When capitalism works as intended (meaning money makes money), it produces plutocracy. This is because a small percentage of the population always has (and has had) almost all the money. So when "money makes money," those few make most of the money that money makes, and wealth (and the power that is wealth) concentrates in a few hands. If you want to have a "growth" economy that uses profit as a mechanism, you either have to accept radical inequality or you implement high taxes on super-incomes and concentrated wealth and distribute the proceeds through the rest of society.
21
No man is an island,
Entire of itself,
Every man is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thy friend's
Or of thine own were:
Any man's death diminishes me,
Because I am involved in mankind,
And therefore never send to know for whom the bell tolls;
It tolls for thee.
Entire of itself,
Every man is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thy friend's
Or of thine own were:
Any man's death diminishes me,
Because I am involved in mankind,
And therefore never send to know for whom the bell tolls;
It tolls for thee.
10
Yes, but some clods we could do without.
3
Reagan and his robber baron masters suckered us into voo-doo "trickle down" economics and laughingly gave us the Laffer Curve.
The result of Reagan's lies was an unmitigated disaster. Nothing trickled down. The middle class got squeezed to the point that we our "consumer" economy is now looking at years of anemic GDP growth. Instead of having the rich pay their fair share, we reduced their tax rates and thereby accumulated massive national debt that (unless we change the current tax code) will be left for our children and grandchildren to deal with.
So let's try the inverse of Reaganomics, and let's go back to the truly progressive income tax rates that we had in the 1950s.
Put some purchasing power back in the hands of the middle class and watch our economy (and tax revenues) grow! That would be a true win-win situation.
The result of Reagan's lies was an unmitigated disaster. Nothing trickled down. The middle class got squeezed to the point that we our "consumer" economy is now looking at years of anemic GDP growth. Instead of having the rich pay their fair share, we reduced their tax rates and thereby accumulated massive national debt that (unless we change the current tax code) will be left for our children and grandchildren to deal with.
So let's try the inverse of Reaganomics, and let's go back to the truly progressive income tax rates that we had in the 1950s.
Put some purchasing power back in the hands of the middle class and watch our economy (and tax revenues) grow! That would be a true win-win situation.
23
An article in the 8-21 June issue of Aviation Week references a Harvard Business Review article by Will Lazanick that noted while corporate profits are 33% higher than pre-recession levels, capital expenditure budgets are stagnant. According to him, the critical reason for the shift to share buybacks is the impact it has on wealth creation for those at the very top, which leaves little for capital expenditures or employee wage increases. Guess it proves that greed dominates today's American business decisions. Wonder what candidates for President think about this? Anyone for tax reform?
15
The rich got richer during this period because they had the capital to invest in the stock market and housing. Moving the minimum wage up to $15/hr is nothing but a feel good scheme to think you're closing the inequality gap.
NYT writers clearly miss the difference between income and wealth. Wealth (holding investment income-producing assets) begets greater income, then greater wealth, then greater income, on-and-on.
That's how true inequality is created - the majority of investable assets held by a small few - not some nominal difference in the minimum wage.
NYT writers clearly miss the difference between income and wealth. Wealth (holding investment income-producing assets) begets greater income, then greater wealth, then greater income, on-and-on.
That's how true inequality is created - the majority of investable assets held by a small few - not some nominal difference in the minimum wage.
10
The City of Santa Fe in my state passed a living wage ordinance ten or so years ago. It now has one of the highest minimum wage rates in the nation. Minimum wage workers got an immediate 65% wage increase, indexed to inflation in order to maintain its purchasing power. "The People's Republic of Santa Fe, the Worker's Paradise", right?
Not so much. The cost of living has skyrocketed. Fully 62% of the workforce in Santa Fe lives outside of the city. It is losing its prized millennial generation, who are moving to Austin and Denver in droves. The town dies when the sun goes down. The rich old hippies and part-time residents from Hollywood and New York City that now populate Santa Fe are too old for much carousing.
And what about the idea that if everyone is paid a living wage, the costs of providing social services will drop? Didn't happen. The needle didn't move on SNAP, public housing, public assistance, etc. Even now, 30% of Santa Fe's children live in poverty. The poverty rate for Hispanics, who were supposed to disproportionately benefit from the living wage, is more than twice that of Anglos in the city.
Be careful of what you wish for. There is no such thing as a free lunch, and throwing other people's money at a problem is not likely to be a panacea.
Not so much. The cost of living has skyrocketed. Fully 62% of the workforce in Santa Fe lives outside of the city. It is losing its prized millennial generation, who are moving to Austin and Denver in droves. The town dies when the sun goes down. The rich old hippies and part-time residents from Hollywood and New York City that now populate Santa Fe are too old for much carousing.
And what about the idea that if everyone is paid a living wage, the costs of providing social services will drop? Didn't happen. The needle didn't move on SNAP, public housing, public assistance, etc. Even now, 30% of Santa Fe's children live in poverty. The poverty rate for Hispanics, who were supposed to disproportionately benefit from the living wage, is more than twice that of Anglos in the city.
Be careful of what you wish for. There is no such thing as a free lunch, and throwing other people's money at a problem is not likely to be a panacea.
12
Can the "help" from the top come as a result of free and open elections. When I say free I mean free of voter suppression, Gerrymandering, having the vote on a non-working day or even a couple of days, free from the Electoral College which gives too great a weight to less populous states, free of political TV ads that are nothing but id driving propaganda, free of 2 year election cycles where 3 months is adequate everywhere else, free of "dark money" and corporate person-hood (whatever that means), free from money is speech (no money is power not speech). This isn't too Utopian because like universal health care, the voting system I refer to is rife in more egalitarian countries.
6
I think this is far too simplistic an article. Just run out and raise the minimum wage. it sounds good but is not totally realistic. Wages should be set based on both skills and the cost of living in a given area, such as rural vs. urban, New England vs. the South, etc. Allowances should also be made for lower minimum wages for teenagers and domestic help. The way to really help level out the playing field is raise taxes sharply on the top 1% and corporations and use the money to fund comprehensive, universal, single payer national health care with reasonable premiums and small co-pays on a "sliding scale". This benefits everyone. Next require mandatory private pensions, either 401 K or defined benefits, for all companies with over say 100 employees, as many European countries now do. Next make post secondary public education education, either technical or academic, "dirt cheap". In all cities over a million apply mandatory rent controls. But most importantly withdraw from all these unfair trade agreements like NAFTA, CAFTA, WTO, etc., gradually raise tariffs and bring home millions of good paying industrial jobs with benefits. End illegal immigration and reduce legal immigration to no more than 200,00 per year instead of a million plus. If these few laws and policies were passed at the federal level you would wind up with a tiny but fluid upper class, a large and growing middle class, and a shrinking and small underclass. A win win situation for the entire United States!
8
This is a bizarre recipe for a huge slow down in GDP growth if not an outright economic recession.
Extraordinary.
Extraordinary.
3
Isn't funny that the NY Times publishes an article regarding the problems with income inequality in the United States, but utterly dismisses Senator Bernie Sanders by portraying him as an out of touch fridge socialist from Vermont, for whom he addresses the exact same reasons why income inequality hurts everyone on the income bottom? Be honest people: you can't keep voting against your own economic interests on candidates who are unwilling to raise taxes on the rich and curb income disparity in this country. Yet, the top one percent has seen their incomes boost since 2009 while the middle class and the poor got hurt with decline household wealth. Both Democrats and Republicans allowed this growing income gap in this country by refusing to raise taxes on the very same people who are buying our government, lobbying our politicians for a pro-corporate agenda, and creating a tax system that benefits only the affluent. This is what Thomas Jefferson warns us about tyranny in our government through money interests in power, as well as Bernie Sanders explaining to all of us that the wealthy are holding this country hostage by killing off the American middle class and the poor.
23
How about making PAC and SuperPAC donations taxable? Use the funds to reduce tax rates for the middle class.
9
Inequality must certainly be addressed. And marginal tax rates for the 1% can and should be increased. But if we simply take money away from the 1% and redistribute it across the 99% without addressing the real reasons for the breakdown in upward mobility we will be kidding ourselves. We'll be right back where we started before long. Imagine a world where we genuinely work to overcome the ingrained systemic obstacles to equality of opportunity (vs. the lip service paid to this now) - there could be plenty of fully qualified people to take the place of the 1% for a little less pay. The competition would pull the highest wages and bonuses down to more reasonable levels. And there would be no more golden parachutes for CEOs who destroy their companies for their own short term gain, wreck the lives of their employees and then walk away scott-free. Is there any politician courageous enough to make this their goal?
3
What are the "systemic obstacles to equality of opportunity" to which you refer? Is everyone a "victim" but the 1%?
No, but the data supports the view that those born into poverty have vastly less access to all resources that could be used to bootstrap them out of it (such as an intact and nurturing family environment, positive encouragement to set goals, good schools, credible role models, well educated minds to interact with, good health care, good diets, etc, etc).
4
If the money donated as campaign contributions were put in a fund to help the 90 %, the problem would be solved.
5
this article smacks of class envy and hatred. Does not the NY Times understand that anything that reduces labor costs reduces the number of laborers employed? One can see, based on articles like this, why job creators have such a hard time with the "mainstream" media.
Why do liberals not understand?
Why do liberals not understand?
3
So what are you saying? That "job creators" in America can only prosper and, indeed, create jobs when they can pay poverty level wages? So how do they manage it in prosperous, well paid, highly productive Germany where, in addition, most workers get 4-6 weeks of annual vacation time? Are our job creators that incompetent?
7
You're assuming that liberals are against economic freedom, even if they spoke out against income disparity in our economy. May I remind you that the only economic freedom you people on the right of the political spectrum want is having a bunch of wealthy elites by not paying any taxes back to the government, and living in a segregated community in a dystopia world based out of Ayn Rand's fable stories. I'm sorry, didn't we just observed our independence from Great Britain on July fourth, which was based on the concept that the rich in England were assaulting poor American colonists through taxation without representation by King George III?
6
Workforce reductions, wage stagnation, tax avoidance, and cash hoarding at large companies/employers have taken the place of investment and growth in terms of that which is most important to them - taking care of shareholders, CEOs, and Execs, first and foremost. Why is that so hard for you understand?
3
Since the '70s, the ultra-rich have invested a lot of money in massive campaign donations, lobbying juggernauts, "think tank" funding and PR advocacy.
But somehow, most people see the current inequality not as a return on this investment in tilting the playing field, but as the fair outcome of a "free market."
?
But somehow, most people see the current inequality not as a return on this investment in tilting the playing field, but as the fair outcome of a "free market."
?
11
I don't get why we need to compare the wages of the poor with the wages of the super rich. We should look at the wages of low and middle income people on an absolute scale. Right now, low and middle income families certainly need a wage boost, but we should not be worrying that the top 10% will benefit more if we institute economic policies to help those at the bottom. As long as these families are living a comfortable life, it does not matter how life is at the top.
1
Though I read the line "some people are more equal than others" many many years ago, I didn't grasp it's meaning (and there are several but they all point to the same thing) until very recently.
