This seems to have stimulated a lot of discussion and some well thought out opinions. It seems we all think we have the solution and if only we could be the king it would be easy. I think this is a very complex issue, both politically and economically, so I don't have an answer. What does seem to be the case is that before the Industrial Revolution, politicians like Jefferson could imagine a democracy of subsistence farmers who were all independent. The rise of Industry made that concept quaint, added enormous wealth to our system and made the middle class better off. All this worked perfectly while we grew markets and innovated new goods like dishwashers that made us more productive in our lives. But maybe we have come to an end to that. Maybe IPhones aren't that usefull, Pokemon may be dangerous, and football jerseys or life is good caps are not going to continue to sell. What keeps our economy and jobs going is to some large degree junk or vanity. Health Care is expensive and does not return the cost in real terms.
So the thing is that we may be faced with a completely new economic model which will require a new political model as the Industrial age peters out. Automation, robots and artificial intelligence may put the middle class into a downward spiral. Just like we are kind of trying to get through Post Nationalism, we may be just starting to approach Post Industrialism. I don't know. I for one don't have the answer, but I worry about it.
So the thing is that we may be faced with a completely new economic model which will require a new political model as the Industrial age peters out. Automation, robots and artificial intelligence may put the middle class into a downward spiral. Just like we are kind of trying to get through Post Nationalism, we may be just starting to approach Post Industrialism. I don't know. I for one don't have the answer, but I worry about it.
26
In 1879 a wise man published a book called "Progress and Poverty" and between 1880 and 1900, about 6 million copies were sold. Everyone knew its ideas. It was radical. It was based on the radical notions that we were all equally entitled to life, liberty, pursuit of happiness, and that the earth was made for all of us, not for the few. It laid out its analysis step by step. While many rich and powerful people didn't like its implications, no one was able to refute its assertions, and no one has yet come up with a better remedy for the problem of advancing technological and other progress leading to concentrating wealth, widening and deepening poverty and economic inequality.
Dr. Shiller's partner Chip Case knew the book, but I've not seen any evidence that Bob Shiller has read it recently.
We permit -- even encourage -- rent-seeking behavior, instead of treating natural resources, including but not limited to the value of our land, as our common treasure. A simple alteration of our existing property tax -- untaxing buildings and placing higher taxes on land value -- would be the first step. It would lower the cost of housing and increase its supply in places where more housing is needed.
Few of today's academic economists seem to have any familiarity with the concept, perhaps because their instructors a generation ago didn't find it in their own careers' best interests to teach best practices.
The book is online. Read it for yourself!
Dr. Shiller's partner Chip Case knew the book, but I've not seen any evidence that Bob Shiller has read it recently.
We permit -- even encourage -- rent-seeking behavior, instead of treating natural resources, including but not limited to the value of our land, as our common treasure. A simple alteration of our existing property tax -- untaxing buildings and placing higher taxes on land value -- would be the first step. It would lower the cost of housing and increase its supply in places where more housing is needed.
Few of today's academic economists seem to have any familiarity with the concept, perhaps because their instructors a generation ago didn't find it in their own careers' best interests to teach best practices.
The book is online. Read it for yourself!
18
And it was reported in the digital edition today that el Trumpolini is taking Sheldon Adelson's advice to practice humilty. Now that is the pot calling the kettle black. I cannot think of two more reprehensible people representing the 1.00% And in another article in the digital edition, a voter in Youngstown, having ALWAYS voted party-line Democrat is opting for el Trumpolini, with this amazing comment: "Vincent Archangelo Strines, a voter in Youngstown who usually favors Democrats, says he will choose Mr. Trump this fall. “He knows business. I think he could bring the economy back. He’s a take-charge kind of guy.” Absolutely Mr. Vincent Archangelo Strines, he is a take-charge kind of guy and without doubt is the one person in the universe to reverse the collapse of Youngstown!
8
Interesting reframing of the issue. The problem is not that the 1% are too selfish, it's that the 99% are too damn reasonable. Sounds right to me
10
But Obama and Hillary say everything is so wonderful, and that nothing should change and we should stay the course.
12
Did all those studies look specifically at Scandinavian countries and why they don't seem to have the economic pathologies of others? And the highest indeces in happiness to boot?
18
Rather than marginal earned income tax rates, progressives in the US right now should focus on taxing capital gains at the same rate as earned income, and on lifting the earnings cap for Social Security income. My guess is that if you surveyed people, very few would think it fair that the wealthy pay SMALLER percentages than median earners in payroll taxes, and very few would think it fair that unearned income is taxed at lower rates than earned income.
38
I've found that the only difference in living in a blue state vs a red state is that the blue state is more expensive. I don't see any personal benefit in living here. We know that's because the rich, whatever their politics, don't pay their fair share of the taxes. But we are silent about the other villain that's bleeding us dry. THE CHURCH. When Bush passed the faith-based initiative, it was so that churches could soak up billions in tax-paid grants, (so even us atheists are TITHED) supposedly to perform charitable functions. But the churches, unlike legitimate charities, do not have to fill out tax forms to reflect how they have spent OUR money. It's time to REPEAL this law that sucks up tax dollars to go who knows where, and also TIME to start taxing churches on their property and profits. Otherwise we really are living in a feudal system.
50
Even before GW Bush, religious institutions tax exempt status cost the taxpayers $80 billion a year.
20
Wise women and men can carp all they want to about creeping Stalinism, but arguably the only way out of this and environmental disaster is some form of Democratic socialism.
27
Truly extreme gaps in income and wealth could arise from many causes. Consider just one: Since 2008, the US economy has added four million jobs. In that same time period, we allowed in eight million *legal* immigrants, one million every year, not including a few million more refugees, illegal aliens, and H1B visa workers.
Supply and demand applies to labor as it does to goods, no matter how many economists, all safely in the 1%, insist otherwise.
Supply and demand applies to labor as it does to goods, no matter how many economists, all safely in the 1%, insist otherwise.
22
I don't know what the solution to the problem is, but I want our leaders to at least be attempting to find solutions. Up to this point, not a finger has been raised to solve this issue, because thanks to the Republicans, our government does nothing but create gridlock. Now I read (in Politico) that the Republicans are already strategizing how to paralyze Hillary Clinton's presidency. Are we going to sit here like sheep while our nation crumbles around us, or are we going to demand action??
28
" And it’s not out of the question that dire political changes, like the rise of racist or otherwise exclusionary social structures, could have terribly damaging consequences for less privileged people."
Tell that to the people of Tibet.
Tell that to the people of Tibet.
3
Is inequality new, a bad thing in itself, or the main economic problem we face? No, no, and no! See http://worksnewage.blogspot.com/2014/01/inequalitys-not-real-problem.html.
3
"I can hire half the working class to kill the other half."
-- Jay Gould
That's how it will end up.
-- Jay Gould
That's how it will end up.
23
The people answering questionnaires who propose tax rates on income and inheritance of around 1/3 do so because they don't have an inkling as to how rich the rich really are.
26
Today’s Inequality Will Easily Become Tomorrow’s Catastrophe. Corrected the headline for you.
With a GOP controlled House and Senate this is exactly what we will get. That is not a prediction but the historic facts. Never has austerity worked and never will it work. Hoping for this time will kill you.
With a GOP controlled House and Senate this is exactly what we will get. That is not a prediction but the historic facts. Never has austerity worked and never will it work. Hoping for this time will kill you.
15
The uncontrolled, unexamined, unlimited pursuit of wealth is somewhat pathalogical; like a similar pursuit of sex partners or an ideal body image. We should tax people like that until they stop. For their own well-being.
It's the decent thing to do.
It's the decent thing to do.
14
If only Congress would enact a jobs bill.
7
Great article.
2
Please don't rely on surveys about opinions on marginal tax rates. Way too many people don't understand the concept of a marginal rate. Quite a few people do not know either their own marginal rate, nor do they know the marginal rates of the rich.
26
As long as we focus on fairness, there will be endless point and counterpoint arguments. We should focus on utility. I believe we must fight inequality, principally through taxation, because it will make us a better nation and society.
9
Starting with a "Development Fund" for the United States would go a long way to provide a way forward in reducing poverty in the United States. There are 3 successful development funds in the world. One is the Alaskan Permanent Fund. The fund is funded by the oil companies pumping oil on Alaska state lands. The fund pays a dividend to the people of Alaska, and the fund is managed by a semi-private organization.
If the federal government reversed the current out of date royalty system by paying private companies to develop resources on federal land and keeping the majority of the profits for the people of the United States, we cold fund education for everyone of our citizens, and help them become the leaders in productivity in the world, and win the commercial struggle in the global marketplace.
If the federal government reversed the current out of date royalty system by paying private companies to develop resources on federal land and keeping the majority of the profits for the people of the United States, we cold fund education for everyone of our citizens, and help them become the leaders in productivity in the world, and win the commercial struggle in the global marketplace.
6
Given the pessimistic conclusions that Professor Shiller presented about the inability of modern societies to rectify inequality through taxation, maybe there are solutions through the building of 'rainy day funds'?
One might be to build up a government reserve funds that would be used when there is an economic downtown (along the lines of Social Security except targeted to counter a decline in government revenues, "Recession insurance"). These funds would be deposited in treasury bills and could be used when government revenues (both Federal and state) drop. This would be politically more acceptable than 'printing money' which is what happened in the 2008 crisis. Such a system would need to be legally tightened so that Congress would not raid it (as they do for the Social Security fund). But, assuming that could be done, it would provide a cushion against economic collapse much as banks are now required to have more equity available for such situations.
Another is to require large direct and indirect mortgage lenders (e.g., Quicken Loans, Fannie, Freddie) to increase their equity, too, as banks have to do. The mortgage industry is underfunded. More radically, require large businesses to create reserve funds that are invested in bond funds.
Building up insurance-type funds will not directly solve the inequality problem but will ensure there is not a massive increase in unemployment when the economy turns 'sour'. Every little bit helps in the long run.
One might be to build up a government reserve funds that would be used when there is an economic downtown (along the lines of Social Security except targeted to counter a decline in government revenues, "Recession insurance"). These funds would be deposited in treasury bills and could be used when government revenues (both Federal and state) drop. This would be politically more acceptable than 'printing money' which is what happened in the 2008 crisis. Such a system would need to be legally tightened so that Congress would not raid it (as they do for the Social Security fund). But, assuming that could be done, it would provide a cushion against economic collapse much as banks are now required to have more equity available for such situations.
Another is to require large direct and indirect mortgage lenders (e.g., Quicken Loans, Fannie, Freddie) to increase their equity, too, as banks have to do. The mortgage industry is underfunded. More radically, require large businesses to create reserve funds that are invested in bond funds.
Building up insurance-type funds will not directly solve the inequality problem but will ensure there is not a massive increase in unemployment when the economy turns 'sour'. Every little bit helps in the long run.
