Economics Student`s




Chapter12: Thischapter is addressing the concept of capitalism in the United Stateof America. The gap between the rich and the poor is emphasized inthis chapter. A research by Das Kapital will be used in this chapterin explaining the accumulation of wealth among the rich population.Das Kapital addresses the issue of workers motivation and he feltthat worker are never compensated fully for their services. He alsopredicted that, as workers produce more wealth, they become poorer.His argument was that the rich get richer and the poor get poorer. Healso pointed out the existence of the inequality of wealth andincome. Another economist, Piketty suggested tax system as the besttool of narrowing the gap and bringing equality in wealth possessionand income. He proposed use of top marginal tax rate to high incomeearners.

Chapter20: Thischapter address the concept of health insurance. Healthinsurance refers to the process of transferring the health risks toanother party known as the insurer. In the United States, there areseveral provisions in the Act regulating the healthcare insurance.The affordable care Act, is commonly referred to as the Obamacaresince it was signed by the US President, Barak Obama in the year2010. A recent study has shown that 40 million of the Americans livewith no healthcare insurance due to the argument that the cost of theinsurance cover has risen up rapidly. Since the passage of theObamacare, the Act has tried to encourage acquisition of healthinsurance coverage.

Chapter24: Thischapter addresses the aspect of America getting older. The averagelife expectancy in the United States is increasing from one year toanother while the birth rates have declined. The today’s familiesare having few children as compared to the past generation. Insummary, the old are living longer while the growth rate of the younggeneration has drastically declined. Hence, this brings us to aconclusion that America is aging.



DasKapital in the twenty-first century (who is getting rich and why dowe care)

Thecentral theme of this chapter is the capitalist system and theexploitation of labour in the economy. Das Kapital addresses theissue of workers motivation and he felt that worker are nevercompensated fully for their services. He also predicted that, asworkers produce more wealth, they become poorer. His argument wasthat the rich get richer and the poor get poorer (Daniel, Douglas &ampRoger, 2012). This argument was consistent with those of othereconomists such as Karl Marx’s and others French economist. ThomasPiketty also conducted a research on the rate of economic growth fromcapital investment and he found that the gap between the rich and thepoor is ever increasing. He also pointed out the existence of theinequality of wealth and income. Piketty suggested tax system as thebest tool of narrowing the gap and bringing equality in wealthpossession and income. He proposed use of top marginal tax rate tohigh income earners.

Economicsversus Reality

Piketty’sprediction of future wealth accumulation of wealth was based on thefacts that the rate of return on individuals’ capital is higherthan the overall economic growth rate. However, this predictionscould only yield correct results if the people in the real worldcould only live forever. In his economic model, he argues that mortalhumans will continue to save over their lifetime and accumulatewealth to cater for their requirements in the retirement age. Theaccumulated wealth is consumed during the person’s old age and partof it be quested to their children and grandchildren. The Pikettymodel provides a distinction between the inherited wealth and theaccumulated wealth. The envy of the rich will depend on their sourceof wealth. The envy of an individual who has acquired wealth morequickly and easily is higher than that of the person who hasaccumulated his/her wealth over a long period of time. The one whoacquires wealth quickly is perceived to be luck while the othercategory is perceived to be hardworking. The findings from thePiketty’s study revealed that in the past six years, the growth inthe total real wealth in the United States is 3.2% per annum whilethe growth in the personal income has grown at 3.3% (Daniel, Douglas&amp Roger, 2012). Economic growth is one of the major aspect ofmeasuring the economic reality.

Theexamination of the distribution of income over the past thirty-fiveyears showed an increase in the general income level. The concept ofincome mobility is also addressed in this chapter and it was foundthat the most important source of income mobility is the life cyclein the earnings pattern. As per this life cycle, the income is lowestfor the young individuals, it rises to maximum at old age of fiftyfive and then decline gradually at the retirement age.

Roleof tax in income equality

Thegovernment in the United States have tried the application of fiscalpolicy to narrow the gap existing between the rich and the poor. Highcorporate tax rates are being charged to high income earners and lowrate to low income earners. Fiscal policy is the most effective toolof ensuring equality in income distribution. The rich are taxed highand the government spending increased to benefit the poor.Adjustments in the tax rates have been experienced since the year1980 when the corporate tax rate was 70% (Daniel, Douglas &ampRoger, 2012). The wealth generated by corporation was thereforedistributed to the general economy. By 1988, the top individual taxrate was cut to 28% and the wealth started dissolving as thecorporations reported their income as individual returns. The tax oncapital gains was further slashes in 1997 and in the year 2003 andmajority took the advantage of these tax cuts for their tax planningstrategies.