There's nothing wrong with achieving wealth honestly whether thru hard work or not imo. But being denied the opportunity to even try is what's going on here.
another famous quote - "if you're not at the table, you're on the menu"
There's nothing wrong with achieving wealth honestly whether thru hard work or not imo. But being denied the opportunity to even try is what's going on here.
another famous quote - "if you're not at the table, you're on the menu"
7
there is a very way - to immediately raise the amount of money present workers across the country can add thousands to the annual wage - without businesses caring about the change - really ! change the TAX code - all individuals below 19,700 pay zero federal tax - from 19,701 to 29,499 - pay 10 percent tax (http: //www.irs.gov/pub/irs-pdf/p15 .pdf) copy of tax table on page 47 - 19700 is 378 /week - you get an extra 41 to keep - a little over a 10% raise - easy quick
"I assume here that raising the minimum wage would not have reduced the income of those in the top 10 percent."
Bad assumption. Unless productivity rises at a faster rate than wages (highly unlikely in the scenario presented), profits will be reduced by the exact amount of the wage increase. The top 10 percent gets a large portion of their income in dividends and capital gains, which are a residual of profits.
Bad assumption. Unless productivity rises at a faster rate than wages (highly unlikely in the scenario presented), profits will be reduced by the exact amount of the wage increase. The top 10 percent gets a large portion of their income in dividends and capital gains, which are a residual of profits.
2
You seem to assume the increased spending by those helped by higher wages would do nothing whatsoever for corporate profits. It's not only productivity that drives corporate profits, but people buying what's produced. If people have no cash to spend, what good is productivity?
7
The author talks about the bottom 90% versus the top 10%, and the economic inequality between the 2 groups. What the author conveniently ignores, and in fact most commentators in this column are ignoring, is that the top 10% is comprised primarily of professionals - doctors, lawyers, engineers, etc. These are people who have spent years getting bachelors, masters, and PhD degrees, and have been successful at establishing a good career. It's not fair to demonize these people for all the hard work they have done to get to where they are, or say that they need to be pulled down in order to help the bottom 90%. Doesn't the American dream consist of working hard to get ahead? If we start pulling these people down, then what does that say about the value we place on hard work?
I do agree that favorable tax treatment of certain sources of income (e.g., capital gains for hedge fund managers) needs to be examined because they are being abused. But don't lump the upper middle class with the uber-rich - that's not fair to those who have worked hard to maintain that upper middle class lifestyle.
In my view, the way forward is to remove all the favorable tax exemptions and regulations and institute a flat tax for 99% of the population. Add an additional tax for incomes above $1 million, regardless of the source. Reduce the size of the IRS since tax submissions for the majority of the people will be very, very simple, and use these savings to fund programs for the needy.
I do agree that favorable tax treatment of certain sources of income (e.g., capital gains for hedge fund managers) needs to be examined because they are being abused. But don't lump the upper middle class with the uber-rich - that's not fair to those who have worked hard to maintain that upper middle class lifestyle.
In my view, the way forward is to remove all the favorable tax exemptions and regulations and institute a flat tax for 99% of the population. Add an additional tax for incomes above $1 million, regardless of the source. Reduce the size of the IRS since tax submissions for the majority of the people will be very, very simple, and use these savings to fund programs for the needy.
3
Read "Winner Take All Society." The key word in this article, capturing the Frank-Cook thesis, is the word "fairness" invoked by Hillary Clinton, or more specifically "more fairness."
You are suggesting income disparities - specifically the greater wealth enjoyed by the higher-degreed- corresponds to greater effort and talent (together forming what many conventionally call "merit") enacted by the economic top 10% to become doctors, lawyers and professors.
Frank-Cook look at superstar arenas like professional sports & classical music to show that a pitcher or opera singer able to perform a tiny bit better than similarly talented (& exerting) counterparts will be remunerated staggeringly higher wealth. A runner 1/100 second faster will be worth millions more than the guy 1/100 second slower.
For Frank & Cook this is the paradigm of the contemporary economy. An academic with one more article published may squeak into the tenure track & earn $175,000 per year (teaching 3 or 4 courses); the one with one less article may subsist on $35,000 shuttling between several community colleges as adjunct, teaching 10 courses, though their accomplishments are comparable. Often the adjunct will be more accomplished, with a bit less luck. So it is for our system: reward/remuneration disparities out of any proportion to "merit" differentials. We're conditioned to call these disparities a function of "merit" but it's mere propaganda forcefed us practically from birth.
You are suggesting income disparities - specifically the greater wealth enjoyed by the higher-degreed- corresponds to greater effort and talent (together forming what many conventionally call "merit") enacted by the economic top 10% to become doctors, lawyers and professors.
Frank-Cook look at superstar arenas like professional sports & classical music to show that a pitcher or opera singer able to perform a tiny bit better than similarly talented (& exerting) counterparts will be remunerated staggeringly higher wealth. A runner 1/100 second faster will be worth millions more than the guy 1/100 second slower.
For Frank & Cook this is the paradigm of the contemporary economy. An academic with one more article published may squeak into the tenure track & earn $175,000 per year (teaching 3 or 4 courses); the one with one less article may subsist on $35,000 shuttling between several community colleges as adjunct, teaching 10 courses, though their accomplishments are comparable. Often the adjunct will be more accomplished, with a bit less luck. So it is for our system: reward/remuneration disparities out of any proportion to "merit" differentials. We're conditioned to call these disparities a function of "merit" but it's mere propaganda forcefed us practically from birth.
8
Beyond politics and new policies, re-balancing wealth will require a profound shift in the way the people with the most resources in our country perceive the people with the least. Sustainable change will only occur if the wealthy evolve out of their misconception that they exist in a silo, and into the truth of their fundamental connectedness to all people, even those who are poor. Only then will our country move toward any semblance of lasting recalibration.
1
Reread "Animal Farm"
1
"(I assume here that raising the minimum wage would not have reduced the income of those in the top 10 percent.)"
This is not what my research shows. In fact, increasing the minimum wage does decrease the share of income going to (at least) the top 1% when you look at state-level data. Why is this? Because inequality is increasing because of a change in the relative bargaining power between workers and firms. As workers lose their bargaining power, the share of income going to the bottom 50% (or even bottom 90%) falls, and the share going to the top 1% rises.
So what can be done? Increasing the minimum wage is certainly one way to increase workers' bargaining power by setting a wage floor. Making it easier for workers to organize would be another way to increase bargaining power. And finally, increasing top marginal tax rates should also help by reducing the incentive executives have to reduce labor costs.
This is not what my research shows. In fact, increasing the minimum wage does decrease the share of income going to (at least) the top 1% when you look at state-level data. Why is this? Because inequality is increasing because of a change in the relative bargaining power between workers and firms. As workers lose their bargaining power, the share of income going to the bottom 50% (or even bottom 90%) falls, and the share going to the top 1% rises.
So what can be done? Increasing the minimum wage is certainly one way to increase workers' bargaining power by setting a wage floor. Making it easier for workers to organize would be another way to increase bargaining power. And finally, increasing top marginal tax rates should also help by reducing the incentive executives have to reduce labor costs.
5
From "losing bargaining power implies an income increase for the top 1%" it does not follow that " increasing (not losing) bargaining power implies a decrease in income for the top 1%".
Studies may suggest that both are true but the one does not follow from the other by logical alone.
Studies may suggest that both are true but the one does not follow from the other by logical alone.
Eat the rich -- old slogans need to come back.
2
Agreed. I like "Pull your own weight"
3
I like "a man's true worth is the size of his bank account".
Neither morality nor wealth can be legislated. We gave up trying to do the former but have spent in excess of $20 trillion trying to do the latter since the mid-sixties. The package of government transfer payments available today varies by state by ranges up to the equivalent of a job paying $40,000 per year. The argument that all we need to do is take a little more from "the rich" (n.b., the definition of rich is anyone who makes more than the person using the term) is patently illogical. Our government is already funded by the top 10% of the population (who pay 70% of the taxes), and we're spending $400-500 billion more than we take in (despite record-high government revenues). Equality before the law is of utmost importance. Equality of income is inconsequential and, more important, disastrous.
4
See my comment referencing "Winner Take All Society." When income disparities correspond to disparities in talent and effort, I'll say we are approaching a reasonably fair or "meritocratic" society. But that is a kind of utopia that could probably never happen, so I'm not afraid to make such a promise. The problem is many in their tacit social Darwinism claim such a scheme is what we have now.
So Mr. Lector, have you, in your "however things are market-distributed, they are market-distributed rightly Panglossian-Darwinisn wisdom, ever heard of Donald McCabe, or less likely, gilded age social theorist Lester Ward? The latter asked, "What if the prowess used to get ahead entails low cunning?" McCabe, a researcher on academic cheating, documents that a majority if students at all levels have relied on cheating to succeed academically. Do you imagine they're not among the 10%? Research shows premeds, the ultimate emblem of "meritocracy" cheat most all.
"Some by evil rise, some by virtue fall" said Shakespeare, paraphrasing Eccliastes.
So Mr. Lector, have you, in your "however things are market-distributed, they are market-distributed rightly Panglossian-Darwinisn wisdom, ever heard of Donald McCabe, or less likely, gilded age social theorist Lester Ward? The latter asked, "What if the prowess used to get ahead entails low cunning?" McCabe, a researcher on academic cheating, documents that a majority if students at all levels have relied on cheating to succeed academically. Do you imagine they're not among the 10%? Research shows premeds, the ultimate emblem of "meritocracy" cheat most all.
"Some by evil rise, some by virtue fall" said Shakespeare, paraphrasing Eccliastes.
1
Simply making the top 1% "finance" the bottom 99% may not do it. I have a hunch that the 1% people are competing among themselves? They are busy fending off their own kind to stay in the tip of the pyramid. Achieving a more equal society requires basic culture change in our attitude and ideal toward being equal as opposed to being special.
3
You're right on the money as to the motivation among the uber rich. In that great treatise "Art of the Deal," the great sage of mehrhabenwollen Donald Trump said at that level "Its all about keeping score." Who knew the Donald was crass like that
Income disparity has been driven by transfer payments to the rich by tax treatment (the carried interest rule, lowered tax rate for capital gains)and Legislation (NAFTA, TPP, Commodity Futures Modernization Act of 2000). Our economy's growth is based on rent seeking business's tthat do not produce value but rather rely on a business model of exploiting workers and consumers (Wallmart, McDonalds, The cellular industry, health insurers, and the airline industry). Wealth inequality is merely a by product of this environment and as long as the large corporations and rich individuals are guaranteed financial success and indemnified for any crimes or losses they commit or incur nothing will change. It's just Socialism for the rich and Capitalism for the poor.
4
Finally, the NY Times has had the backbone to state plainly what has been clear for so long to those willing to read between the lines.
The goal is income inequality, at all costs, indeed at any cost, including the very destruction of wealth. In this literally insane view, we will all be better off if the top 1% and their wealth were sunk to the bottom of the sea. We would all certainly be more equal; and doesn't equality mean happiness?
In a free society, wealth will flow to those with the skills, talents, and drive to earn it. In a global economy that is true to the nth degree. Confiscation cannot achieve what its adherents believe it will: wealth for all. Instead it will create equality but only in the form of equal poverty. We will all be equal, sharing scraps and crumbs when at least some of us could have had cake.