2
One basic economic point which the 1% ers seem to miss is the law of supply and demand. If inequality continues at its current pace, where is demand going to come from? The more wealth is accumulated in fewer and fewer hands, the less and less money is available to drive the consumer demand side of the economy which makes up approximately 70% of GNP. Hopefully, a basic sense of self survival will bring the 1% to join in a move for a more rational distribution of wealth.
19
Dr. Shiller fails to mention that India was ruled by a colonial power, Great Britain during the Bengal famine that found it easy to ignore the starvation deaths. Periods of rising inequality tend to be self correcting as inequality leads to excess savings, over investment and depressions including the biggest example, 1929 slaughter of the millionaires when nobody could afford to buy what their factories produced.
1
There is no godly reason for poverty! Let's all be generous for once and equalize the wealth and in a few generations there will be no need for charity, or scarcely any, there will be no more predator class that grows out of generations of poverty; far fewer need of prisons. If the wealth is shared equally capitalism will be that much more profitable for the capitalists!
8
The tax rate is of no meaning if the wealthiest don't pay it - which they don't thanks to the incredible tax loopholes they have managed to engineer over the last 40+ years in America and around the world.
"Experts" must develop a new model of economic measurement if anything is to change. Historically economics have been designed to PROTECT the wealthiest. Every true economic measurement must weigh the entire social consequences if we are to have an economy that works for everyone.
Warren Buffet and Bill Gates have publicly said that they could never spend all the wealth they have accumulated yet they keep getting more and more because of tax breaks. In fact, they steal from the rest of us to create the wealth. The vast majority of the population goes to work every day and has taxes automatically taken from OUR wages so we don't have a choice. Then we get charged exorbitant rates for putting the rest of OUR money into banks and 401Ks for future "safety" and it gets stolen by the financial elite. Institutionalized theft on a grand scale.
The answer is very simple. Tax the wealthiest at 30% and make them pay it on ALL wealth. Get rid of ALL the loopholes that prevent them from carrying any of the heavy load they take the greatest advantage of. All Americans will then be able to afford the social benefits we expect from OUR hard-earned taxpayer dollars.
"Experts" must develop a new model of economic measurement if anything is to change. Historically economics have been designed to PROTECT the wealthiest. Every true economic measurement must weigh the entire social consequences if we are to have an economy that works for everyone.
Warren Buffet and Bill Gates have publicly said that they could never spend all the wealth they have accumulated yet they keep getting more and more because of tax breaks. In fact, they steal from the rest of us to create the wealth. The vast majority of the population goes to work every day and has taxes automatically taken from OUR wages so we don't have a choice. Then we get charged exorbitant rates for putting the rest of OUR money into banks and 401Ks for future "safety" and it gets stolen by the financial elite. Institutionalized theft on a grand scale.
The answer is very simple. Tax the wealthiest at 30% and make them pay it on ALL wealth. Get rid of ALL the loopholes that prevent them from carrying any of the heavy load they take the greatest advantage of. All Americans will then be able to afford the social benefits we expect from OUR hard-earned taxpayer dollars.
23
There are solutions but not those proposed by progressives. The cornerstone of any solution is a US population that is sustainable, that would be in the 200-250 million range, far less than currently. Next would be an economy that provides unskilled opportunities by refusing to import manufactured goods and avoiding excessive automation. This will result in a lowered standard of living on the average. We also need a different mix of population with fewer low capability individuals and more capable ones. We will need to provide jobs for people at higher ages as well. None of this is really possible with our current leaders or population mix.
6
as long as the "economists" are locked into dealing with effects rather than causes they are going to muddle around and wonder what is happening. all of this statistical data sheds exactly zero light on the cause of the enormous inequality.
Simply put, the cause is the same as it has always been. Those in power have generated a series of illusory conclusions about the nature of Reality, which basically say that there is a class of humans who should rule the others and get all the money.
All of these conclusions,l which are and have always been, the drivers of our political systems can be read about in Ayn Rand's books or in the "economic theories of Milton Friedman.
Simply put, the cause is the same as it has always been. Those in power have generated a series of illusory conclusions about the nature of Reality, which basically say that there is a class of humans who should rule the others and get all the money.
All of these conclusions,l which are and have always been, the drivers of our political systems can be read about in Ayn Rand's books or in the "economic theories of Milton Friedman.
3
The implication that people are and should be treated as fundamentally different from each other based on one system, economics is rediculous. Economics and all other non-biological systems are human constructs of choice based on values. Our human values are in decline, creating bigotries and impacting lives, for the most part, in unsustainable ways. Let's focus on enlightened values and we might create justice in economics, politic, religion, social interactions our own individual well being.
5
On the whole, this essay is beyond gloomy, and Professor Shiller's proposal for wage insurance to alleviate the problem of inequality doesn't somehow seem up to the job. What does offer a more hopeful strategy for dealing with entrenched poverty and the grotesque squandering of human capital is to convince people that higher taxes are part of a war mobilization effort. As is frequently argued, the mass manufacture of weapons to fight WWII, more than any other government program, lifted the country out of the Depression. It is up to responsible political leaders (if there are any) to instill a similar sense of urgency in the tax-averse populace. Every time I drive along the Merritt Parkway and see the recent improvements, which were paid for by President Obama's Recovery Act, I am reminded of what the government can do in a crisis. The Stimulus of 2009, which had bipartisan support, largely saved us from falling into a deeper recession--the result, BTW, of unregulated Wall Street speculation.
9
It isn't technology that causes metastasizing inequality, it is how we chose to use it.
In the 1970s we envisioned a better life in the twenty first century. We thought that prosperous citizen/workers would work a twenty hour week, that our biggest problem would be what to do with all that leisure time. That future was clearly within our grasp. Implicit in that vision though was the assumption that the benefits of progress would still be shared in the 1970s proportion between worker/citizens and capitalists.
Instead work weeks today are longer, incomes are lower and poverty and hopelessness are rampant. All of the benefits of technological progress and more have gone to the owners of the means of production. Why?
Technology greatly increased the efficiency of supervision, administration and control, and that facilitated the rise of enormous globe girdling neo-feudal empires. It was our replacement of egalitarian Enlightenment principles as the operating basis of our society with net-feudalism, unconstrained accumulation of capital and power, something much older and distinctively evil.
In the 1970s we envisioned a better life in the twenty first century. We thought that prosperous citizen/workers would work a twenty hour week, that our biggest problem would be what to do with all that leisure time. That future was clearly within our grasp. Implicit in that vision though was the assumption that the benefits of progress would still be shared in the 1970s proportion between worker/citizens and capitalists.
Instead work weeks today are longer, incomes are lower and poverty and hopelessness are rampant. All of the benefits of technological progress and more have gone to the owners of the means of production. Why?
Technology greatly increased the efficiency of supervision, administration and control, and that facilitated the rise of enormous globe girdling neo-feudal empires. It was our replacement of egalitarian Enlightenment principles as the operating basis of our society with net-feudalism, unconstrained accumulation of capital and power, something much older and distinctively evil.
6
Today's inequalities are already tomorrows inequalities today.
Did the Greeks start this system of how life should revolve around economics, and today we have the theorists predict our economic futures.
What if instead we changed our attitude away from economics and more towards making the world and it's people one of sustaining each other through life on a daily basis. We all desire the same, and need the same yet we put economics first and foremost,with all it's complications,expectations,and dire consequences...no wonder we have not cured these discrepancies ...because they are all based on economics and only economics, and the forecasts and results have never changed throughout history. Sounds like the definition of insanity, forecasted by economists.What is the real problem here?
Did the Greeks start this system of how life should revolve around economics, and today we have the theorists predict our economic futures.
What if instead we changed our attitude away from economics and more towards making the world and it's people one of sustaining each other through life on a daily basis. We all desire the same, and need the same yet we put economics first and foremost,with all it's complications,expectations,and dire consequences...no wonder we have not cured these discrepancies ...because they are all based on economics and only economics, and the forecasts and results have never changed throughout history. Sounds like the definition of insanity, forecasted by economists.What is the real problem here?
7
The greatest risk in surtaxing the "rich" lies in reducing the incentive to achieve.
Most of the rich are achievers - not all, but most.
Tampering with their will to achieve invokes the "law" of unintended consequences, just as the Great Society's welfare-related laws have unintentionally destroyed families, particularly black ones, leading to the present 40%/70%+ (all US/black) rate of out-of-wedlock births.
Personally my motivation to save - once taught to me as absolutely "good" - has been greatly reduced by today's low interest rates. The interest on my British bank savings account has just been reduced to 0.01% per annum!
Most of the rich are achievers - not all, but most.
Tampering with their will to achieve invokes the "law" of unintended consequences, just as the Great Society's welfare-related laws have unintentionally destroyed families, particularly black ones, leading to the present 40%/70%+ (all US/black) rate of out-of-wedlock births.
Personally my motivation to save - once taught to me as absolutely "good" - has been greatly reduced by today's low interest rates. The interest on my British bank savings account has just been reduced to 0.01% per annum!
11
Your survey participants don't understand what happens over time when taxes are low.
Let's say your participants are members of families making somewhere around the median US family income of $65,000-70,000 per year, which is about the same as the cost of living. These families have no money left over after expenses to put aside in investments and savings.
Families making $375,000 per year can easily set aside $50,000 per year. After 30 years, using even the most conservative calculations, these families will have way north of $3,000,000 dollars. Median income families will have zip, nada, zilch, zero after 30 years.
So the family making $375,000 per year earns five to eight times the typical American family right now, in this snapshot in time. In thirty years they will be hundreds of times wealthier. If your survey participants understood this, maybe their responses would be different.
Thankfully, we have Social Security in this country. Otherwise we'd really be in trouble.
20-40% sounds like a "fair" amount of taxes, but people don't understand how to think about taxes. They think that if other people are making five to eight times what they are right now, that they will always be five to eight times wealthier. This is wrong--the wealth gap increases dramatically with time. If you present your survey takers with the 30 year story, maybe they'll think the family making $375,000 should be paying much higher taxes.
Let's say your participants are members of families making somewhere around the median US family income of $65,000-70,000 per year, which is about the same as the cost of living. These families have no money left over after expenses to put aside in investments and savings.
Families making $375,000 per year can easily set aside $50,000 per year. After 30 years, using even the most conservative calculations, these families will have way north of $3,000,000 dollars. Median income families will have zip, nada, zilch, zero after 30 years.
So the family making $375,000 per year earns five to eight times the typical American family right now, in this snapshot in time. In thirty years they will be hundreds of times wealthier. If your survey participants understood this, maybe their responses would be different.
Thankfully, we have Social Security in this country. Otherwise we'd really be in trouble.
20-40% sounds like a "fair" amount of taxes, but people don't understand how to think about taxes. They think that if other people are making five to eight times what they are right now, that they will always be five to eight times wealthier. This is wrong--the wealth gap increases dramatically with time. If you present your survey takers with the 30 year story, maybe they'll think the family making $375,000 should be paying much higher taxes.
27
Why don't we just legislate so everyone makes the same, adjusted for cost of living in various different regions cities. Then there would be complete equality, at least in your world.