HealthInsurance for All . . . Or Maybe Not (Theeconomic effects of the Affordable Care Act)

Healthinsurance refers to the process of transferring the health risks toanother party known as the insurer. The person transferring the risk(insured) agrees to pay a fixed premiums to the insurer for acompensation for any health costs and medical expenses incurred. Inthe United States, there are several provisions in the Act regulatingthe healthcare insurance. The affordable care Act, is commonlyreferred to as the Obamacare since it was signed by the US President,Barak Obama in the year 2010. A recent study has shown that 40million of the Americans live with no healthcare insurance due to theargument that the cost of the insurance cover has risen up rapidly(Daniel,Douglas &amp Roger, 2012).Since the passage of the Obamacare, the Act has tried to encourageacquisition of health insurance coverage.

Increasednumber of covered individuals

TheAffordable Care Act (ACA) has resulted to an increase in the numberof Americans with health insurance. By 2015, an average of eight toeleven million adults had received a particular form of healthinsurance due to the impact of the legislation. Private insurancecover is the most common since approximately half of the insuredpopulation have done so in the private insurance company. Privateinsurance firms in the United States are assumed to be more efficientand effective. The other population has purchased Medicaid andfederal state health insurance programs for the poor or low-incomeearner. Initially the ACA had forecasted to have an extreme impact onthe health insurance that was predicted to be compulsory. Those withno cover could be fined each year. The premiums were set at 1% ofones’ income and the rate would increase to about 2.5 percent. Thesubsidized health insurance played a great role in easing the burdenon the tax payers’ side.

TheAffordable Care Act

Theprimary aim of this Act was to ensure that people who have serioushealth problems can get insurance irrespective of their level ofincome. Just as the words suggest, the acquisition of the insurancehealth cover is affordable. Intensive campaigns have also beenorganized by the US Government to educate the citizens on the benefitof having a health insurance cover. At first, some people with noroutine health problem declined to buy health insurance up the costto all taxpayers and other insured pool (Daniel,Douglas &amp Roger, 2012).ACA was supposed to encourage individuals to obtain a primary carephysician in case of emergency in their health care. The new lawincreased the opportunities for health insurance exchanges. Anotherthing that has increased the demand for health insurance is level ofcompetition in the industry. Insurance companies are striving tocompete by offering quality and attractive services and at lowestcost possible. Due to the lack of entry barriers, the insuranceindustries have become more saturated and therefore, for any firm tobe successful in the market, it must come up with competitivestrategies that will help them in acquiring and maintaining largemarket share. Private insurance companies are believed to be offeringthe top quality services and therefore, it has attracted the majorityof the insured population (Daniel,Douglas &amp Roger, 2012).Health insurance cover with the private sector is also more effectiveand reliable.

Fromthis analysis and also the recent studies carried out by the variouseconomists, it is clear that Affordable Care Act has resulted to asignificant rise in the demand for the health care insurances.Partially, it is the successful experience from the previous insuredpopulation that contributes to the need of health policy cover but toa great extent, ACA has contributed more to the increase demand ofthe insurance policy to everyone in the United States.


TheGraying of America (Americais getting older, and you will foot the bill)

Thegreatest population in the United States is the young generationhowever, it is predicted that by 2030, approximately 20% of theentire population will be sixty-five and above (Daniel,Douglas &amp Roger, 2012).The baby boomers who pushed for the Beatles and the rolling stonesinto stardom are also retiring their roles in the economy. Theaverage life expectancy in the United States is also increasingcontinuously. On the other hand, the birth rates are at its low levelrecords according to the recent studies. The today’s families arehaving few children as compared to the past generation. In summary,the old are living longer while the growth rate of the younggeneration has drastically declined. The population in the oldgeneration is therefore expected to be much high as compared to thecurrent population thus, the Graying of America.

Theorigin of the senior boom

Themain reason behind the senior boom is the increased life expectancy,in America. In 1900, the life expectancy was as low as forty-sevenyears but the range in the modern life has increased to seventy nineyears. Another factor that has led to the existence of the seniorboom is the low birth rate (Daniel,Douglas &amp Roger, 2012).These implies that, the old are living longer as the young generationbecomes few. The cost of elderly has also being lowered due totodays’ subscriptions in the social security schemes that allow theindividuals to save for their old age. The government has alsodeveloped provisions favouring the aged populations. Federal budgetis set aside to cater for the Medicare of the aged and the seniorcitizens are the beneficiaries of the fast growing share in thegovernment spending. Not forgetting, the medical expenses are themajor concern of the most elderly but the US Government hassubsidized such expenses and even making them more accessible to theelderly. After all, there is no one that can wish of denying theelderly a decent medical service and a conducive retirement scheme.Hence, this brings us to a conclusion that America is aging.


DanielK., Douglas C., &amp Roger M. (2012). TheEconomics of Public Issues 9thEdition.New York: Pearson Education UpperSaddle River.