The goal is income inequality, at all costs, indeed at any cost, including the very destruction of wealth. In this literally insane view, we will all be better off if the top 1% and their wealth were sunk to the bottom of the sea. We would all certainly be more equal; and doesn't equality mean happiness?
In a free society, wealth will flow to those with the skills, talents, and drive to earn it. In a global economy that is true to the nth degree. Confiscation cannot achieve what its adherents believe it will: wealth for all. Instead it will create equality but only in the form of equal poverty. We will all be equal, sharing scraps and crumbs when at least some of us could have had cake.
7
Yes;
Inequality is a secondary issue but it can represent other issues like economic rents reduced democracy (political rents) asset bubbles and a general misuse of capital
Inequality is a secondary issue but it can represent other issues like economic rents reduced democracy (political rents) asset bubbles and a general misuse of capital
Yes. We will all be equal, sharing the scraps and crumbs- of the 1%.
Look around- the decaying cities, neglected industry, decrepit infrastructure. This is all because it is more profitable for the 1% to invest in foreign countries, or in fantastical 'financial assets' with imaginary returns, than in the real goods and services this country needs to prosper and survive. You claim 'Oh, but they do invest!' Sure, but just enough to maintain their monopoly pricing and rents, rather than support the real growth this country needs for the people to share in their prosperity.
Do not doubt that the 1% runs this country, and from the economic and social shambles they are turning this country into, they derive their profit.
Think otherwise? A dispassionate comparison of the US economy today to that of China's will clarify the issue in your mind.
Is it the poor, however laborious or indolent you may think them to be, who brought this about? Or the actions of the 1%. and those policies dictated by the 1% to 'our' government?
Look around- the decaying cities, neglected industry, decrepit infrastructure. This is all because it is more profitable for the 1% to invest in foreign countries, or in fantastical 'financial assets' with imaginary returns, than in the real goods and services this country needs to prosper and survive. You claim 'Oh, but they do invest!' Sure, but just enough to maintain their monopoly pricing and rents, rather than support the real growth this country needs for the people to share in their prosperity.
Do not doubt that the 1% runs this country, and from the economic and social shambles they are turning this country into, they derive their profit.
Think otherwise? A dispassionate comparison of the US economy today to that of China's will clarify the issue in your mind.
Is it the poor, however laborious or indolent you may think them to be, who brought this about? Or the actions of the 1%. and those policies dictated by the 1% to 'our' government?
2
Reductio ad absurdum.
No one is proposing that everyone should receive the same income regardless of skills, talents and drive. But we are in a situation where top executives are paid several hundred times more than average workers, and several thousand times more than those at the bottom of the list. That is insane; nobody's skills, talents and drive are that special.
No one is proposing that everyone should receive the same income regardless of skills, talents and drive. But we are in a situation where top executives are paid several hundred times more than average workers, and several thousand times more than those at the bottom of the list. That is insane; nobody's skills, talents and drive are that special.
2
The tremendous focus on income inequality is very appealing. However, I would argue that reducing poverty should be our primary focus. Many assert that you can not reduce poverty as long as income inequality exist.
This argument is clearly untrue. The best example is China in the last 40 years. The per capita income started at less than $1 dollar a day, qualify by UN standards as "utter poverty". Over 600 million people have been lifted out of poverty into the middle class. Recently and today, income inequality is even higher in China than the U.S. In fact, Mao kept things horribly bad by insisting everyone should be equally poor (no income inequality). Another example is the industrialization of Britain and the US with lords with vast holdings and robber barons. The industrialization of these two countries caused Dickensian conditions, but undoubtedly both the US and Britain were much better for it.
Income inequality is a symptom much more so than a cause. Access to education, a fairer tax system, blacklisting ex-convicts, a fairer judicial system are all more important factors that require urgent solutions.
This argument is clearly untrue. The best example is China in the last 40 years. The per capita income started at less than $1 dollar a day, qualify by UN standards as "utter poverty". Over 600 million people have been lifted out of poverty into the middle class. Recently and today, income inequality is even higher in China than the U.S. In fact, Mao kept things horribly bad by insisting everyone should be equally poor (no income inequality). Another example is the industrialization of Britain and the US with lords with vast holdings and robber barons. The industrialization of these two countries caused Dickensian conditions, but undoubtedly both the US and Britain were much better for it.
Income inequality is a symptom much more so than a cause. Access to education, a fairer tax system, blacklisting ex-convicts, a fairer judicial system are all more important factors that require urgent solutions.
4
The marketplace aka society places different values on various skills. Many of the lowest skill sets have been replaced by robots thereby displacing humans many of whom were in manufacturing. Minimum wages apply to jobs valued minimally in terms of skills needed. Certainly minimum wages need to be fair and adjusted to inflation. The causes of income inequality are many including poor education, lack of work ethic, teenage pregnancy, job scarcity and government job programs which are ineffective. Criminal records are also a contributor to the problem. All the problems cited need to be addressed meaningfully for the poor to have better lives. Lifting those at the bottom is uplifting and positive. Redistribution tactics only punish the successful while failing to address the causes of income inequality. Assisting the the poor by pulling them up is admirable and necessary. Punishing higher earners with greater skills is unfair and divisive let alone Un American.
7
Raising wages is just a start to reducing the exteme inequalities in the US today. What this article and most of the NY Times writing on this subject ignore is that the huge wealth transfer for the past 35 years is mostly due to the tax changes initiated under Reagan and continued to this day.
Top US tax rate of over 70% before Reagan droppped to as low as 15% (dividend preferred tax rate pushed through by Bush2) while at the same time social security withholding taxes increased by 4 fold on incomes under $100K.
From capital gains taxes, oil & gas ltd. partnerships, real estate trusts, and the myriad of tax breaks Congress has passed the wealthy are enjoying some of the lowest taxes in US modern history. This is true for state and local taxes as well as federal. Throughout the US states are capping real estate taxes, providing corporate tax holidays, and eliminating state income taxes while sales taxes are increasing.
The US must chang its tax code to reverse wealth inequality. However, Congress and most US state assemblies are completely controlled by big money, so there is zero probability that there will be any tax changes that would benefit the poor and middle class .
Top US tax rate of over 70% before Reagan droppped to as low as 15% (dividend preferred tax rate pushed through by Bush2) while at the same time social security withholding taxes increased by 4 fold on incomes under $100K.
From capital gains taxes, oil & gas ltd. partnerships, real estate trusts, and the myriad of tax breaks Congress has passed the wealthy are enjoying some of the lowest taxes in US modern history. This is true for state and local taxes as well as federal. Throughout the US states are capping real estate taxes, providing corporate tax holidays, and eliminating state income taxes while sales taxes are increasing.
The US must chang its tax code to reverse wealth inequality. However, Congress and most US state assemblies are completely controlled by big money, so there is zero probability that there will be any tax changes that would benefit the poor and middle class .
8
Two policies correlate overwhelmingly to lower poverty rates:
Cash welfare benefits- http://politicsthatwork.com/graphs/welfare-poverty
Education spending- http://politicsthatwork.com/graphs/education-poverty
Cash welfare benefits- http://politicsthatwork.com/graphs/welfare-poverty
Education spending- http://politicsthatwork.com/graphs/education-poverty
Low wage workers, at this point, also include many people who in the past would have been solidly middle class. All the professional workers who now work as contingent workers are the source of part of the declining middle class and have been robbed by our economy. As people with credentials and skills, they are still very much in demand, but are paid a pittance. Count the adjunct professors, designers, lawyers and others working only on contract. It's not like they aren't hired. There is lots of poorly paid, part time work available.
The executive ranks pulled these people down because they represent high costs to business (and legislatures, who feed the .1% and control policy debates), and this is part of what is still hollowing out the middle class. I am totally sympathetic with low wage employees (who rarely get full time hours), and are generally treated as valueless, replaceable entities.
The real problem is that business (and its legislative arm) has no interest in conceiving of employees as anything but a cost. The highest incomes do not come to earners, and those who get salaries in the billions are not earning them. We must break the cycle of wealth traveling uphill, and the charade that these people have any but their own interests in mind. They have many minions on payroll working to keep this the way wealth sustains itself.
The executive ranks pulled these people down because they represent high costs to business (and legislatures, who feed the .1% and control policy debates), and this is part of what is still hollowing out the middle class. I am totally sympathetic with low wage employees (who rarely get full time hours), and are generally treated as valueless, replaceable entities.
The real problem is that business (and its legislative arm) has no interest in conceiving of employees as anything but a cost. The highest incomes do not come to earners, and those who get salaries in the billions are not earning them. We must break the cycle of wealth traveling uphill, and the charade that these people have any but their own interests in mind. They have many minions on payroll working to keep this the way wealth sustains itself.
15
We will hear, again and again, the argument that preventing the ultra-rich from continuing to vacuum up all the economy's gains, and more, would be freedom-destroying communism.
1
Ginger and Marianne live on a small tropical island. Ginger picks coconuts all day and sells them on the dock to cruise passengers for $1 apiece. Marianne picks coconuts in the morning but knocks off at noon to subathe all afternoon. Ginger picks and sells 50 coconuts each day, Marianne only 20. Marianne, outraged at Ginger's fortune, waives a battered article from Saez, Stiglitz and Piketty, before the island tribal chief and prevails on him to confiscate $30 per day from Ginger, on the grounds that Ginger is "vacuuming up" five sevenths of their collective income. Ginger, disgruntled, joins Marianne on the beach.
9
Marianne continues to fume afterwards, stating that with Ginger no longer working as hard, Marianne's lifestyle has declined.
3
In the real world, the person making all of the money isn't picking a single coconut. They are telling somebody else to pick them, and giving the picker one cent for every $3 in coconut revenue. And the boss doesn't want to pay any taxes, so the pickers are paying all of that too.
5
Tax rates over the last 30 yrs have clearly been the #1 driver of income inequality followed by trade agreements that benefit the 10%ers but have been a negative for the 90%. Why has no one suggested a return to the pre-Reagan tax rates that discouraged the extreme overcompensation that is now rampant among 1%ers. The 70s were the peak of US income equality. So all you 20, 30 and 40 somethings that weren't born yet, or old enough to pay taxes, Google the tax rates of the time, the 1%ers compensation of that era and the 90-10 spread of that time. The enrichment of the 10%, and particularly the 1% has come at a steep cost to the 90%. Bring back the steeply graduated tax rates (sorry Rand) of the 60's and 70's and stop TTIP and TPA .
1
As a barely middle class individual I do not mind paying taxes. I know that taxes are the price I pay to live in a civilized society. Those taxes pay my elected officials. They pay for roads, schools, waterways, railroads, the National Parks, the EPA, etc. What I resent is listening to rich corporations and people complaining about how high their taxes are when, percentage wise, I'm paying more. I resent hearing how companies bargain for the bottom rate in taxes in return for locating plants or jobs in a particular area and then complain about how poor the schools are or how poorly the roads are. If you want quality you have to put some money behind it. If all you care about is how little you can contribute financially, you're getting what you're paying for.
If this country wants to have a thriving middle class those that run it and the corporatocracy need to stop thinking short term profits, bottom line, etc., and start to look at paying us decent wages, providing decent jobs, and understanding that success is more than a large number on the plus side of a balance sheet.