I don't know about you but I grew up in less than generous circumstances. Got an academic scholarship to HS and an ROTC scholarship to college. Spent 5 years on active duty and saved enough to pay for graduate school.
Then I toiled for 20+ years in financial services, lost most of my savings and my job when my firm went under in 2008. Eventually found a new job and have busted my butt since 2010 trying to earn back what I lost. Didn't gripe about losing my savings and my job.
I don't have a lot of issues with inequality. No one ever told me life would be easy, in fact the Jesuit fathers in HS made it pretty clear it would be a hard path. They never talked about equality of outcome. But they did talk about equality of opportunity and making the most of what you are given. I've done an ok job and hope my daughter will find her own way with maybe a little help from me.
So I am happy to pay my fair share. As long as everyone else does too. But don't penalize me because I chose to work harder and live lower than I had to.
I don't know about you but I grew up in less than generous circumstances. Got an academic scholarship to HS and an ROTC scholarship to college. Spent 5 years on active duty and saved enough to pay for graduate school.
Then I toiled for 20+ years in financial services, lost most of my savings and my job when my firm went under in 2008. Eventually found a new job and have busted my butt since 2010 trying to earn back what I lost. Didn't gripe about losing my savings and my job.
I don't have a lot of issues with inequality. No one ever told me life would be easy, in fact the Jesuit fathers in HS made it pretty clear it would be a hard path. They never talked about equality of outcome. But they did talk about equality of opportunity and making the most of what you are given. I've done an ok job and hope my daughter will find her own way with maybe a little help from me.
So I am happy to pay my fair share. As long as everyone else does too. But don't penalize me because I chose to work harder and live lower than I had to.
6
I wish Economics Nobelist Schiller had addressed a huge cause of inequality: that of inefficient markets (market failures) of use of "economic rents" (politically induced scarcity), externalities, and information asymmetry.
In NYC, SF, SD, LA, Boston, Washington DC, London, and other cities, apartments are much more expensive to rent and housing to purchase because of politically induced scarcity of housing through zoning which reduces housing density and overuse of historic landmark status. These "economic rents" transfer income/wealth from renters to landlord, making people like Donald Trump far wealthier than there should be if the market were efficient. Renter income that should go towards purchasing goods and services go towards wealthy landlords instead. If the politically-induced scarcity of housing were removed, there would be much more employment for construction workers from the ensuing housing boom.
Part of the reason for high health care costs are the externalities of the high cost of tobacco use, of drinking sugar-added beverages that contribute to obesity, of air pollution -- all of these contribute to high health care costs. Those that pollute the air don't pay for the health care costs caused by the air pollution.
Fix market failures: bad zoning laws, make people pay for their externalities, and there will be a big start toward addressing inequality.
In NYC, SF, SD, LA, Boston, Washington DC, London, and other cities, apartments are much more expensive to rent and housing to purchase because of politically induced scarcity of housing through zoning which reduces housing density and overuse of historic landmark status. These "economic rents" transfer income/wealth from renters to landlord, making people like Donald Trump far wealthier than there should be if the market were efficient. Renter income that should go towards purchasing goods and services go towards wealthy landlords instead. If the politically-induced scarcity of housing were removed, there would be much more employment for construction workers from the ensuing housing boom.
Part of the reason for high health care costs are the externalities of the high cost of tobacco use, of drinking sugar-added beverages that contribute to obesity, of air pollution -- all of these contribute to high health care costs. Those that pollute the air don't pay for the health care costs caused by the air pollution.
Fix market failures: bad zoning laws, make people pay for their externalities, and there will be a big start toward addressing inequality.
3
Externalities, market failure, economic rents - all reasons to support public policy if we could find some consensus. One of the bigger economic rents: health care of course. The key here is that the issue is being raised openly and we are starting to look outside the usual boxes.
4
There are probably good reasons why we are not very good at income redistribution. First, for most of recorded history, there has been an enormous disparity between haves and have nots with very few efforts to alter those relationships; so we are very used to this as the status quo. Generally, wealth and power protects itself as an essential element of human nature. We are not all equal in ingenuity, drive, luck, and other qualities that lead to wealth and power; so, some people will naturally achieve more than others. It is probably possible add considerably to this list.
The problem is not the disparity but the abuse of wealth and power. We will never eliminate poverty, because unless everyone is absolutely equal (which is essentially impossible), there will always be some who have less than others, and they will be poor.
If we accept that analysis, what we should be focusing on the elimination of unnecessary pain and suffering. As others have more, we should be willing to see others have less, but mainly in the quality of a life free from basic wants and fears, not necessarily great material possessions and large bank accounts. That means we should focus more on universal healthcare and education, jobs, safety, etc. FDR got it right in many ways about what people really needed.
The problem is not the disparity but the abuse of wealth and power. We will never eliminate poverty, because unless everyone is absolutely equal (which is essentially impossible), there will always be some who have less than others, and they will be poor.
If we accept that analysis, what we should be focusing on the elimination of unnecessary pain and suffering. As others have more, we should be willing to see others have less, but mainly in the quality of a life free from basic wants and fears, not necessarily great material possessions and large bank accounts. That means we should focus more on universal healthcare and education, jobs, safety, etc. FDR got it right in many ways about what people really needed.
9
Perhaps because those that earned their wealth are not so willing to redistribute it through the government. They have the means to not allow such redistribution. Now many wealthy in the past have distributed part of their wealth through charity, that is the correct way to do so.
2
Surprise,surprise! Federal tax does NOT fund Federal expenditure, so taxing has no say in that issue. The real issue is one of fairness, and generally the scale of taxation relevant to worth does it.
The government can fund welfare [not to mention pensions and education even the military], simply by buying the debts they create. A Central bank operation.
But he is correct in forecasting trouble if inequality is not addressed in western nations. So with paying for improvements in the lot of the poor so readily at hand it will be pure vindictive politics that stops progress. But they will lose in the end, although maybe not their heads now.
The government can fund welfare [not to mention pensions and education even the military], simply by buying the debts they create. A Central bank operation.
But he is correct in forecasting trouble if inequality is not addressed in western nations. So with paying for improvements in the lot of the poor so readily at hand it will be pure vindictive politics that stops progress. But they will lose in the end, although maybe not their heads now.
2
The idea that taxes are a redistributive modality is absurd. The economic system has already accomplished that outcome with complicit participation by the very politicians who receive the largesse of campaign contributions to assure that wealth remains in the hands of the few. Our current system is NOT democracy but an autocracy guaranteed by all governmental policies and the law. That reality is and has been assured by 'citizens united'. Real democracy assures equal participation in the benefits of a collective responsibility for ALL members of that society. "Wake up to reality America!"
11
Karl Marx would agree.
1
Inequality is built in the current system of exchange of commodities. Labor power, the commodity that exclusively creates value, in the social aggregate exchanges for less value than the one it produces. That's the ABC of political economy. The rest as they say is history. But the prize fighters or apologists of this system overlook that simple truth.
2
I think that the burden of caring for the people whose jobs are eliminated by trade agreements and technology should be done by the businesses that benefit directly from those agreements and tech advances and indirectly by the consumers who benefit from the lower costs to them.
7
The authors pose the question of what will we do if taxing the wealthy at about one third won't produce enough revenue to meaningfully help the very poor and sagging middle class? I don't think the problem would be with taxing the wealthy at that rate and producing sufficient tax revenue. The problem would be as it is now, with them using every loophole and offshore tax haven to pay as little taxes as possible so that the US continues to lose billions every year in real tax revenue.
And it is a very sad situation, because people fail to realize that the US is heading towards being a failed democracy and a third world country in everything but name only. The more poverty is allowed to spread, the more it will continue to spread. Large areas in the country have already been lost to economic blight. All the small businesses that have traditionally provided a significant number of decent paying jobs have closed down because of high rents and low revenue. The few larger companies there are cannot employ everyone and typically only have need for specialized skills anyway. As large corps and chains continue to work towards doing more with less labor/fewer employees, the govt has got to realize that small businesses and non tech entrepreneurship are desperately needed to fuel our economy. My salary is your salary and your salary is my salary. Not everything boils down to how much taxes the rich are paying.
And it is a very sad situation, because people fail to realize that the US is heading towards being a failed democracy and a third world country in everything but name only. The more poverty is allowed to spread, the more it will continue to spread. Large areas in the country have already been lost to economic blight. All the small businesses that have traditionally provided a significant number of decent paying jobs have closed down because of high rents and low revenue. The few larger companies there are cannot employ everyone and typically only have need for specialized skills anyway. As large corps and chains continue to work towards doing more with less labor/fewer employees, the govt has got to realize that small businesses and non tech entrepreneurship are desperately needed to fuel our economy. My salary is your salary and your salary is my salary. Not everything boils down to how much taxes the rich are paying.
13
We have to create institutions that will make redistribution unnecessary. The Mondragon Coop has a rule that the CEOs do not make more than 4.5 t0 6.5 more money than the least paid of the co-workers. Many other rules of the game have to be changed.
Who has the power to organize such a revolution against the "masters of mankind" and their "vile maxim": "All for us, and nothing for the rest" (Adam Smith)? We, the people?
Who has the power to organize such a revolution against the "masters of mankind" and their "vile maxim": "All for us, and nothing for the rest" (Adam Smith)? We, the people?
7
I appreciate the author's suggestion that there is hope, but as a country we have already demonstrably failed this test, have we not? Almost all Republicans pledged never to raise taxes, which has crippled their ability to reduce deficits, let alone reduce misery. They refuse to even acknowledge that the temperature on Earth is rising as heat records are broken year after year and polar ice melts, or that there is anything to be done about it. Republicans have refused to work with our democratically elected President for the last eight years on anything of substance, and with the House evidently assured to Republicans that will not change in the next four or eight years into the future.
The nomination of Donald Trump shows that before raising taxes or raising wages or job insurance to help the displaced and starving in the coming years, they will blame Mexicans, or Muslims, or some vulnerable other for our problems. Already the extreme right-wing has gone mainstream, here and in Europe, and Donald Trump's policy proposals are to lock up Hillary Clinton and deport 11 million immigrants. With hints of political violence and ethnic cleansing already on the wind (and it hasn't even gotten tough yet) is there any chance at all of wise economic adjustment to avoid social catastrophe?
The nomination of Donald Trump shows that before raising taxes or raising wages or job insurance to help the displaced and starving in the coming years, they will blame Mexicans, or Muslims, or some vulnerable other for our problems. Already the extreme right-wing has gone mainstream, here and in Europe, and Donald Trump's policy proposals are to lock up Hillary Clinton and deport 11 million immigrants. With hints of political violence and ethnic cleansing already on the wind (and it hasn't even gotten tough yet) is there any chance at all of wise economic adjustment to avoid social catastrophe?
20
We can easily reduce or even eliminate deficits. First remove any federal government programs that are not in the constitution and don't have a 2/3 majority support. That will greatly reduce the federal government, allowing states to have whatever services that their citizens desire. Sort of how the constitution was to work.
