it is easy to see how candidates who are right now competing on how progressive they are to their primary voters and in a context where the 1% is frequently evoked, would criticize stock market gains.

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