If this country wants to have a thriving middle class those that run it and the corporatocracy need to stop thinking short term profits, bottom line, etc., and start to look at paying us decent wages, providing decent jobs, and understanding that success is more than a large number on the plus side of a balance sheet.
8
You mean you actually believe the fiction that corporations "pay" taxes? Most people know that it is simply passed through to its consumers. Making something a corporate tax is a good way to make the individual tax take appear smaller, and apparently this has worked on you.
2
I see two main problems with this.
1. Scheiber's argument rests on the claim that rapid growth for the very affluent precludes rapid growth for everyone else. That would greatly concern me. But I don't know of any evidence to support it. Why doesn't Scheiber share his evidence with us?
2. Scratch Scheiber's argument and what you really find is the same old same old attempt to provoke our envy of the rich for his own political and professional profit. I hope we are better than he thinks we are.
1. Scheiber's argument rests on the claim that rapid growth for the very affluent precludes rapid growth for everyone else. That would greatly concern me. But I don't know of any evidence to support it. Why doesn't Scheiber share his evidence with us?
2. Scratch Scheiber's argument and what you really find is the same old same old attempt to provoke our envy of the rich for his own political and professional profit. I hope we are better than he thinks we are.
3
Your argument worked before the panic of '08. It rings hollow now.
1
What few want to acknowledge is that disparate income can never really be fairly earned on anything like a "level playing field" (the central trope, along with the "invisible hand") as our central principle of destreconomic justice because not only do such level playing fields never exist, it is the central business of capitalism to conquer and destroy them whenever they do. The whole point of business is to tilt the field against the competition, sacrificing resources now to gain that advantage later. The bottom line is the more money you have, the easier it is to get even more money. A billionaire with half a brain could generate an extra million virtually at will, with virtually no effort.
Saying criticism of the ever increasing concentration of wealth is a matter of class resentment at those who are simply more successful merely lies about how the market actually works and vast fortunes generated. The more money you have, the more you get. That's the market unmitigated by ethical principle. There are those who seek to inject fairness, and those who seek to exclude it.
Saying criticism of the ever increasing concentration of wealth is a matter of class resentment at those who are simply more successful merely lies about how the market actually works and vast fortunes generated. The more money you have, the more you get. That's the market unmitigated by ethical principle. There are those who seek to inject fairness, and those who seek to exclude it.
2
Higher taxes become astonishingly attractive to the rich when compared to some of the alternatives. During the Great Depression, the United States imposed higher taxes to limit the wealthy, and created a social safety net that included a living minimum wage; bank deposit insurance; and Social Security...not out of the goodness of the hearts of Congress, but at the behest of the then-0.1% - who perceived these actions as substantially more attractive than the course chosen by the people of Russia.
2
I don't know what history book you are sourcing for this comment, but the 0.1% considered Roosevelt a traitor to his class. They fought his New Deal, Social Security, and other progressive legislation all the way to the Supreme Court. There are NO documents that I have ever read that thought Roosevelt was more attractive than Russia. What was more attractive to the 0.1% was Facism and they had their most famous campaigner in Charles Lindberg.
5
Reducing income equality is important to improving the performance of the economy and reducing dire poverty, but ultimately wealth inequality must be addressed, which is Piketty's main argument. A meaningful estate tax may be more workable that the occasional levies of a percentage of wealth that he proposes. This could be achieved not by lowering the threshold for the estate tax, which of course merely benefits the extremely wealthy, but by eliminating the multitude of loopholes (including many forms of trusts and, yes, even limiting the charitable deduction) so that vast fortunes simply cannot be passed on, and the proceeds can be used for social investment and, as Piketty also suggests, paying down the debt.
8
If people would stop having children they could not afford of they would stop impregnating people to birth children who will never be adequately educated, cared for, etc. that would start on eliminating a great part of the poverty population in this country and we would not have to worry about "income equality" which has and will always be here until people take responsibility.
10
This is truly a fundamental misunderstanding of how poverty works. People are not necessarily impoverished because of their choices. The point is that the wealthiest country surely can devise a system that treats the bottom majority like human beings. Human beings have the right to a family and a living wage. Eliminating human beings instead of providing for them is not the solution. Go home you are drunk Janis.
2
So you think people who cannot afford to have children deserve to live in poverty? But do the children also deserve to live in poverty? To be denied the education they need to improve their lives?
George, we all want to encourage education.
"Well we're waiting here in Allentown...
For the promises our teachers gave
If we worked hard
If we behaved....
Every child had a pretty good shot
To get at least as far as their old man got...
In a work, the educational achievement social contract you allude to doesn't have the same credibility it used to, that is, if it ever really did in the first place.
"Well we're waiting here in Allentown...
For the promises our teachers gave
If we worked hard
If we behaved....
Every child had a pretty good shot
To get at least as far as their old man got...
In a work, the educational achievement social contract you allude to doesn't have the same credibility it used to, that is, if it ever really did in the first place.
Stopping the flow of illegal aliens and deporting those already here would reduce the supply of low-wage, low-skill labor. Obviously, this would cause wages to rise. However, those on the political left are more concerned with increasing the supply of their voters than in enforcing our nation's laws.
7
"Stopping the flow of illegal aliens" (etc.)
Aside from the physical improbability thereof, it would reduce the pool of easily intimidated workers available to our multi-national mega-corporations.
And guess to whom those corporations send campaign contributions?
If we were actually serious about 'illegal immigration' (And the point can be made that the answer is to vastly, vastly increase the LEGAL slots available) - we would be arresting and prosecuting corporate officers for hiring illegals - again, something that is pretty unlikely to happen.
Aside from the physical improbability thereof, it would reduce the pool of easily intimidated workers available to our multi-national mega-corporations.
And guess to whom those corporations send campaign contributions?
If we were actually serious about 'illegal immigration' (And the point can be made that the answer is to vastly, vastly increase the LEGAL slots available) - we would be arresting and prosecuting corporate officers for hiring illegals - again, something that is pretty unlikely to happen.
2
The flow of illegal aliens is in the financial interests of large corporations, corporate farmers , and anyone who can afford gardeners and domestic help. The real opposition is to legal immigration. The growth of income inequality and even worse wealth inequality is a worldwide systemic problem, with predictable consequences.
1
While some of your complaint may be true as to construction, it is patently untrue that agricultural jobs are lost to Americans.
The experiences in Georgia and Arkansas, where illegals were persecuted resulted in agricultural failure for the economy. Higher wages were offered but an insufficient number of "American citizens" or "legals" were available to offset the loss.
As an American citizen, I hoed beans for $1.19 an hour in 115 degree heat in a field with 20 braceros and other legal and illegal migrants. I was later elevated to a regular member of the farm's irrigation and general labor crew, which consisted usually of four persons. myself, Larry, also a citizen, but generally unemployable because of his grand mal epileptic seizures, Mike, an undocumented Hispanic alien, who worked there 20 years, and fourth position who repeatedly changed from the black community, until Willie a 70+ year old came to work the last year I worked there.
Several times the foreman attempted to get additional help from the state unemployment office. It was funny those mornings after he advertised, 30 or more would appear for work at 5:30 a.m., and all would be gone by 10 a.m. or noon at the latest, depending on when the temperature hit 95 degrees.
In my view most of the "illegals" take jobs few "American citizens" want or could handle.
The experiences in Georgia and Arkansas, where illegals were persecuted resulted in agricultural failure for the economy. Higher wages were offered but an insufficient number of "American citizens" or "legals" were available to offset the loss.
As an American citizen, I hoed beans for $1.19 an hour in 115 degree heat in a field with 20 braceros and other legal and illegal migrants. I was later elevated to a regular member of the farm's irrigation and general labor crew, which consisted usually of four persons. myself, Larry, also a citizen, but generally unemployable because of his grand mal epileptic seizures, Mike, an undocumented Hispanic alien, who worked there 20 years, and fourth position who repeatedly changed from the black community, until Willie a 70+ year old came to work the last year I worked there.
Several times the foreman attempted to get additional help from the state unemployment office. It was funny those mornings after he advertised, 30 or more would appear for work at 5:30 a.m., and all would be gone by 10 a.m. or noon at the latest, depending on when the temperature hit 95 degrees.
In my view most of the "illegals" take jobs few "American citizens" want or could handle.
In the 1950s and 1960s this country thrived and became the economic engine that ruled the world. A huge part of that growth was because of the high taxes being levied on high incomes. Rather than pay the people at the top enormous salaries, at least half of which would go in taxes, companies put that money into research and development and paid the workers well for the fruits of their labor. In turn, the American consumer had more discretionary income to buy the products American companies made.
The answer to lessening inequality is many-faceted; however, raising taxes on the highest earners and paying a living wage to the people who make the highest earners' success possible will start cutting the class distinctions and grow the economy.
Another idea is placing a small tax on each stock trade and start taxing investment income the same as working income. Income is income.
The answer to lessening inequality is many-faceted; however, raising taxes on the highest earners and paying a living wage to the people who make the highest earners' success possible will start cutting the class distinctions and grow the economy.
Another idea is placing a small tax on each stock trade and start taxing investment income the same as working income. Income is income.
20
Oddly enough, my grocer does not ask me the source of my income - so as to variably price his merchandise. To him dollars are dollars are dollars, and he treats them all the same.
I only wish that those writing our tax laws had that much common sense.
Yes, all income should be taxed the same. If we feel that this might be burdensome, then let us raise the personal exemption, and the standard deduction..an act that would benefit each taxpayer equally.
And yes, Ms. Dunn makes a good point that higher taxes on the wealthy did not seem to adversely affect our nation.
I only wish that those writing our tax laws had that much common sense.
Yes, all income should be taxed the same. If we feel that this might be burdensome, then let us raise the personal exemption, and the standard deduction..an act that would benefit each taxpayer equally.
And yes, Ms. Dunn makes a good point that higher taxes on the wealthy did not seem to adversely affect our nation.
1
Investment income is not working income. Working income is guaranteed and paid within a week of two of earning it. Investment income is subject to substantial risk, and for long held assets, is subject to lower value due to deflation.
And yet, investment income spends just the same as wages or salary. Go figure.
Why are policy makers not required to understand Economics 101 - specifically the concepts of scarcity and choice, sustainability, the participants in the flow of money and the organizational structures that affect monetary and fiscal policy decisions? The "wealth gap" and "redistribution of money" are terms thrown around without understanding or true meaning. Policy makers can no longer afford to throw their hands up and surrender to indecision. Education yourselves if you plan on representing "We The People."
Just when has income ever been equal? In the Old Testament, we hear about the "rich man and the poor man". Thus it has always been. Today, many nof the poor are living lifestyles those in the past could only dream about. Big screen TV's, smart phones, new fashionable clothing, eating out. No poor person before has EVER lived so well.
When the minimum wage is raised to that degree, the ones hurt are once again the Middle Class as I can promise you, there wages will not increase. If someone is now earning $20 an hr after many years of work, he will not get a raise to bring it in proportion to a new-hire at minimum wage. We already have many cleaning help getting $25 an hr for unskilled labor, while the math tutor with a masters degree only gets $35.