2
Hillary will probably have an unprecedented chance to try to do something serious about inequality, such as raising inheritance taxes to 30% and restoring taxes on capital gains to the same levels as earned income.
Bill Clinton contributed the largest step in reducing taxes on unearned income like capital gains, while Abraham Lincoln thought capital gains should be taxed HIGHER than earned income. Thomas Jefferson outlawed extreme inheritance when he was governor, to prevent people like the Koch brothers from dominating government.
And of course we fought a revolution in 1776 to rid ourselves of rule by a hereditary class. The hereditary wealth of almost all rich Americans, including six of the ten wealthiest, is dangerous.
Hillary shows no sign of doing any of this. In fact, it appears that she has promised her financial backers that she will not do more than token actions to reduce inequality. We the people must demand action from her. Saying that she is better than the alternative is not enough.
To see what to do, watch Comedy Party Platform on YouTube (2 min 9 sec). Thanks. [email protected]
Bill Clinton contributed the largest step in reducing taxes on unearned income like capital gains, while Abraham Lincoln thought capital gains should be taxed HIGHER than earned income. Thomas Jefferson outlawed extreme inheritance when he was governor, to prevent people like the Koch brothers from dominating government.
And of course we fought a revolution in 1776 to rid ourselves of rule by a hereditary class. The hereditary wealth of almost all rich Americans, including six of the ten wealthiest, is dangerous.
Hillary shows no sign of doing any of this. In fact, it appears that she has promised her financial backers that she will not do more than token actions to reduce inequality. We the people must demand action from her. Saying that she is better than the alternative is not enough.
To see what to do, watch Comedy Party Platform on YouTube (2 min 9 sec). Thanks. [email protected]
13
"...try to do something serious about inequality, such as raising inheritance taxes to 30%..." Estate taxes are already 45% for large estates. Extending such taxes to all inheritances would virtually wipe out all generational transfers of small businesses -- the very sort of businesses that sustain "sustainable" communities.
5
Capital gains need to be adjusted for inflation. If you bought stock in 1980 for $1000, and sell it today for $2000, you have not really made $1000.
Similarly, dividends need to be made tax-deductible to corporations and taxable to the recipients.
Similarly, dividends need to be made tax-deductible to corporations and taxable to the recipients.
Wealth is what's left after spending. So am I hearing if two people have the same incomes, but spend very differently, they should be made equal from time to time? Let me know so I can head to Vegas with my retirement savings. Its more fun to watch it disappear that way than with the taxman.
10
I'm pretty sure that is not what Professor Shiller is advocating.
6
If you hear that, it is your own invention. That is not what Schiller said.
I think what he did say is that incomes well above what is needed to live comfortably allow the recipients to invest and accumulate significant wealth. I will add that along with that wealth come power, influence, and often a myopic and ungenerous view of how that wealth, power and influence were (or weren't) gotten.
I think what he did say is that incomes well above what is needed to live comfortably allow the recipients to invest and accumulate significant wealth. I will add that along with that wealth come power, influence, and often a myopic and ungenerous view of how that wealth, power and influence were (or weren't) gotten.
3
And particularly so if that investment takes the form of rent-seeking. We permit the privatization of what are rightly our common assets, common treasure, at our own peril.
2
We are undermined by people simply extrapolating from the past. They don't consider what is different now that requires rethinking positions. It's like not worrying about flood because the river in your town isn't yet in flood - even though upstream it's in flood stage. Automation is destroying low wage jobs more rapidly than in the past. At a minimum, we should tax the wealthy (including me) more and spend more fixing our infrastructure which will create more low end jobs.
17
Another fallacy. The construction workers who build roads and bridges are unionized, highly skilled, and earn high salaries. The money they make puts them in the top 20% of household incomes.
The days of thousands of unskilled men with shovels are long gone.
The days of thousands of unskilled men with shovels are long gone.
3
Given that I share you fears, I am glad to see them expressed by an economist with status; but how can the need for change be sold to the electorate, who are also not only short sighted, but vote emotionally, ignoring consequences? And the politicians who allow lobbyists to create legislation to protect special interests, and who sink to their knees to beg the money needed to find each campaign?
9
You can't completely eliminate inequality nor would you wish to unless you want to stifle the initiative and innovation that brings forth technological, economic and social change. Nor is it particularly helpful to compare our current condition with events 150 years ago which is far too distant to be relevant. So Shiller's is both too bleak and is somewhat hyperbolic in stating the situation. All this said we have undoubtedly reached a threshold in the US economy where inequality at its present levels is undermining the economy rather than being part of a dynamic capitalist system. This is explained by economics not emotion. Very affluent households like the 1% who are now taking about 22% of national income simply spend less of their incremental income (what economists call their margin propensity to consume) than do other people. You can only own so many Maserati's. So with the bulk of income and wealth gains going to this small group, overall income growth is not going to translate into anything like the historical increase in demand that happened in the period 1945-80. This is the fundamental problem.
8
From the early 1940s to the early 1960s, we had a tax rate on the highest income bracket of 90% or higher (a peak of 94%) for 19 of 20 years. It dipped into the eighties once. WWII and its aftermath undoubtedly increased patriotism; the wealthy didn't fight taxes as much as today.
17
We may need to reread the column, and modify our understanding of the world accordingly. Schiller is bringing a new perspective based on new reality. This is not the time to be trying to interpret the present based on the past. Automation has massively changed our economy. When I was a kid capital was raised to build factories that hired workers. Over the last 50 years capital has been used to build software/hardware systems that (as it turned out) got rid of workers. The old "social contract" was that if you wanted to have a life you got a job and earned your keep - and jobs were available. Now that jobs are not available what are we going to do? I benefited from great stock returns in the 1980's to say 2008 because companies were gaining great productivity through automation, and dumping workers. Surely some of my gains were at the expense of those workers.
7
@John Mann
Alstead, NH
Power looms didn't get rid of workers then? How about those IBM computers in the 60's? New technologies have been changing our economy since the dawn of the modern industrial age so it's hard to know what you're talking about when you say we need to modify our understanding of the world. And when you say jobs were available you're really talking about the US in the period 1945-80 and even that wasn't immune to downturns in the business cycle. There is only one way in which society increases it's wealth and that is productivity improvement. That improvement has been considerable in the US in the period 1990-2016 because of the PC and other revolutions. Our inequality problem stems from the fact that most of the benefits of those productivity gains has gone to a small number of people.
Alstead, NH
Power looms didn't get rid of workers then? How about those IBM computers in the 60's? New technologies have been changing our economy since the dawn of the modern industrial age so it's hard to know what you're talking about when you say we need to modify our understanding of the world. And when you say jobs were available you're really talking about the US in the period 1945-80 and even that wasn't immune to downturns in the business cycle. There is only one way in which society increases it's wealth and that is productivity improvement. That improvement has been considerable in the US in the period 1990-2016 because of the PC and other revolutions. Our inequality problem stems from the fact that most of the benefits of those productivity gains has gone to a small number of people.
4
This country can look forward to massive problems with the economy in the future. We have an overly-burdened social services system, lack of jobs, no immigration control, both Social Security and Medicare are unsustainable at present requirements. All of this is coming at an enormous cost to every tax payer (although almost 50% do not pay income tax at all). You have the uneducated producing tribes of children who the rest of us are require to support. Along with this the Socialistic Democratic Party (just interested in more votes for their party) now suggests paying their dental care and college. Can anyone see where this catastrophe is going?
8
@Janis, We get it!- the "alt-rightwing conservatives want to keep ALL their "marbles". The "catastrophe" is your mindset! Sad,
3
The Great Hoax constantly repeated by all sides is that Income Redistribution can't be achieved here because Americans won't accept Socialism..
What that syllogism omits is that the Great Redistribution has already occurred thanks to a rigged tax system aided by gigantic subsidies.
What that syllogism omits is that the Great Redistribution has already occurred thanks to a rigged tax system aided by gigantic subsidies.
38
The problem with higher taxes on the rich to pay for rediistribution is the the record shows the government cant deliver. Handouts dont work, economists have a very poor record predicting outcomes of various prposals and liberal ideas sound good but dont work in practice. Eliminate regulations that just prepetuate beaurcrats, let small business thrive, get government to work better.
5
I have great respect for Robert Shiller, which is contrary to my view of economists generally. He is quite right to worry about technological and other change possibly causing mass unemployment and/or a drastic decline in incomes. I doubt, however, that we will move proactively to head off such a catastrophe. And in fact we probably aren't smart enough to know in advance what steps to take.
Addressing economic inequality is one thing, but we should be clear that ending inequality is neither possible nor desirable. The fruits of socialism include class stratification (recall the nomenklatura of the Soviet era), the stifling of individual initiative, and more, not less, poverty. A smaller gap between rich and poor is desirable; eliminating that gap would require a form of authoritarianism that no freedom-loving people should accept.
Inheritance taxes are all well and good when it comes to the top one-half of one percent, but we don't want people selling the family farm in order to pay a death tax. And history shows that government will tend to raise rates over time once it achieves the ability to tax something.
Addressing economic inequality is one thing, but we should be clear that ending inequality is neither possible nor desirable. The fruits of socialism include class stratification (recall the nomenklatura of the Soviet era), the stifling of individual initiative, and more, not less, poverty. A smaller gap between rich and poor is desirable; eliminating that gap would require a form of authoritarianism that no freedom-loving people should accept.
Inheritance taxes are all well and good when it comes to the top one-half of one percent, but we don't want people selling the family farm in order to pay a death tax. And history shows that government will tend to raise rates over time once it achieves the ability to tax something.
7
" And history shows that government will tend to raise rates over time once it achieves the ability to tax something."
onlein Dakota 11 minutes ago
"From the early 1940s to the early 1960s, we had a tax rate on the highest income bracket of 90% or higher (a peak of 94%) for 19 of 20 years. It dipped into the eighties once. WWII and its aftermath undoubtedly increased patriotism; the wealthy didn't fight taxes as much as today."
onlein Dakota 11 minutes ago
"From the early 1940s to the early 1960s, we had a tax rate on the highest income bracket of 90% or higher (a peak of 94%) for 19 of 20 years. It dipped into the eighties once. WWII and its aftermath undoubtedly increased patriotism; the wealthy didn't fight taxes as much as today."
5
@BeauKooJack - But the actual taxes that the well-off really paid during the early 40s to the early 60s were only about 30-35%.
But now, with FICA, property tax, and state and local income tax, households making $300-500K can pay as much as 50% in tax.
But now, with FICA, property tax, and state and local income tax, households making $300-500K can pay as much as 50% in tax.
3
We don't need an inheritance tax at all. In the year without such people inherited the basis of assets and paid tax only when they were sold. That would be simple, fair, and the correct solution. Nobody even talks or recognizes this simple solution.
1
Yes! Every sensible individual will share the concern of the author's highly valid hope that "none of these things ever happen. But even if they are unlikely, as part of our progress to a better world, we should be thinking now of how we might address them".