Much of poverty today is caused by substance abuse, smoking (very expensive), and by buying prepared foods or fast food. Don't tell me they're too tired to cook after their long working hours, or that they don't have fresh food available as studies have shown that just isn't true. Everyone is tired at the end of the workday, including SAHM's with young children, but that doesn't mean one should have meals prepared for them.
We need to bring Home Ec back into the Middle Schools so that EVERYONE - both boys and girls - learns how to fix simple, inexpensive nutritious meals. Maimonidies said it very well when he said "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime."
When the minimum wage is raised to that degree, the ones hurt are once again the Middle Class as I can promise you, there wages will not increase. If someone is now earning $20 an hr after many years of work, he will not get a raise to bring it in proportion to a new-hire at minimum wage. We already have many cleaning help getting $25 an hr for unskilled labor, while the math tutor with a masters degree only gets $35.
Much of poverty today is caused by substance abuse, smoking (very expensive), and by buying prepared foods or fast food. Don't tell me they're too tired to cook after their long working hours, or that they don't have fresh food available as studies have shown that just isn't true. Everyone is tired at the end of the workday, including SAHM's with young children, but that doesn't mean one should have meals prepared for them.
We need to bring Home Ec back into the Middle Schools so that EVERYONE - both boys and girls - learns how to fix simple, inexpensive nutritious meals. Maimonidies said it very well when he said "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime."
7
Some good ideas...alas if people stop eating out, so many low paying jobs would be lost. Having a smart phone doesn't make up for not having access to affordable health care or a good education.
The company that employs the cleaning help gets $25/hr. The actual cleaner gets less than half.
1
Why on earth would our goal include not affecting the rich? They certainly don't seem to care about anything their policies affect. Affect them.
8
I was poor without any help. Now I am a surgeon and living a good life all because of my hard work. I will find people who really need help and donate half of my income for them. But under no circumstances I will let government take my hard earned money and redistribute it to drug addicts and their kind. Everyone has a choice. If you chose to ruin your life do not expect rich to help you out.
2
The bottom of the income scale is closely correlated to the bottom of the education scale. If someone can't learn basic math & English no one will hire them. Certainly not @ $120 per day.
2
More like $150 per day after adding in employer-paid payroll taxes and benefits.
Given that salaries have to be paid whether an employee is profitable or not, the employer needs to be fairly sure a minimum wage employee is going to contribute at least an additional $200 per day before making a hiring decision.
Is that minimum wage employee going to be bring in an extra $200 per day? Many will not.
Given that salaries have to be paid whether an employee is profitable or not, the employer needs to be fairly sure a minimum wage employee is going to contribute at least an additional $200 per day before making a hiring decision.
Is that minimum wage employee going to be bring in an extra $200 per day? Many will not.
1
Then don't be surprised when your taxes go up, or the national debt increases, to make that person whole.
1
Scheiber is one of my favorite commenters on the economy, his book about the financial crisis a must read. Having said that, I will suggest that Scheiber is avoiding the main issue about inequality: is excessive inequality an economic issue (as opposed to a social issue) and, if so, is excessive inequality self-correcting? The historical evidence indicates that excessive inequality and financial instability are highly correlated, and that excessive inequality is self-correcting absent intervention by the government. What's the historical evidence? 1929 et seq. and 2007 et seq. Of course, the Fed didn't intervene in 1929 and inequality plummeted whereas the Fed did intervene in 2007 and inequality fell somewhat but soon recovered to the pre-crisis level. Am I suggesting that in the next financial crisis, that the Fed not intervene? I'm not crazy, just observant. Are we in for another financial crisis? Yes, if history is our guide. Will the Fed intervene as it did in 2007 et. seq.? Piketty believes so (he says so in his book). Me, I'm not as optimistic (or pessimistic depending on your point of view). The better question is how many times can the Fed manage a financial crisis? My answer: not an infinite number of times. [There's an explanation for the correlation between excessive inequality and financial instability, but there's insufficient space to summarize it here. Scheiber knows the explanation.]
Er, if a huge depression is the way excessive inequality corrects, I think it may be reasonable to avoid excessive inequality in the first place.
4
Simply reducing or eliminating the difference of the tax on income derived from capital versus the tax on earned income would go a long way to reducing inequality. I do note that beginning with the Reagan tax cuts on high earners was the the real beginning of the C-Suite salary boom led by the increase CEO pay. Why pillage the investors for a seven or eight figure income when you would have to pay 60% in taxes? With the Reagan cuts, suddenly the CEO and CFO and COO could keep a lot more of the boodle.
10
It's time to bring back 90% the marginal tax rates in the Eisenhower era (, or maybe something in that direction).
8
Because the entire dozen people that paid it, nationwide, had such a big effect upon tax collection?
When will people learn that the high tax rates were a marketing exercise, meant to comfort people that didn't know any better?
When will people learn that the high tax rates were a marketing exercise, meant to comfort people that didn't know any better?
1
I don't believe the circa 1994 income surge among the lowest earners means squat.
The early 90s recession was in fact a full blown depression with foot-tall stacks of resumes submitted for every crappy job and unemployed college graduates losing not only their freshman through senior year flab through hunger, but much of their muscle mass. I saw it with my eyes. It was like the 30s dust bowl. My friends looked like the Joads. People forget. I don't, and I won't. No nicer than 2008-2012.
But my point: the post recession was not some Clinton miracle: when a recession ends, wages rebound. It's the cycle. Maybe some good policy choices helped get that rebound, but any rebound from starvation income levels will seem like an economic boom.
The early 90s recession was in fact a full blown depression with foot-tall stacks of resumes submitted for every crappy job and unemployed college graduates losing not only their freshman through senior year flab through hunger, but much of their muscle mass. I saw it with my eyes. It was like the 30s dust bowl. My friends looked like the Joads. People forget. I don't, and I won't. No nicer than 2008-2012.
But my point: the post recession was not some Clinton miracle: when a recession ends, wages rebound. It's the cycle. Maybe some good policy choices helped get that rebound, but any rebound from starvation income levels will seem like an economic boom.
5
"If something isn't impossible, there must be a way to do it," said the recently passed away hero Nicholas Winton.
I'm taking my cue from him, and some recent browsing at Martha Nussbaum's attempts to restore classical Greek democratic ethical principles. (And indeed, maybe a bit of Pixar "Inside Out" on the benefits of ostensibly negative emotions.)
DRUMROLL... Tatatatatata.....
SHAME SHAME SHAME. That's how! SHAME the hyper wealthy who "earn" disproportionately to their effort and talent, which together are what people call "merit" and the criteria of FAIRNESS.
On all tax returns, force all filers to sign a statement that their income ratios, is, income relative to average incomes, are DESERVED based on effort and talent. A hedge fund manager or fortunate heir receiving 10,000x a nurse's income should sign a declaration this ratio is warranted based on merit. Most would decline, in which case that should sign a declaration that though not "merited,"it's "legally" earned, and they want to keep the funds.
If they opt for the latter, they should be subject to a wealth tax based on the income ratios of organizations from which their wealth was earned. The higher the ratio (highest earner to lowest), the higher the tax rate, thus incentivizing more equitable pay.
I'm taking my cue from him, and some recent browsing at Martha Nussbaum's attempts to restore classical Greek democratic ethical principles. (And indeed, maybe a bit of Pixar "Inside Out" on the benefits of ostensibly negative emotions.)
DRUMROLL... Tatatatatata.....
SHAME SHAME SHAME. That's how! SHAME the hyper wealthy who "earn" disproportionately to their effort and talent, which together are what people call "merit" and the criteria of FAIRNESS.
On all tax returns, force all filers to sign a statement that their income ratios, is, income relative to average incomes, are DESERVED based on effort and talent. A hedge fund manager or fortunate heir receiving 10,000x a nurse's income should sign a declaration this ratio is warranted based on merit. Most would decline, in which case that should sign a declaration that though not "merited,"it's "legally" earned, and they want to keep the funds.
If they opt for the latter, they should be subject to a wealth tax based on the income ratios of organizations from which their wealth was earned. The higher the ratio (highest earner to lowest), the higher the tax rate, thus incentivizing more equitable pay.
5
Income disparity taxation is a very novel idea and one worth pursuing. Unfortunately, our Congress, who would have to pass these tax laws, are very happy with the status quo.
3
God this is dreadful. Your data is at least. You make the dubious assumption that incomes for the 10% would remain the same if the minimum wage was raised to $15, which is untrue. It's not like the economy would have just remained, if a colossal rise in the federal minimum wage would to take place. If it did, I can assure you the top 10% of wages would not have increased as the rate they did, narrowing the gap,
3
Jake, not saying the the income of the 10% would stay the same, he is saying that EVEN IF the income of the Rich stayed the same, raising the min wage would not reduce inequality much. Big difference.
Get money out of politics and rein in the rent seeking professions. Wall Street is about 4 times as much of the GDP than it was 30 years ago.
Raise taxes and spend more on infrastructure and education.
Raise taxes and spend more on infrastructure and education.
7
Bill Clinton has noted that the country lost manufacturing jobs during the 8 years after he left the White House. But it also lost those jobs while he was in office.
The US lost 140,000 manufacturing jobs in 1998, 170,000 in 1999, and 99,000 in 2000.
Those were a vital source of well-paying jobs for those without college degrees, regardless of the overall economic growth of the US.
The US lost 140,000 manufacturing jobs in 1998, 170,000 in 1999, and 99,000 in 2000.
Those were a vital source of well-paying jobs for those without college degrees, regardless of the overall economic growth of the US.
6
For starters, let's recognize that the range of variation in human abilities and skills in vastly smaller than the current range in compensations. IQ, height, strength, endurance, sensory acuity, motivation, you name it all vary by a factor of maybe 3 between the most gifted individuals and the average of the bottom 10%.
It seems to me we should adjust the tax rates to cap the take-home ratio (all forms of compensation, not just wages) so that no one brings home more than, say, 100 times the average of the lowest 10 percent. That leaves plenty of room for aspiration and achievement. Setting a maximum ratio (rather than a fixed dollar bracket) would provide a unique incentive structure to the wealthiest, namely: In order to take home more, figure out how to improve the lot of those at the bottom.
It seems to me we should adjust the tax rates to cap the take-home ratio (all forms of compensation, not just wages) so that no one brings home more than, say, 100 times the average of the lowest 10 percent. That leaves plenty of room for aspiration and achievement. Setting a maximum ratio (rather than a fixed dollar bracket) would provide a unique incentive structure to the wealthiest, namely: In order to take home more, figure out how to improve the lot of those at the bottom.
17
An important engine of growth in the US is venture capital. This is what allows California to be rich enough to pay its bills (sometimes with difficulty) rather than having to declare bankruptcy.
Venture capital depends upon getting the occasional 100X+, and more commonly a 10X+ return in order to justify the majority of companies that go bankrupt. Important wins like this include Google, Apple, Sun Microsystems, and Facebook, all US champions either during the past or now. These companies collectively have made 10s of thousands of people into millionaires.
Do what you ask, and you kill California.
Venture capital depends upon getting the occasional 100X+, and more commonly a 10X+ return in order to justify the majority of companies that go bankrupt. Important wins like this include Google, Apple, Sun Microsystems, and Facebook, all US champions either during the past or now. These companies collectively have made 10s of thousands of people into millionaires.