Economy would be better off if control and power were less concentrated in the hands of a few major players, brings to mind for me similar concepts discussed in books like Small Is Beautiful.
Andy Coghlan and Debora MacKenzie in https://www.newscientist.com/article/mg21228354-500-revealed-the-capital... says that the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. "
Tremendous progress towards an egalitarian society is achievable with awareness gained from the likes of TED lecture Who controls the world? "James Glattfelder studies complexity: how an interconnected system — say, a swarm of birds — is more than the sum of its parts. And complexity theory, it turns out, can reveal a lot about how the world economy works. Glattfelder shares a groundbreaking study of how control flows through the global economy, and how concentration of power in the hands of a shockingly small number leaves us all vulnerable"
Economy would be better off if control and power were less concentrated in the hands of a few major players, brings to mind for me similar concepts discussed in books like Small Is Beautiful.
Andy Coghlan and Debora MacKenzie in https://www.newscientist.com/article/mg21228354-500-revealed-the-capital... says that the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. "
Tremendous progress towards an egalitarian society is achievable with awareness gained from the likes of TED lecture Who controls the world? "James Glattfelder studies complexity: how an interconnected system — say, a swarm of birds — is more than the sum of its parts. And complexity theory, it turns out, can reveal a lot about how the world economy works. Glattfelder shares a groundbreaking study of how control flows through the global economy, and how concentration of power in the hands of a shockingly small number leaves us all vulnerable"
13
This article talks relatively more about pessimism, and some of the predictions could be termed at best little biased. Things have improved from the days of famine, as described by Prof A. Sen and depicted by S. Ray on a famous film. The quality of life is better almost everywhere, and the exceptions prove the point. In third world countries like India, the inequality is colossal. Compared to that it is not so pervasive (in terms of percentage or number of affected people) in the developed world. If the taxation is considered as a yardstick, then it has to be mentioned that during Indira Gandhi's Socialist (still very much so with a different face) regime, the taxation rate on the 'rich' was a staggering 90%, while the anticipated 'goal' was not fulfilled at all. So, we should desist from discussing first and third worlds in the same vein, as the universality of any such model/s gets lost...
2
Yet the US had its strongest growth in history when the tax rate for the highest income earners was 95%--just after WWII.
The entire point of a staggeringly high tax rate is not to actually collect that tax; it's to incentivize the reinvestment of money back into the companies they came from, thus avoiding counting it was income.
The entire point of a staggeringly high tax rate is not to actually collect that tax; it's to incentivize the reinvestment of money back into the companies they came from, thus avoiding counting it was income.
13
@E C - But in practice such high rates lead to many phony tax-dodging schemes, as people would invest in anything to avoid paying the tax. A lot of capital was misallocated because of these tax shelters.
It is much better to tax all income at the same low rate, with no exemptions, and let everybody just pay what they owe without a lot of convoluted rules.
It is much better to tax all income at the same low rate, with no exemptions, and let everybody just pay what they owe without a lot of convoluted rules.
2
I am pleased to see longer term problems being taken up in these pages after so much of another economists writing that less ambitious, smaller half measures are not only more than sufficient but prudent. I look forward to seeing more in the paper that has gone further than any other major media outlet to educate me about economics and encouraging me to read books and articles I have previously thought beyond my abilities as an English major and creative.
The statistics cited here, that the average person believes the wealthiest should be taxed in the high 30% goes far to prove that the wealthy really are different from the rest of us, that for them there is no "enough". Recognizing this and managing it is what should be built into the future. We need to understand whether the notion of enough is innate from birth, culturally obtained or does having more alone cultivate such avarice as is most starkly depicted in the Bengal famines?
That simply having more alone creates entitlement, I suspect, is the strongest of the three. It explains middle class resentment and blindness to poverty that the other two do not.
The implications of this reach deeply into all corners of our society and all but demand we throw away much employment, income and tax policy. If Trump is anything to go by and my experience of the wealthy is that he is rather typical, the wealthy need help to not become the destroyers that wealth inevitably makes them.
The statistics cited here, that the average person believes the wealthiest should be taxed in the high 30% goes far to prove that the wealthy really are different from the rest of us, that for them there is no "enough". Recognizing this and managing it is what should be built into the future. We need to understand whether the notion of enough is innate from birth, culturally obtained or does having more alone cultivate such avarice as is most starkly depicted in the Bengal famines?
That simply having more alone creates entitlement, I suspect, is the strongest of the three. It explains middle class resentment and blindness to poverty that the other two do not.
The implications of this reach deeply into all corners of our society and all but demand we throw away much employment, income and tax policy. If Trump is anything to go by and my experience of the wealthy is that he is rather typical, the wealthy need help to not become the destroyers that wealth inevitably makes them.
9
Sad people are some of the strongest believers in tomorrow's catastrophe, what is often said of the sad, or more exactly those called depressed, is they are repressing anger, one of Hope's two daughters, Courage of course is the other daughter. Think hope deferred, and then look to government, sorry to sound so angry but, I look there.
2
We are living in the sixth extinction--the one caused by man. Professor Schiller's dire predictions seem unlikely to be stopped by a sudden change in human behavior. Chapter V of Elizabeth Kolbert's The Sixth Extinction: An Unnatural History "Welcome to the Anthropocene" tells why human kind can't help itself out of the mess it has has created. Would that it could be otherwise!
15
1/3rd fair tax? We are already WAY above that, even on middle income workers. I am single, self-employed and earn approxamtely $80k/year. If you include SS and Medicare (15.4% off the top), federal income tax, state income tax here in Massachusetts, local property taxes, fees and permit costs paid to government, sales tax, gasoline tax, etc. the result is closer to 50%. Do the math with a sharp pencil. Government waste and inefficiency through an entrenched bureaucracy and political corruption are the problems, not lack of money taken from hard-working people.
13
Me:
Didn't you miss the point of the article? The solution is not to tax YOU more. It is to redistribute the wealth that is accumulating in the hands of a very few.
A program of improved efficiency and a purge of corruption in government is always a good idea. But the money retrieved in such an effort pales in comparison to what the Oligarchs are harvesting off of the backs of our "hard-working people".
Truth be told, some of the happiest people on Earth are taxed way more than us. Why are they happy? Because they get something for their money: healthcare, education, ever improving infrastructure.... which are universally available. Call them human rights, if you will.
We could learn from other nations and history. But we're too "exceptional" for that.
Didn't you miss the point of the article? The solution is not to tax YOU more. It is to redistribute the wealth that is accumulating in the hands of a very few.
A program of improved efficiency and a purge of corruption in government is always a good idea. But the money retrieved in such an effort pales in comparison to what the Oligarchs are harvesting off of the backs of our "hard-working people".
Truth be told, some of the happiest people on Earth are taxed way more than us. Why are they happy? Because they get something for their money: healthcare, education, ever improving infrastructure.... which are universally available. Call them human rights, if you will.
We could learn from other nations and history. But we're too "exceptional" for that.
73
@Billybob - But you have to think like an economist and a politician.
An income of $80K puts you in the top quintile in nationwide incomes. When economists and politicians say 'tax the affluent', they don't mean Bill Gates, they mean you! And what does the poor sap who is making $80K, $90K, $110K get for his taxes? Nothing! You're too rich to qualify for subsidies and benefits, so pay up!
This explains when our politics are the way they are. There are a large number of voters in the top quintile who feel they pay high taxes and get nothing.
An income of $80K puts you in the top quintile in nationwide incomes. When economists and politicians say 'tax the affluent', they don't mean Bill Gates, they mean you! And what does the poor sap who is making $80K, $90K, $110K get for his taxes? Nothing! You're too rich to qualify for subsidies and benefits, so pay up!
This explains when our politics are the way they are. There are a large number of voters in the top quintile who feel they pay high taxes and get nothing.
6
You're lucky, you have $40,000 after taxes. I have $30,000 after taxes.
Two post WWII artifacts helped to provide fairly poorly educated, white, Americans with a two generation bump to middle class, from 1945 to 1980:
1. All of the industrialized world, save the United States, had all of their manufacturing destroyed. The only place in the world that could make anything was the United States.
2. During this huge manufacturing blip, African Americans, Mexicans, etc., generally, were disallowed employment...providing all of the benefit of this economic upturn to whites.
The combination of the above two (hopefully) aberrations in history left poorly educated, low skill, white people in quite a good economic position.
However, by 1980 the rest of the world had rebuilt, some countries with our help. Brand new factories produced some quality competitors to American products being built in old, pre WWII factories (like Kodak for example, vs Fuji).
Now? The rest of the world dominates manufacturing as American management has sought, and, obtained, license to move all manufacturing offshore.
No longer can poorly educated, white, Americans count on a good life by just being born.
Now, they are in the same race everyone else is in. And, they have to run it, or, lose.
Seriously, getting that message out, clearly, is the best thing we can do for whites with low skill and low education in the USA.
1. All of the industrialized world, save the United States, had all of their manufacturing destroyed. The only place in the world that could make anything was the United States.
2. During this huge manufacturing blip, African Americans, Mexicans, etc., generally, were disallowed employment...providing all of the benefit of this economic upturn to whites.
The combination of the above two (hopefully) aberrations in history left poorly educated, low skill, white people in quite a good economic position.
However, by 1980 the rest of the world had rebuilt, some countries with our help. Brand new factories produced some quality competitors to American products being built in old, pre WWII factories (like Kodak for example, vs Fuji).
Now? The rest of the world dominates manufacturing as American management has sought, and, obtained, license to move all manufacturing offshore.
No longer can poorly educated, white, Americans count on a good life by just being born.
Now, they are in the same race everyone else is in. And, they have to run it, or, lose.
Seriously, getting that message out, clearly, is the best thing we can do for whites with low skill and low education in the USA.
40
Spot on! I would only add that during this time the wealthy also paid a higher percentage of income tax, and there was also a greater investment of excess wealth in new businesses and building throughout the nation to provide these low skill, low education jobs. Aside from manufacturing, construction was also a huge employer during the 20th century. The amount of jobs that would be created in that sector just by repairing and in some cases rebuilding our distressed infrastructure would go a long way to providing good paying jobs that do not require college for the next 30 years at least.
5
Michael, I think the GI Bill that allowed so many returning servicemen to attend college (typically the first in their families to do so) should be added as the third factor that bumped up the middle class.
4
Michael, in relatively few words, you have written the truth of decades of economic history. Hats off to your effort!
Would more read your very serious message!
Would more read your very serious message!
1
This isn't rocket science. We know the cause and the fix: it is immigration, outsourcing, offshoring and globalization. Bitter medicine that must be swallowed however un-PC it sounds. But the good news is the ball's rolling firmly in the right direction. First Brexit, then the catapulting of Trump to the Republican nomination. The message is getting louder, resonating with the populace, who more willing to see beyond the political incorrectness although at the cost of daily, virulent attacks on the messenger by leading newspapers especially this one. Fortunately those attacks are also being soundly ignored except for PC deniers for whom it's ever so sweet music.