Do what you ask, and you kill California.
1
The rentier-class calls themselves "job creators." The plain fact is that they have not been creating many jobs, particularly not creating good jobs, for the middle class and below.
The US is no longer "the land of opportunity:" homesteading ended long ago. Everything is owned, and increasingly a very few people own the overwhelming fraction.
It is the nature of wealth and empire for the wealthy to use the power of their wealth to avoid taxation -- to shift the taxation onto the lower classes. This is "clientelism" writ large, or even outright oligopoly. It is the way nations die -- the Roman Empire died this way, the French and Russian revolutions happened this way.
When Romney talked about "the takers" he was using rentier dog-whistle language for "these people have no right to live, we don't want them anymore." We all got it, Mitch.
Those are the people who fought WWII and are now very old. They are the people who fought in Viet Nam and are now my age -- many of them never got a good job afterwards. And many who fought in Afghanistan or Iraq are unemployed, or scrambling to stay afloat working several burger-flipping/retail jobs.
All of the "little people" are the customers, those who pay rent.
Henry Ford understood that capitalism meant creating a market for the products; that wages needed to be enough so that people could have some discretionary income.
People should read "Tin Horns and Calico" -- about the rent wars, and think.
The US is no longer "the land of opportunity:" homesteading ended long ago. Everything is owned, and increasingly a very few people own the overwhelming fraction.
It is the nature of wealth and empire for the wealthy to use the power of their wealth to avoid taxation -- to shift the taxation onto the lower classes. This is "clientelism" writ large, or even outright oligopoly. It is the way nations die -- the Roman Empire died this way, the French and Russian revolutions happened this way.
When Romney talked about "the takers" he was using rentier dog-whistle language for "these people have no right to live, we don't want them anymore." We all got it, Mitch.
Those are the people who fought WWII and are now very old. They are the people who fought in Viet Nam and are now my age -- many of them never got a good job afterwards. And many who fought in Afghanistan or Iraq are unemployed, or scrambling to stay afloat working several burger-flipping/retail jobs.
All of the "little people" are the customers, those who pay rent.
Henry Ford understood that capitalism meant creating a market for the products; that wages needed to be enough so that people could have some discretionary income.
People should read "Tin Horns and Calico" -- about the rent wars, and think.
17
Why don't we stop chasing a "pipe-dream" of income inequality and instead focus on effective education and job creation in industries where those better educated can earn more money. Seems to be a more direct, cheaper, more effective way of returning the "American dream" back to its people. Enough or assumption- and rhetoric-laden discussions of taking away from these and giving it to those.....
7
The reason is that if you remove the Rich from the group of the college educated, the income of the remaining people has stagnated similarly to that of the people without college degrees. The reason that the income of the college educated has risen is that the Rich get college degrees and the income of the Rich has gone up like a rocket.
4
Sorry, but the pipe dream you speak of was a reality when the uber rich paid high taxes and tax polices favored investment instead of speculation. They income has been "taken away" from working people for years via stagnant wages and higher taxes on them. We are quickly headed into the age of robotics and somebody better get their head out of the sand and figure out what we are going to do with the millions of people who will not have jobs or a way to make a living.
5
But how do you pay for better more effective education and job creation? The money has to come from somewhere, and once upon a time, it was by taxing higher-income individuals at a higher rate. You cannot have it both ways.
1
I'd like to see prominent liberals speak of income inequality
as being an undesirable concentration of wealth and power. This is
an idea that would find favor with many libertarians and
conservatives as well.
as being an undesirable concentration of wealth and power. This is
an idea that would find favor with many libertarians and
conservatives as well.
4
Both Hillary and Bernie have done so.
4
Raising the minimum wage to $15 would probably reduce the incomes of the wealthy (though not by much) because that would be that much less they were able to "vacuum up."
Right now the share of GDP going to wages and salaries is at an historic low, with more income flowing to capital than at any other time. Globalization and immigration have been used as a double hammer to "reduce labor inputs" as a conservative economist charmingly phrased it in a recent Times op-ed.
Reducing labor inputs, that is, reducing the incomes of their fellow citizens so they can have more for themselves, is the primary goal of the ownership class. But since they own the government we aren't going to be able to force them to cut us any slack. And voting for Bernie isn't going to change that unless we also vote in a very different set of congressmen and senators to work with him.
Right now the share of GDP going to wages and salaries is at an historic low, with more income flowing to capital than at any other time. Globalization and immigration have been used as a double hammer to "reduce labor inputs" as a conservative economist charmingly phrased it in a recent Times op-ed.
Reducing labor inputs, that is, reducing the incomes of their fellow citizens so they can have more for themselves, is the primary goal of the ownership class. But since they own the government we aren't going to be able to force them to cut us any slack. And voting for Bernie isn't going to change that unless we also vote in a very different set of congressmen and senators to work with him.
10
Another Times article noted that history has two ways of dealing with the concentration of wealth and power - taxation and revolution.
The difficulty in using the tax code is that we don't have enough tax brackets to claim a progressive system and make the accumulation of wealth and power undesirable. We used to have about 15 brackets that divide the three major groups (Lower, Middle and Upper) into quintiles with progressively higher marginal taxes with each dollar on the tax ladder getting the "Flat" treatment for its bracket. Then JFK lowered the top brackets, not by re-indexing the system but by eliminating the top brackets. More brackets were eliminated by Reagan.
Today the Upper Middle income earners are in the same bracket as the ultra wealthy but without the ability to manage their income so that they don't pay taxes like the top income earners in the same bracket (The same is true for business taxes). Any attempt to "Tax the Rich" slams the upper middle class and small businesses all because of the elimination of brackets.
Re-instituting more brackets will raise a campaign against complicating taxes (actually the deductions are what complicate taxes). Nobody will pay attention to the fact that the high marginal taxes of the 1950's drove the behavior to invest in the company not compensate the executives.
The difficulty in using the tax code is that we don't have enough tax brackets to claim a progressive system and make the accumulation of wealth and power undesirable. We used to have about 15 brackets that divide the three major groups (Lower, Middle and Upper) into quintiles with progressively higher marginal taxes with each dollar on the tax ladder getting the "Flat" treatment for its bracket. Then JFK lowered the top brackets, not by re-indexing the system but by eliminating the top brackets. More brackets were eliminated by Reagan.
Today the Upper Middle income earners are in the same bracket as the ultra wealthy but without the ability to manage their income so that they don't pay taxes like the top income earners in the same bracket (The same is true for business taxes). Any attempt to "Tax the Rich" slams the upper middle class and small businesses all because of the elimination of brackets.
Re-instituting more brackets will raise a campaign against complicating taxes (actually the deductions are what complicate taxes). Nobody will pay attention to the fact that the high marginal taxes of the 1950's drove the behavior to invest in the company not compensate the executives.
55
With today's computers we can calculate tax-rates times tax-base on whatever increment you want, and it would be surprising that the well-off couldn't afford to do the calculations. For those who have high economic means, you don't need "brackets" to define which tax-base gets you to which tax-rate you are to apply (we do want to bracket-off lower income folks, in fairness it is proper economics to lighten the overall effect of tax burdens to minimize the competition on what is left).
But one of the real ways to do this is to make "brackets" that define the tax-base subject to the tax-rate defined first by Net Worth of the taxpayer. A person of few means feels the burden of a tax strongly, by the same economic logic, a person of high net worth simply does not share the same sense of burden, regardless how flat or high the rate is. In other words, if you are in the high bracket(s), defined first by your Net Worth, all of your new income is on the margin (we currently use an artificial definition of the 'wherewithal' the person has available to them, giving people brackets defined only by 12-month views of 'marginal' income). We can define income subject to tax in a different and economically fairer way.
In this suggested "bracketing" approach, people of significant net worth will find their fair-tax burden defined by instructions on how to calculate a tax base (properly seeing all new income in it) and its tax-rate. People of lesser means are in other brackets.
But one of the real ways to do this is to make "brackets" that define the tax-base subject to the tax-rate defined first by Net Worth of the taxpayer. A person of few means feels the burden of a tax strongly, by the same economic logic, a person of high net worth simply does not share the same sense of burden, regardless how flat or high the rate is. In other words, if you are in the high bracket(s), defined first by your Net Worth, all of your new income is on the margin (we currently use an artificial definition of the 'wherewithal' the person has available to them, giving people brackets defined only by 12-month views of 'marginal' income). We can define income subject to tax in a different and economically fairer way.
In this suggested "bracketing" approach, people of significant net worth will find their fair-tax burden defined by instructions on how to calculate a tax base (properly seeing all new income in it) and its tax-rate. People of lesser means are in other brackets.
3
JF, et al.,
What you are proposing is a Wealth Tax, not an income Tax. Could that be done? From a purely technical perspective: Yes. From a political perspective: highly doubtful.
The problem with a wealth tax is the assessment of value of personal property as not all wealth shows up on spreadsheets and financial statements. It is also possible to hold valuables outside of the taxing jurisdiction or simply out of sight of the assessor (that box of gold coins underneath the basement floor).
My argument for more income tax brackets is that a high enough marginal tax on incomes above a certain point make it untenable to pay executives 400 times that of the average employee of the corporation. (And creating a pack of highly paid executives under the CEO.) With high marginal rates the calculation says it makes more sense to invest in the business to create new products and services that will, in turn, create more jobs which will create more demand, which creates a larger market for more goods and services (a.k.a., the virtuous cycle).
What you are proposing is a Wealth Tax, not an income Tax. Could that be done? From a purely technical perspective: Yes. From a political perspective: highly doubtful.
The problem with a wealth tax is the assessment of value of personal property as not all wealth shows up on spreadsheets and financial statements. It is also possible to hold valuables outside of the taxing jurisdiction or simply out of sight of the assessor (that box of gold coins underneath the basement floor).
My argument for more income tax brackets is that a high enough marginal tax on incomes above a certain point make it untenable to pay executives 400 times that of the average employee of the corporation. (And creating a pack of highly paid executives under the CEO.) With high marginal rates the calculation says it makes more sense to invest in the business to create new products and services that will, in turn, create more jobs which will create more demand, which creates a larger market for more goods and services (a.k.a., the virtuous cycle).
4
GNWells - An income tax, but a different way to define which set of instructions apply to your bracket.
And your complaints about reporting of economic activities hold for any type of tax regime, they all depend on honest portrayals and oversight of the filings. But in terms of which bracket you identify as your Net Worth when filing your income taxes it would be a broad range so the details of reported values aren't expected, just identify the range you fit in to for this year's income tax purposes (and I'd suspect that you only need to provide added schedules for those of over say $10 M Net Worth compared to those with $50 M - everyone else would be in the normal schedules). The rates in any bracket depends on the amount of needed revenue, sufficient to meet the policy-purposes of the times. I can't imagine the rates being much higher in these additional, higher brackets, a few percentage points above the normal schedules. More revenues are collected though because less new income is bracketed-off or excluded.
But once we apply the proper definition of marginal income (which is all that is being proposed really), one might expect to see lower rates in the brackets used by most taxpayers. You could set the bracketing-thresholds lower to push more into the higher brackets, depending on the economics or other policy interests (say you want to remedy the fact that windfalls were collected in prior periods, concentrating net worth by way of distorted economics).