The point being, that irrespective of whether Trump'll win or not, his message already has, and we'll see it repeated even louder in the coming years. Which is great, because going local's the only way to address all the catastrophe soothsaying.
As for job/wage insurance, it'll only work when employers, being the biggest source of risk and also biggest and only beneficiaries from reduced employment and lower wages, agree to pay the premiums. That won't happen unless mandated by law and so it definitely won't happen.
Yes, the sky is indeed falling, but one way (Trump) or the other (one term Hillary), the message will linger, get acted upon, and the sky ultimately get pushed back to it's rightful place. Nevertheless, don't stop thinkin' about tomorrow. Per Prof. Shiller here, sounds frightful, and it is.
The point being, that irrespective of whether Trump'll win or not, his message already has, and we'll see it repeated even louder in the coming years. Which is great, because going local's the only way to address all the catastrophe soothsaying.
As for job/wage insurance, it'll only work when employers, being the biggest source of risk and also biggest and only beneficiaries from reduced employment and lower wages, agree to pay the premiums. That won't happen unless mandated by law and so it definitely won't happen.
Yes, the sky is indeed falling, but one way (Trump) or the other (one term Hillary), the message will linger, get acted upon, and the sky ultimately get pushed back to it's rightful place. Nevertheless, don't stop thinkin' about tomorrow. Per Prof. Shiller here, sounds frightful, and it is.
13
We have a birth rate of zero. Without immigration who will do the work to lift this economy? Without globalization how will the middle class afford anything?
Despite Trumo's vacuous promises, those jobs are not coming back. If you stick a tariff on everything, no one will be able to afford anything.
Despite Trumo's vacuous promises, those jobs are not coming back. If you stick a tariff on everything, no one will be able to afford anything.
"Despite past failures, we should not lose hope in our ability to improve the world. In a recent column, I described ways in which society might change a deep-rooted sense of entitlement by radically broadening wage and job insurance." To change something that is deeply rooted, you have to educate people, not just come up with new insurance schemes. We need to introduce the concepts of civics, morality, and character development into our children's curriculums if we want them to think differently about themselves and each other.
16
As I read many articles along these lines I am struck by the idea of a "tipping Point" in our society and culture and the world of economics and work. I think that the government or some prestigious group or organization must say Let us get together and say that this, this and this will happen if we do not act. And there will be terrible consequences when this happens.That the quality of work must be understood as it manifests in the sense of well being or self worth.
That clear specific objectives must be outlines and probable course of action offered.
I think that when the American people are given clear facts and options We will act in the best siterests of the country and outselves
That clear specific objectives must be outlines and probable course of action offered.
I think that when the American people are given clear facts and options We will act in the best siterests of the country and outselves
Sadly, we already have seen the extent of the Human Race to acknowledge the obvious, accept it as inevitable, and begin triage. We still have an egregious percentage of Americans who contend that "global warming" is nothing more than a left-wing conspiracy. It would seem that, as a race, we only want to believe what we want to.
5
Forget paying for services the poor, how about just keeping the country from becoming a hereditary oligarchy? The maximum tax-rate should be 99%. Same with inheritance tax. Extreme levels of income or wealth should be tempered and brought back into balance via taxation, even if the sum total of those taxes doesn't cover much of government expenditure. It is in everybody's interest to discourage an ultra super-rich class that can buy elections via unlimited donations, eliminate unfavorable news coverage by financing lawsuits, etc.
Its a no-brainer.
Its a no-brainer.
46
Yup, tax rates on the super wealthy and on inheritance should reflect fairness, even if doing so isn't going to fix the economic problems of the poor and middle class. Unfortunately it appears to be politically unattractive since it likely won't be enough to fix the problems, and would turn off wealthy donors.
8
Here's another way to address inequality: government should do everything possible to give every person an equal start in life. This means equal access to health care, starting with prenatal, equal access to quality early childhood education, truly equal primary and secondary schools, where funding does not depend on the wealth of the community, and free public post-secondary eduction.
Today, your chances in life depend far too much on the zip code where you grow up. If we really provided equal opportunity, it would go a long way toward evening out inequality.
Today, your chances in life depend far too much on the zip code where you grow up. If we really provided equal opportunity, it would go a long way toward evening out inequality.
19
One thing government cannot do, among the long list of what you recommend, is change people emotionally, psychologically or culturally. Many of these same kids you speak of, even given every opportunity you suggest, will go home to a single parent home- oft times to a parent who is a child herself without parenting skills. They will grow up in a culture where violence, drugs and hopelessness reign and where oft times a victimization mindset has been adopted that eagerly accepts the government dole.
This type of home environment is found in every high poverty area of our nation, from the inner cities to Appalachia to the reservations. It is likely that more government intervention may assist an additional number of children to break out of the cycle of poverty. But the government needs to concentrate much more on giving people a hand up rather than a hand out.
This type of home environment is found in every high poverty area of our nation, from the inner cities to Appalachia to the reservations. It is likely that more government intervention may assist an additional number of children to break out of the cycle of poverty. But the government needs to concentrate much more on giving people a hand up rather than a hand out.
9
Not all single parents are "children without parenting skills." who will raise children who will become drug users or people who are otherwise "on the dole" and it is insulting to those of use who have raised productive, law abiding children when people stereotype single parents, people of color, or poor people in general. Attitudes such as yours are just an excuse to look the other way rather than deal with the real problems--and those problems are racism, sexism, and classism--which in turn, is used to justify the current state of extreme economic inequality.
10
Children with well-educated parents consistently get a better education, because they have two full-time tutors helping them in every aspect of life - at home. Where else would you see a lawyer who bills $600 an hour spending his whole afternoon trying to get a 4-year-old boy to behave properly?
2
The media frequently quote 'the wealth of the top 10%'. When you look into the "top 10%" the 90-99% is doing well, but the 1% and the .01% are what is really driving the gain in aggregate wealth.
You can't go after the 1% by setting a higher tax rate on couples earning $250-350,000 because that's the professional class elite that "defends" the ultra-wealthy. In principle, or directly, as their lawyers, financial management agents, and tax specialists.
What these people know, interacting daily with their billionaire employers is that wealth is a matter of luck, not talent. They have to sign off on obscene compensation packages, and they have to defend them, to stay employed but
their heart is not 100% in it.
The super-wealthy have learned to fly under the radar. The average American does not understand what these levels of wealth represent. For an individual or in aggregate.
Wealth at this level allows one to build more wealth using financial systems, based on current their wealth. No need to build factories, and hire people; just pay a few quants to trade some derivatives, and arbitrage securities, commodities, and currency.
Yes. 25% of the US GDP is in financial services, but that is not good news. That's people making more money from financial machinations, completely separated from Main St and the majority (99%) of American lives.
In a biological context, this phenomenon would describe a parasitic infection or cancer.
You can't go after the 1% by setting a higher tax rate on couples earning $250-350,000 because that's the professional class elite that "defends" the ultra-wealthy. In principle, or directly, as their lawyers, financial management agents, and tax specialists.
What these people know, interacting daily with their billionaire employers is that wealth is a matter of luck, not talent. They have to sign off on obscene compensation packages, and they have to defend them, to stay employed but
their heart is not 100% in it.
The super-wealthy have learned to fly under the radar. The average American does not understand what these levels of wealth represent. For an individual or in aggregate.
Wealth at this level allows one to build more wealth using financial systems, based on current their wealth. No need to build factories, and hire people; just pay a few quants to trade some derivatives, and arbitrage securities, commodities, and currency.
Yes. 25% of the US GDP is in financial services, but that is not good news. That's people making more money from financial machinations, completely separated from Main St and the majority (99%) of American lives.
In a biological context, this phenomenon would describe a parasitic infection or cancer.
131
Exactly. Everything is finances, and an interesting aspect of tax history is the way lower tax rates for the wealthy coincide with the rise of the stock and bond market as a primary vehicle for wealth building. As you pointed out, one can become obscenely rich without the risk of building a factory or hiring people. And if they do need to build a factory, they do it in Vietnam or Taiwan where they don't have to worry about government regulations and labor laws preventing them from exploiting workers and extracting every bit of profit possible.
4
The top 10% does much more. They also own all the local business, the fast-food franchises, the car dealerships. They are the full professors at Ivy League schools, the judges in the big courts, the top lawyers and accountants. They provide the money and the troops for local and nation political parties. Nearly all the candidates for political office are drawn from the 90-99% group, so they essentially run the country.
2
It is a mathematical certainty that the rich will get richer.
So the question is how do we enable the working stiff to get ahead.
In the old days, corporations funded pension plans.
In the old days corporations had profit sharing plans where worker and executives received the same percent of their salary into the plan.
Today, Wall Street "run" the companies, effectively eliminating the op profits going to these same instruments.
And then there is the marginal tax rate after socially beneficial spending (interest on auto purchases, sales tax paid, home mortgage) that has dropped from 80 % to a max of 38%.
These lessened the impact of the mathematical certainty.
So the question is how do we enable the working stiff to get ahead.
In the old days, corporations funded pension plans.
In the old days corporations had profit sharing plans where worker and executives received the same percent of their salary into the plan.
Today, Wall Street "run" the companies, effectively eliminating the op profits going to these same instruments.
And then there is the marginal tax rate after socially beneficial spending (interest on auto purchases, sales tax paid, home mortgage) that has dropped from 80 % to a max of 38%.
These lessened the impact of the mathematical certainty.
5
Tim:
It's called legalized bribery and through the advent of Citizens United and legislation before it, that pretty much placed all of the power in the hands of major corporations to dictate the government agenda in their favor and the ecomic outcome was inevitable. The recent 25 year Princeton/Northwestern Universities study just further confirmed it.
It's called legalized bribery and through the advent of Citizens United and legislation before it, that pretty much placed all of the power in the hands of major corporations to dictate the government agenda in their favor and the ecomic outcome was inevitable. The recent 25 year Princeton/Northwestern Universities study just further confirmed it.
17
A family living in New York with an income of $375,000 would typically pay almost 50% in total tax. That would pay about $100K in Federal income tax, $20K social security, $25K in state income tax, and about $30K in property tax.
These are not low tax rates by any means. Proposals to raise taxes meet resistance because taxpayers rightly assume that when politicians say 'the rich', they mean anyone who has any significant money.
These are not low tax rates by any means. Proposals to raise taxes meet resistance because taxpayers rightly assume that when politicians say 'the rich', they mean anyone who has any significant money.
11
No, it has, if anything, more to do with billions in bank bailouts, subsidies, offshore tax avoidance havens AND 57% of every federal tax dollar you pay to finance the military/industrial complex fighting never ending wars.
2
They still have a damned good six-figure income after paying 50%. I have $30,000 after paying the SAME 50%.
First, define what a high standard of living for the median might comprise -- in particular change the mix between public goods and private consumption -- and then mobilize the investment programs to build this median high standard of living and the wage and income security necessary to sustain it.
So, first image it, then sell it, then do it.
So, first image it, then sell it, then do it.
Robotics and artificial intelligence are not the only things driving increased inequality, and increasing upper income taxation is not the only solution.
Upward redistribution of wealth is an almost constant feature of governmental policy, although the wealthy along with their politicians and media like to ignore or minimize upward redistribution, preferring to focus on the downward variety, for obvious reasons.
Here are some of the policy drivers of upward redistribution:
The 1996 Telecom Act which gave the telecoms their own geographic monopolies - now US customers pay more for cable TV and internet than the rest of the developed world (and with significantly slower internet speeds),
Medicare and Medicaid, which provides big pharma huge markets, are prevented by law from bargaining for lower rates - extracting what little money the elderly and poor have and sending it upward,
ACA maintained the private insurance system which siphons off up to 20% of our premium dollar, part of which is used to lobby congress to prevent adoption of the only sane system of health care finance, single payer,
What's referred to as "globalization" and described in the media as a benign and naturally occurring phenomenon, much like the weather, is in effect, an intricate system designed and managed by the small segment of society that receives the wealth it sends upward.
You either have to be blind or a member of the media not to see these deliberate, systemic inequality drivers.
Upward redistribution of wealth is an almost constant feature of governmental policy, although the wealthy along with their politicians and media like to ignore or minimize upward redistribution, preferring to focus on the downward variety, for obvious reasons.
Here are some of the policy drivers of upward redistribution:
The 1996 Telecom Act which gave the telecoms their own geographic monopolies - now US customers pay more for cable TV and internet than the rest of the developed world (and with significantly slower internet speeds),
Medicare and Medicaid, which provides big pharma huge markets, are prevented by law from bargaining for lower rates - extracting what little money the elderly and poor have and sending it upward,
ACA maintained the private insurance system which siphons off up to 20% of our premium dollar, part of which is used to lobby congress to prevent adoption of the only sane system of health care finance, single payer,
What's referred to as "globalization" and described in the media as a benign and naturally occurring phenomenon, much like the weather, is in effect, an intricate system designed and managed by the small segment of society that receives the wealth it sends upward.
You either have to be blind or a member of the media not to see these deliberate, systemic inequality drivers.
189
I will copying this comment, and reposting it. I hope you don't mind.
when there is No Room in the Inn , a great inequality driver will have happened for the first and the last shall be free at last.
The rent along with the taxes it takes many to stake a claim in ownership are too d____d high.
The rent along with the taxes it takes many to stake a claim in ownership are too d____d high.
So on the one hand "the majority of people share simple notions of entitlement and fairness" and yet his greatest worry is based on the historical record that "the problem in each case was that the food was not shared adequately." So which is it? Seems his own writings contradict himself. Or maybe he just means that most people are moral, except the rich of course. ;-)
3
Nowhere does the author consider the real problem is overpopulation. It will get harder and harder to find jobs and anything else to keep billions of people busy especially without destroying the planet in the process. Policies should be to stop population growth and gradually reduce it to more sustainable levels.
75
Bingo! This is the single-most catastrophic issue, and of course it creates expedited climate change due to scarce resources. I mean, I can't believe no one wants to consider this. It's so obvious to me and one of the main reasons I refused to have children--which ended my marriage.
19
So...if population is the real problem, what is the real solution?
1
I live in a high-breeding area. and pay $7000 in school taxes (half of my property tax bill, in a lousy 'hood). Sick of supporting rich people's kids. Town built a $31 million school, has high debt, and we have to have a gala to pay for a MUNICIPAL animal shelter. God forbid our taxes should go to help animals, and not to rich people's kids. PS: We pay school taxes til we DIE.
1
Dr. Shiller,
Climate change and wars devastate vast populations today, as I write, and the devastation is expanding in a geometric progression. Tiny increments of slowly evolving increases in temperatures were predicted ten years ago. Today temperatures leap to higher levels around the world on a daily basis. Droughts do not end, whether they are in China or California. Huge migrations of populations are happening right now as the middle east empties out into Europe and Britain. Inequality has already reached absurd levels that have destroyed not just the American middle class, and lower classes, but entire continents: the Middle-East, South America (Venezuela, Argentina, Brazil), most of Africa, become more devastated for lack of food, money supply from hoarding ruling classes...so in my view the geometric progressions of population growth, inequality, war, and famine will turn the "vast" devastations of today into earth-shaking catastrophes before we reach 2020.
Your hope that "none of these things ever happens" would have been heartening in the 1960's when the earth's human population was 3.5 Billion souls. In 2016, when 7.5 billion souls are going forth and multiplying as Malthus' Doctrine predicted, beyond the limits of the earth's resources.
I am only surprised by the remarkable academic detachment and serene equanimity in your essay on vast future devastation that has already arrived.
rsvp [email protected]
Gene Thompson, Yale '66
Climate change and wars devastate vast populations today, as I write, and the devastation is expanding in a geometric progression. Tiny increments of slowly evolving increases in temperatures were predicted ten years ago. Today temperatures leap to higher levels around the world on a daily basis. Droughts do not end, whether they are in China or California. Huge migrations of populations are happening right now as the middle east empties out into Europe and Britain. Inequality has already reached absurd levels that have destroyed not just the American middle class, and lower classes, but entire continents: the Middle-East, South America (Venezuela, Argentina, Brazil), most of Africa, become more devastated for lack of food, money supply from hoarding ruling classes...so in my view the geometric progressions of population growth, inequality, war, and famine will turn the "vast" devastations of today into earth-shaking catastrophes before we reach 2020.
Your hope that "none of these things ever happens" would have been heartening in the 1960's when the earth's human population was 3.5 Billion souls. In 2016, when 7.5 billion souls are going forth and multiplying as Malthus' Doctrine predicted, beyond the limits of the earth's resources.
I am only surprised by the remarkable academic detachment and serene equanimity in your essay on vast future devastation that has already arrived.
rsvp [email protected]
Gene Thompson, Yale '66
44
The beauty of capitalism is that it self-corrects excesses, and that includes excessive inequality. History confirms it, including recent history (2008). Whenever inequality reaches excessive levels, investment opportunities become scarce and returns drop (for various reasons including depressed aggregate demand), inducing owners of capital to seek higher returns by taking on more risk, mainly by speculating on asset prices. Soon enough the speculation is undone by risk, asset prices plummet, and a financial and economic crisis follows. The silver lining is that the collapse in asset prices also reduces inequality (because the wealthy own most of the assets). Governments and central banks, however, intervene (especially central banks) to reverse the collapse in asset prices, which also serves to preserve inequality. In his book Piketty wrote that governments and central banks will always intervene in a financial crisis. A few brave (or is it misguided) economists (including those associated with the Austrian school) oppose intervention and would allow asset prices to plummet even at the risk of another great depression. What economist wants to be known as promoting depression economics; it's equivalent to a medical doctor being known as Dr. Death. If it were up to him would Shiller intervene or would he allow excessive inequality to self-correct. What would you do?
3
But we live in different times today, an age of brilliant machines, one where automation is now poised to replace virtually all human capabilities. When the collapse comes, the system will certainly reduce head counts. Millions of people will loose their jobs, as we saw in 2008. But instead of "self-correcting," the jobs won't return, at least not well-paying ones. Machines will replace those jobs that are lost, to a far greater extent than just 10 years ago. As a result, Income inequality will increase, not decrease. We've seen this trend with each of the most recent business cycle. Under today's paradigm, the more the system trenches, the more automation takes up the slack.
And don't forget: there is a peculiar way in which automation creates far fewer winners and far more losers in the .
And don't forget: there is a peculiar way in which automation creates far fewer winners and far more losers in the .
2
In a test tube, a result can be dependable. In our current financial system, we do not practice a form of capitalism that can be mapped, or studied in an objective manner. We bail out those who should be weeded out, we grant subsidies and preferential tax treatment to those who pleasure us (with money and influence), and we create a synthetic variety of pseudo-capitalism that is equal parts patronage, and nepotism. Corporate America only wants a version of "capitalism" that is rigged.
8
“All is for the best in the best of all possible worlds”
Slavery too could make a comeback as the cost of labor falls even further as a resource that seems to have no end, while natural resources depleat. Capitalism left unabated will push labor into ever more extremes. You already hear echoes emerging from corners such as, "they want to be cared for," or, "they can't care for themselves, so we must." This is code for a society rationalizing the price of humanity.
6
We already have wage slavery.
15
You already have slavery all over the planet. Some slavers just operate underground in the US. Child marriage, forced marriage - most slavery nowadays is tied to religion - child labor, prostitution. It's here, it's everywhere.
1
Let's look at taxes and government benefits. Between 2009-2012 period, the top 1 percent captured 91 percent of the total growth (Saez study). Then look at U.S. corporations. According to the Institute on Taxation and Economic Policy, the average tax rate from 2008-2012 on utility, gas and electric companies, 2.8%; the industrial machinery sector, 4.3%; IT industry; 9.8%. Aerospace and military industry, 19.7%. Dozens of corporations including General Electric, Verizon, Boeing and Corning paid the government absolutely nothing. Others like Apple and Cisco have sheltered almost a trillion dollars of untaxed revenues offshore; their highly paid executives further benefited by a tax system they can game. Then add welfare programs for the rich written into our tax code. From 2013:
1) Carried interest loophole. Cost: roughly $12B.
2) Low rates on capital gains & dividends. 1 percenter benefit: $66B.
3) Exclusion of employer-sponsored retirement. 1 percenter benefit: $13B.
4) Mortgage interest deduction. 1 percenter benefit: $11B.
5) Charitable contribution deduction. 1 percenter benefit: $18B.
6) Deduction of state and local taxes. 1 percenter benefit: $14B.
Just these 6 programs account for $133B in government benefits, for the 1 percent. Include the rest of the big tax breaks and the total rises to $355B— and doesn't include imputed rental income, accelerated deprecation, or the exclusion of capital gains on home sales.
1) Carried interest loophole. Cost: roughly $12B.
2) Low rates on capital gains & dividends. 1 percenter benefit: $66B.
3) Exclusion of employer-sponsored retirement. 1 percenter benefit: $13B.
4) Mortgage interest deduction. 1 percenter benefit: $11B.
5) Charitable contribution deduction. 1 percenter benefit: $18B.
6) Deduction of state and local taxes. 1 percenter benefit: $14B.
Just these 6 programs account for $133B in government benefits, for the 1 percent. Include the rest of the big tax breaks and the total rises to $355B— and doesn't include imputed rental income, accelerated deprecation, or the exclusion of capital gains on home sales.
35
It pays to be rich, right?