And your complaints about reporting of economic activities hold for any type of tax regime, they all depend on honest portrayals and oversight of the filings. But in terms of which bracket you identify as your Net Worth when filing your income taxes it would be a broad range so the details of reported values aren't expected, just identify the range you fit in to for this year's income tax purposes (and I'd suspect that you only need to provide added schedules for those of over say $10 M Net Worth compared to those with $50 M - everyone else would be in the normal schedules). The rates in any bracket depends on the amount of needed revenue, sufficient to meet the policy-purposes of the times. I can't imagine the rates being much higher in these additional, higher brackets, a few percentage points above the normal schedules. More revenues are collected though because less new income is bracketed-off or excluded.
But once we apply the proper definition of marginal income (which is all that is being proposed really), one might expect to see lower rates in the brackets used by most taxpayers. You could set the bracketing-thresholds lower to push more into the higher brackets, depending on the economics or other policy interests (say you want to remedy the fact that windfalls were collected in prior periods, concentrating net worth by way of distorted economics).
Privatize education with loans nobody can repay, privatize healthcare that only the healthy can pay. And heaven forbid that you raise the minimum wage. If anyone complains the rich scream "Class War" which in truth it is. The Rich may think this war is against them, in truth it is the war they are doing against all the rest of us.
87
This applies to every income disparity. If you work in Tech you have a a good salary by national standards (not so good given Silicon Valley cost of living).
Your CEO makes an insane multiple of what you make.
The engineers in my company get 2% salary increases but the CEO gets 10-20%. This does not reflect his "value add" to the corporate revenue in my estimation.
I think we need to curtail CxO level salaries as the primary approach to addressing income equality.
Your CEO makes an insane multiple of what you make.
The engineers in my company get 2% salary increases but the CEO gets 10-20%. This does not reflect his "value add" to the corporate revenue in my estimation.
I think we need to curtail CxO level salaries as the primary approach to addressing income equality.
39
In tech, the CEO can make a massive difference.
Apple thrived when Steve Jobs was there, struggled when he was kicked out, and thrived again when he returned. Apple hasn't had a single new hit since Steve's passing but so far is living off of his products. Microsoft was a juggernaut under Bill Gates and began its decline after he left.
The tech job market is also highly competitive. If you are being underpaid, you can easily find another job in the Bay Area, or better yet, start your own company. Nothing is stopping you, except yourself.
Apple thrived when Steve Jobs was there, struggled when he was kicked out, and thrived again when he returned. Apple hasn't had a single new hit since Steve's passing but so far is living off of his products. Microsoft was a juggernaut under Bill Gates and began its decline after he left.
The tech job market is also highly competitive. If you are being underpaid, you can easily find another job in the Bay Area, or better yet, start your own company. Nothing is stopping you, except yourself.
The ones at the top have taken all of the wealth from the bottom. We are living through the largest transfer of wealth to the top 1% in our nation's history, thanks in a large part, to the gutless and worthless federal reserve.
11
The greatest pressure on the bottom class is seepage from the middle class into its ranks. "Stagnant" middle class wages is a misnomer. What is really happening is not some nice, smooth, average income freeze, but a bifurcation in the middle class, where a few at the upper end are gaining income but many more at the bottom are slipping into poverty or near poverty status. This drop in status is especially true among families of color, short sellers of property, and victims of vicious off-shoring. Go get 'em Bernie Sanders. This is your time to shine!
30
Converting tax deductions to tax credits on mortgage interest, state and property taxes and retirement savings will help significantly with tax fairness and will also reduce distortions in the real estate market, with top tax rates now at 39.6%.
3
It's not really inequality, it is poverty.
The purpose for taxing the rich is to make government that will lift people out of poverty.
Getting good schools, people educated and working and paying taxes instead of welfare or in prison.
But changing the culture of poverty is not only costly, it is a lot of work. Much easier to cut a welfare check or run a prison.
The purpose for taxing the rich is to make government that will lift people out of poverty.
Getting good schools, people educated and working and paying taxes instead of welfare or in prison.
But changing the culture of poverty is not only costly, it is a lot of work. Much easier to cut a welfare check or run a prison.
11
It is inequality -- because economic inequality necessarily and systematically breeds political inequality -- it undermines democracy. And then the rich use their political power to enact policies that further increase inequality -- the vicious cycle we have been living since the 1980s.
1
"The Clinton years had very impressive economic growth over all, some of which benefited families in the bottom 90 percent. But a majority of the growth benefited those in the top 10 percent, who took home nearly two-thirds of all the income gains as a group."
In particular, this: that the top 10% took home nearly two-thirds of all the income gains.
It turns out, two-thirds wasn't enough. Over the past several years, they're taking home far more than two thirds. More like 90%.
It would be great if we could crawl our way back to the crumbs we were getting in the 1990s.
In particular, this: that the top 10% took home nearly two-thirds of all the income gains.
It turns out, two-thirds wasn't enough. Over the past several years, they're taking home far more than two thirds. More like 90%.
It would be great if we could crawl our way back to the crumbs we were getting in the 1990s.
14
The Comedy Party advocates Welfare for All, replacing the welfare now paid only to the rich and the poor. Today, the poor receive food stamps, sometimes rent stamps, and sometimes tax refunds. The rich receive much more,, millions for each non-working farmer for example. The rest of us get nothing.
If everyone received a payment equal to the poverty level plus $1, there would no longer be any poverty. The economy would boom because demand would zoom upward. The rich would become a little more rich, but the 99% would do a lot better.
This has been tried in Canada and on US Indian reservations. It works. The cost would be less than the middle East wars, and could be paid by taxing unearned income of the rich (i.e., inheritance). Senator McGovern liked the idea.
To see this and other common sense steps, go to YouTube and watch Comedy Party Platform (2 min 9 sec). Then invite me to speak to your group and send a buck to Bernie. Thanks.
If everyone received a payment equal to the poverty level plus $1, there would no longer be any poverty. The economy would boom because demand would zoom upward. The rich would become a little more rich, but the 99% would do a lot better.
This has been tried in Canada and on US Indian reservations. It works. The cost would be less than the middle East wars, and could be paid by taxing unearned income of the rich (i.e., inheritance). Senator McGovern liked the idea.
To see this and other common sense steps, go to YouTube and watch Comedy Party Platform (2 min 9 sec). Then invite me to speak to your group and send a buck to Bernie. Thanks.
8
If everyone received the poverty level plus $1, the poverty level would adjust upwards. That so many people that read the NY Times fail this basic reasoning test worries me about the future of this nation.
3
My local Aldi advertises " management trainee positions at $ 24 an hour. Requirement High school diploma or equivalent .
I pointed that out to a Walmart employee. She seemed hesitant to consider s switch - something that still puzzled me:
Until I looked at glasswort reviews:
Pros
"Great starting pay and benefits" (in 52 reviews)
Cons
Pros :
"Work-life balance is nonexistent" (in 35 reviews)
First review :
Great company, great pay, great benefits, autonomy, many perks, great colleagues and leaders, lots of training opportunities, a company that truly cares for its employees and puts people first.
Cons
It's a challenging job but I wouldn't call that a "con"... I love my job.
My conclusion is that you still can move up in today's US but you must work harder than when I was young , globalization and immigration having taken its toll.
I pointed that out to a Walmart employee. She seemed hesitant to consider s switch - something that still puzzled me:
Until I looked at glasswort reviews:
Pros
"Great starting pay and benefits" (in 52 reviews)
Cons
Pros :
"Work-life balance is nonexistent" (in 35 reviews)
First review :
Great company, great pay, great benefits, autonomy, many perks, great colleagues and leaders, lots of training opportunities, a company that truly cares for its employees and puts people first.
Cons
It's a challenging job but I wouldn't call that a "con"... I love my job.
My conclusion is that you still can move up in today's US but you must work harder than when I was young , globalization and immigration having taken its toll.
4
It is harder because there is less opportunity and fewer openings and more competition for the openings that do exist. It is harder to move up because globalization and immigration have made things more competitive. A few people manage to move up in any economy, so moving up is always possible and only exaggerators say it is not. The question is how many people succeed, and what happens to the half that are below average.
5
Forget about fairness or morality. Let's just look at economics to see why inequality is bad.
Experiments are hard to come by in economics, but we have a couple in the US to look at since WWI. There have been two medium long periods of very high inequality (Gini about 0.5), the 1920's and the 2000's. Both led to periods of disastrous economics, On the other hand, there was the long period of 1946 - 1973 (Gini about 0.25) which was a period of great prosperity. Since I do not place much faith in any economic theory, this evidence makes me believe that high inequality is very bad for the country.
But I know people like explanations. They want to know why. So I'll give it a shot.
1. Inequality depresses demand. A non-rich person must spend a greater percentage of his income to live than a Rich one. When many people are out of work, or are underpaid, when inequality is high, the non-rich do not have enough money to buy the stuff they need or want. They may want a new car, but they cannot afford it. This means businesses are not expanding because they do not have enough customers. You cannot create demand out of thin air. It requires getting money to people to spend it.
2. Inequality encourages financial speculation. What do the Rich do when they have so much money they cannot remember how many houses they own? They speculate with it. There is a definite correlation.. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746
What does wild speculation do? See 1929 & 2008
Experiments are hard to come by in economics, but we have a couple in the US to look at since WWI. There have been two medium long periods of very high inequality (Gini about 0.5), the 1920's and the 2000's. Both led to periods of disastrous economics, On the other hand, there was the long period of 1946 - 1973 (Gini about 0.25) which was a period of great prosperity. Since I do not place much faith in any economic theory, this evidence makes me believe that high inequality is very bad for the country.
But I know people like explanations. They want to know why. So I'll give it a shot.
1. Inequality depresses demand. A non-rich person must spend a greater percentage of his income to live than a Rich one. When many people are out of work, or are underpaid, when inequality is high, the non-rich do not have enough money to buy the stuff they need or want. They may want a new car, but they cannot afford it. This means businesses are not expanding because they do not have enough customers. You cannot create demand out of thin air. It requires getting money to people to spend it.
2. Inequality encourages financial speculation. What do the Rich do when they have so much money they cannot remember how many houses they own? They speculate with it. There is a definite correlation.. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746
What does wild speculation do? See 1929 & 2008
60
Inequality makes financial speculation (except for lotteries and such) possible. Financial speculation happens when there is more money to invest than there are good investments.
3
A couple of observations: 1)I believe the Piety/Saez data includes capital gains, 2)The period 2009-2014 saw a major bull market, resulting from the fed-induced drop in interest rates. It is not surprising that the result is huge "income" for those with large equity positions. The results would look quite different if the starting/ending points encompassed a bear market--say 2007 to 2009. Also, consider that the Internal Revenue Code requirements on deductibility of executive compensation have driven a major shift to equity based deferred compensation, which also distorts average income numbers during the bull phase of the equity markets. The biggest thing that could be done to reduce inequality as reported here would be for the fed to raise interest rates sharply. Everybody would be poorer, but the property owning classes would see a bigger percentage drop in reported income as capital gains disappear.
2
The idea that low-income workers' wages could be raised by increasing the minimum wage is a chimera.
If the existing minimum-wage workers can't do $15 worth of work an hour, then they will not be hired. Their jobs will be taken by others who can do $15 an hour worth of work.
In order to raise up the people at the bottom, we have to increase their skills and education so that they have more to offer to employers. Otherwise, they will simply be shuttled aside, and join the permanently unemployed.
If the existing minimum-wage workers can't do $15 worth of work an hour, then they will not be hired. Their jobs will be taken by others who can do $15 an hour worth of work.
In order to raise up the people at the bottom, we have to increase their skills and education so that they have more to offer to employers. Otherwise, they will simply be shuttled aside, and join the permanently unemployed.
6
Just what determines what $15 worth of work per hour is? Someone has to hand the burgers to the SUV driver! Let the SUV driver pay more for burgers!
23
Reality does not work that way. Many low-paying jobs, such as home health care aide or convenience store clerk, consist largely of being around until needed. An hour of standing around waiting is always worth the going rate if someone is needed to wait.
8
That's the dilemma, RDeanB.
At some tipping point, employers may decide it is more profitable to automate burger delivery.
At some tipping point, employers may decide it is more profitable to automate burger delivery.
4
Income inequality is real; but there I don't see how raising taxes on upper income people will have an impact on their income. Raising taxes will certainly effect their net income; but it won't have an impact on their gross wages, or, the gross incomes for everyone else.
Lowering taxes on the middle and working class does not change the gross wages of those people either; it merely increases their net income.
The facts, figures, and percentages that are cited by economists, pundits, and politicians alike all deal with gross incomes.
Lowering taxes on the middle and working class does not change the gross wages of those people either; it merely increases their net income.
The facts, figures, and percentages that are cited by economists, pundits, and politicians alike all deal with gross incomes.
2
The last sentence is not true. P& S have a lot of work that looks at the difference between gross income and income after taxes and government payments. Also Krugman's new friends, Janet Gornick and Branko Milanovic at the CUNY Graduate Center’s Luxembourg Income Study Center are looking hard at this point, e.g. http://www.gc.cuny.edu/CUNY_GC/media/CUNY-Graduate-Center/PDF/Centers/LI...
It's a hot topic.
It's a hot topic.
5
Wrong. Steeply progressive taxes would have the effect of lowering gross earnings as a reflexive reaction. Why get paid more if you won't be able to spend or invest it?
5
Raise the taxes and then pay for infrastructure maintenance and construction, and similar programs to the 30s. Make the government the employer of last resort. Get those bridges in shape!
2
The blind greed of our capitalist culture ignores the obvious: If you pay the workers more they will spend more and it will end up in the pockets of the 1 percent anyway.
I see WalMart employees shopping at WalMart all the time. I see Burger King employees hauling meals home at the end of their shifts. If they made more money, they would buy more.
That's so simple I can't see how corporate executives fail to notice: More money to workers will mean more money to the corporation.
Oh, and yes, we should return the tax rates to the Eisenhower years, dust off the Sherman AntiTrust Act and jail Wall Street executives who destroyed the economy.
As soon as wages are significantly raised.
I see WalMart employees shopping at WalMart all the time. I see Burger King employees hauling meals home at the end of their shifts. If they made more money, they would buy more.
That's so simple I can't see how corporate executives fail to notice: More money to workers will mean more money to the corporation.
Oh, and yes, we should return the tax rates to the Eisenhower years, dust off the Sherman AntiTrust Act and jail Wall Street executives who destroyed the economy.
As soon as wages are significantly raised.
75
A few years ago I heard two WalMart employees talking at the checkout. One said, with enthusiasm, "We get paid today." The other smiled, then said "Yeah, but I'll just turn around and spend it all here." It reminded me of the movie Matewan.
3
You reflect the conservative thinking of Henry Ford, no friend of the working man, but smart enough to recognize he created a market for his cars by paying his employees enough to buy one.
1
I'm pretty sure if you pay those employees more they won't be shopping at WalMart or Burger King more. If anything they will have the ability and desire to shop elsewhere!
"As a practical matter, it’s highly unlikely that you could increase income growth for the bottom 90 percent without also lifting income growth for those at the top, thereby increasing inequality."
Is this a problem?
This article illustrates that focusing on "inequality" is pointless misdirection. What does it matter what the 1% or 10% make? If they are taxed more to reduce their earnings narrowing the gap will lower paid worker be better off?
Focusing on pathways to better paying jobs is a worthwhile goal. Fixating on the spread in not.
Is this a problem?
This article illustrates that focusing on "inequality" is pointless misdirection. What does it matter what the 1% or 10% make? If they are taxed more to reduce their earnings narrowing the gap will lower paid worker be better off?
Focusing on pathways to better paying jobs is a worthwhile goal. Fixating on the spread in not.
14
It would be one thing if, during the Clinton years, that, say, 1/3rd of all of the total growth in income in the United States went to the top 10% and 2/3rds to the bottom 90%; at least the smaller group would have got the smaller share. But it was the opposite! Surely you don't believe that there is no point at which too-high growth rates for the compensation of the wealthiest reduces the share for everyone else– especially in this era of lower growth rates?
1
The spread certain matters if those at the bottom are struggling. The spread certainly matters if it drives up real estate and other prices in ways that other can't keep up with. And more tax revenue could go toward upgrading our infrastructure, and basic research, which would create jobs.
8
Yes, it is a problem. First of all, the Rich spend a much smaller part of their income so the money they have does not help as much with commerce. Then you have to ask what do they do with their money. The answer is clear. They speculate with it. To see the effects of wild speculation see 1929 and 2008.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 shows the correlation between inequality and speculation.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 shows the correlation between inequality and speculation.
16
The rich got a lot richer when their tax rates plummeted to near historic lows. Is it a surprise to anyone that asking the rich to pay more income tax/capital gains/estate taxes is the probably the best way to bring some equality back to our economy? That fix is way overdue. Seems like the nation could regain some of the greatness and prosperity it once had if we simply went back to the more historically progressive rates.
94
Yeah, Piketty & Saez have data on that that includes the taxes on corporations owned by the Rich. http://elsa.berkeley.edu/~saez/piketty-saezJEP07taxprog.pdf
For the super Rich, the top 0.01%, for example, overall tax rates have been cut in half from 1960 to 2004, or to put it differently, after tax income for this group has doubled due to policy alone. And remember we were in the Great Prosperity in 1960.
For the super Rich, the top 0.01%, for example, overall tax rates have been cut in half from 1960 to 2004, or to put it differently, after tax income for this group has doubled due to policy alone. And remember we were in the Great Prosperity in 1960.
10
How much more "progressive" should they be? The top 1% of income earners already pay more than 35% of federal income taxes. And please don't trot out the tired line of 90% marginal tax rates in the Eisenhower era. Unless you bring back all of the deductions, eliminate the entitlement programs created since then, and devastate the rest of the world's economies through WWII (eliminating competition), the argument is meaningless.
12
James is the one who is trotting out tired old lines that have been refuted over and over right here in this blog.
First of all the S & P figures I gave are overall rates which is the tax rate actually paid which is after all those deductions. It is true that few people paid these overall rates. I had to look at the 0.01%, but that was because few people took outrageous compensation. There were several reason for this, but one was the very high marginal rates. After all. why fight for the extra mil if you have to give 90% of it to the government?
Then he repeats the Europe was rubble myth. Look at the graph on Page 60 of Piketty's book. It shows the percent of the world's output from the various regions, America, Europe, Africa, and Asia, from 1700 - 2012. During the the post WWII period Europe's percentage was constant at about 38%. America's went down from slightly more than Europe's to slightly less.
You could also look at our balance of trade which fluctuated a bit around zero. We did not get prosperity off of others.
English and French industries were largely untouched during the war. Of course it would have taken a miracle for Germany to quickly recover, but if you look up "German Miracle" or "Wirtschaftswunder", you can see that was exactly what happened.
I fail to see what Medicare has to do with this discussion.
First of all the S & P figures I gave are overall rates which is the tax rate actually paid which is after all those deductions. It is true that few people paid these overall rates. I had to look at the 0.01%, but that was because few people took outrageous compensation. There were several reason for this, but one was the very high marginal rates. After all. why fight for the extra mil if you have to give 90% of it to the government?
Then he repeats the Europe was rubble myth. Look at the graph on Page 60 of Piketty's book. It shows the percent of the world's output from the various regions, America, Europe, Africa, and Asia, from 1700 - 2012. During the the post WWII period Europe's percentage was constant at about 38%. America's went down from slightly more than Europe's to slightly less.
You could also look at our balance of trade which fluctuated a bit around zero. We did not get prosperity off of others.
English and French industries were largely untouched during the war. Of course it would have taken a miracle for Germany to quickly recover, but if you look up "German Miracle" or "Wirtschaftswunder", you can see that was exactly what happened.
I fail to see what Medicare has to do with this discussion.
8
The suggestion is that Clinton had much to do with economic growth, when in fact economic growth was driven by the move the PC and the advent of the internet, neither of which Clinton had anything to do with, other than get out of the way. There are jobs which are never coming back - for people in their 40s, 50s, and 60s, who do not have technological savvy, high paying jobs are largely a thing of the past. People of all ages that embrace technology and change, and are educated or educate themselves in the new economy, will do quite well. Let's focus on job growth, and not nibble at the edges with the minimum wage. Develop infrastructure programs, trade schools, and a more equitable education system. Then we will see real job and wage growth.
13
We had "infrastructure programs, trade schools, and a [more] equitable education system." What happened to them? We *privatized* them... sold them for pennies-on-the-dollar (and sold-out the children, and their children, and their children's children).
People who "embrace technology" are nothing more than consumers of higher-priced toys.
People who "embrace technology" are nothing more than consumers of higher-priced toys.
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This has to be one of the most politically intractable problems we have in the U.S., given that money drives politics. It will take a candidate with incredible fortitude to use the money to get elected, the propose solutions that will bite those feeding hands.
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Have you heard of Bernie Sanders?
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Bernie!
4
It will take a
constitutional amendment.
Money is not speech.
Corporations are not people.
Easy.
constitutional amendment.
Money is not speech.
Corporations are not people.
Easy.
4
This seems quite confused and confusing. For example, the argument about raising the minimum wage. I believe that is a good idea. However, even so, I don't believe GDP will grow by the amount added to the wages of the underpaid. If so, where is that money coming from? Corporate profits? And so, eventually, dividends paid to the 10%? then it WILL decrease income of the top 10%, in contrast to the claims in the article. Please, reason a bit more carefully before coming to conclusions you like. It might make a difference.
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bruce - Here are two possible sources of the money.
1. Printed by the FED and spent by the federal government,
2. An improvement in our foreign trade balance.
Both of which are unlikely. The reason the author made the assumption that the income of the Rich would not be affected was that he is saying that the center left to extreme right guys are sprouting nonsense when they say the inequality can be significantly reduced without reducing the income of the Rich.
1. Printed by the FED and spent by the federal government,
2. An improvement in our foreign trade balance.
Both of which are unlikely. The reason the author made the assumption that the income of the Rich would not be affected was that he is saying that the center left to extreme right guys are sprouting nonsense when they say the inequality can be significantly reduced without reducing the income of the Rich.
1