7
Just to correct your list of what you believe to be benefits only for the one percenters; millions of middle class working Americans also benefit from:
1) Lower long term rates on capital gains via their mutual fund and stock investments;
2) Exclusion from taxation on employer retirement plans and medical insurance;
3) Home mortgage interest deduction;
4) Deductions of state and local property, school and income taxes;
and finally one exclusion that is of huge benefit to the middle class- roughly 60% of whom own their own home- the exclusion of capital gains upon the sale of your home,
I would suggest that any serious effort to do away with these deductions and exclusions would be met with strenuous and vocal objection, and not just by the one percenters
1) Lower long term rates on capital gains via their mutual fund and stock investments;
2) Exclusion from taxation on employer retirement plans and medical insurance;
3) Home mortgage interest deduction;
4) Deductions of state and local property, school and income taxes;
and finally one exclusion that is of huge benefit to the middle class- roughly 60% of whom own their own home- the exclusion of capital gains upon the sale of your home,
I would suggest that any serious effort to do away with these deductions and exclusions would be met with strenuous and vocal objection, and not just by the one percenters
5
You do realize that 2008-2012 includes the worse recession we have seen in decades. If corporations don't make money....they don't pay taxes.
1
The point that people think in simple terms of "fairness" when asked about tax rates is a good one. But let's not forget that a "tax rate" is a particular narrative frame around the issue. We need to start using other frames that will more effectively get to the heart of what people really want in fairness. Some studies have shown that when people are asked how much wealth inequality is OK, Americans give proportions like the wealthy earning 7 or 9 times more than the lowest paid workers, a proportion seen in countries in Scandinavia but not in the US, where CEO's now make hundreds of times more. Other possible frames to use include the simple question "Should someone who works a full-time job be unable to afford to buy a modest home, pay their medical bills, raise their children and save for retirement?"
12
Looks like Dr.Shiller forgot to add an important point. Let me help him : Yale university which is the 2nd richest in the world doesnt pay a dime as property tax. Rather its the middle class and poor of New Haven who bears the burden of subsidizing Yale!
57
It also has one of the largest endowments in the country and is hoarding it, and also using it to pay very lucrative salaries to star professors!
10
Same in NYC with the Catholic Church, which vies with the non-profit (?) NYU for the esteemed role of the largest landowner in Manhattan.
Both are tax exempt.
The first is a violation of our First Amendment, while the second can be laid squarely on the shoulders of our venal NY politicians, as always.
Both are tax exempt.
The first is a violation of our First Amendment, while the second can be laid squarely on the shoulders of our venal NY politicians, as always.
2
It has been said that the factory of the future will have only two employees: a man an d a dog. The dog will keep everyone out, and the man will feed the dog.
But who will buy the products the factory produces?
But who will buy the products the factory produces?
10
How high will the bar to owning one of those factories be?
2
The factory will produced robots.
Shiller is no dope, but he seems to assume that the cure to inequality is one flavor of socialism or another. What if redistributionist policies that alleviate inequality in the short run actually exacerbate inequality in the long run? Guaranteed access to educational loans has caused education costs to skyrocket. Guaranteed access to healthcare regardless of ability to pay has caused health costs to skyrocket. Mortgage subsidies have caused housing costs to skyrocket. Meanwhile, Social Security has reduced savings 1) by making it hard for people to save due to high taxation; 2) by discouraging saving through minimizing the differences between savers and spenders; 3) forcing people to invest in low-interest government bonds. Whether it's price controls on wages or sharply progressive marginal tax rates, supposedly anti-inequality measures have the effect of making it impossible for regular people to get ahead. Only those already fabulously wealthy can survive in a progressive utopia. And if an attempt is made at taxing wealth instead of income, the wealthy will simply depart the country, leaving the rest of us even worse off.
4
The wealthy have always found ways to protect their material resources from confiscation. Taxing wealth would have the perverse effect of depressing investment in private entities that produce private sector jobs. Certainly taxing wealth would diminish charitable giving. Reductions in the creation of private sector job formation and charitable giving are the last things that most people (i.e., the non-wealthy) need.
Whatever you design and execute, if the design or the execution is defective, it will break.
The socialism vs capitalism paradigm is the mail impediment to good design or execution of a solution. We need something that accommodates both gracefully, as both are necessary in a functioning society. No, I don't have the answer, I hope I can ask the right questions.
The socialism vs capitalism paradigm is the mail impediment to good design or execution of a solution. We need something that accommodates both gracefully, as both are necessary in a functioning society. No, I don't have the answer, I hope I can ask the right questions.
7
Actually taxing wealth increases charitable giving, as long as it is deductable. Chariities are against lowering the corporate or high end tax rates because the marginal value of a contribution is reduced.
5
The ex-middle-class in the United States is already living in a nightmare of economic inequality and unemployment. New Jersey leads the country in long-term unemployed older workers (age 50+) somewhere in the area of 125,000+ ( http://www.newstartcareernetwork.org ). Employers are not hiring older workers even though the older workers have proven skill-sets, experience, mature emotional intelligence and know-how. Not to mention, they are generally more loyal.
15
I see three rationales for progressive taxation or government income/wealth redistribution: shifting the tax burden to those who can more easily bear it; helping low income people attain a minimum standard of living; punishing the wealthy for violating some desired social norm.
Whatever we might agree (wishful, I know) as the proper level of government spending, we already have a progressive tax system. Put aside debate on certain types of income, and look not at federal income brackets but at effective net rates after current transfer programs, and the higher earners pay the majority, while the lower half (on average) has a zero to negative tax rate. https://www.cbo.gov/publication/51361
We can also debate endlessly what represents the minimum standard of living that people "deserve," and clearly some in the US today live below what many of us might consider humane, and perhaps fair. But recall that "fairness" has many meanings, and while you might think fair means equal economic success, others might think fair means that they keep what they make--especially if they play by the rules in place.
And of course concepts of fairness inspire people to chastise (or worse) those who seem to succeed too well. And then we are on to defining strict norms and limits, and deciding what should be "enough." Of course, we could then apply that from the beginning of career prep, say elementary school, and discourage achievement over a certain grade score.
Whatever we might agree (wishful, I know) as the proper level of government spending, we already have a progressive tax system. Put aside debate on certain types of income, and look not at federal income brackets but at effective net rates after current transfer programs, and the higher earners pay the majority, while the lower half (on average) has a zero to negative tax rate. https://www.cbo.gov/publication/51361
We can also debate endlessly what represents the minimum standard of living that people "deserve," and clearly some in the US today live below what many of us might consider humane, and perhaps fair. But recall that "fairness" has many meanings, and while you might think fair means equal economic success, others might think fair means that they keep what they make--especially if they play by the rules in place.
And of course concepts of fairness inspire people to chastise (or worse) those who seem to succeed too well. And then we are on to defining strict norms and limits, and deciding what should be "enough." Of course, we could then apply that from the beginning of career prep, say elementary school, and discourage achievement over a certain grade score.
1
Bob, there is a purely economic reason that inequality is bad. Rich people spend a smaller percentage of their wealth or income. After all when you have so many houses you can't remember how many you have and you have an elevator for horse, it difficult to find places to spend. This means there is less money to conduct commerce which drives the economy.
In addition, what the Rich do with their money is to speculate with it. There is a definite correlation between periods of high inequality and high amounts of financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 We have just had a punishing example of why excess financial speculation is bad for the economy.
In addition, what the Rich do with their money is to speculate with it. There is a definite correlation between periods of high inequality and high amounts of financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 We have just had a punishing example of why excess financial speculation is bad for the economy.
17
In "Wealth and Democracy." Kevin Phillips points out that there is a feedback in economic distribution because as the rich get richer, they use their wealth to get more power. They then use their power to get more wealth and so on. There seems to be a tipping point where this process becomes impossible to reverse. When inequality becomes bad enough, the country soon goes down the tubes. He gives several examples, e.g. the 18th century decline of the Dutch Republic. Chrystia Freeland used 14th century Venice to illustrate this process in a Times article, but history is replete with other examples.
http://www.nytimes.com/2012/10/14/opinion/sunday/the-self-destruction-of...
According to Phillips, the great success of America has been that before the tipping point was reached, something has always happened that reverse the flow of money upwards, e.g. the rise of unions, FDR's reforms.
Will that happen this time?
http://www.nytimes.com/2012/10/14/opinion/sunday/the-self-destruction-of...
According to Phillips, the great success of America has been that before the tipping point was reached, something has always happened that reverse the flow of money upwards, e.g. the rise of unions, FDR's reforms.
Will that happen this time?
96
Will this happen this time is the critical question posed by the commentary.
My answer: probably not but Senator Sander's was on the right track in his recognition along with Elizabeth Warren that the system is rigged and it will take a revolution or a reinvention of the system that we have created since the Reagan years. I recall that we were beginning to recognize the gap in incomes and wealth in the 1980s but failed gain the support for action, in fact we seem to get worse. I read Mancur Olson's book in 1982, "The Rise and Decline of Nations" and he was saying the same think as Kevin Phillips. Olson's study and these was as the rich got richer they sought to influence law and regulation to make conditions more favorable to their own interests and Olson proved that as they tried to get a large slice of the pie, they caused the pie to be smaller. I haven't seen anything yet to disprove Olson's thesis.
I thesis is that government needs to take natural monopolies, like electric power production, health care, out of private hands and make them very inexpensive. Why? Simply because private investment will not share the benefits with those that do the work to provide these services.
I think we have a monumental disruption coming in shifting to new non-fossil energy sources. I really don't think it will be done well by the private sector. That is why I keep hammering away for a new international investment bank to create non fossil energy like space based solar.
My answer: probably not but Senator Sander's was on the right track in his recognition along with Elizabeth Warren that the system is rigged and it will take a revolution or a reinvention of the system that we have created since the Reagan years. I recall that we were beginning to recognize the gap in incomes and wealth in the 1980s but failed gain the support for action, in fact we seem to get worse. I read Mancur Olson's book in 1982, "The Rise and Decline of Nations" and he was saying the same think as Kevin Phillips. Olson's study and these was as the rich got richer they sought to influence law and regulation to make conditions more favorable to their own interests and Olson proved that as they tried to get a large slice of the pie, they caused the pie to be smaller. I haven't seen anything yet to disprove Olson's thesis.
I thesis is that government needs to take natural monopolies, like electric power production, health care, out of private hands and make them very inexpensive. Why? Simply because private investment will not share the benefits with those that do the work to provide these services.
I think we have a monumental disruption coming in shifting to new non-fossil energy sources. I really don't think it will be done well by the private sector. That is why I keep hammering away for a new international investment bank to create non fossil energy like space based solar.
7
Some suggestions, James:
1. Institute an efficient universal gov run health care system, say Medicare for All. The data shows we could save over 1.5 TRILLION dollars each year which could better used elsewhere.
2. Return to much more progressive tax rates to encourage the Rich to leave more of their profits in their companies & their companies to pay their workers more, & to discourage the Rich from wild speculation.
3. Strengthen unions by requiring workers to pay for the union benefits they receive & by enforcing rules on coercion by companies against organization. Follow Germany & require union representation on the boards of large companies.
4. Strongly regulate speculation, e.g. require the buyer of a futures contract to take delivery, require banks to get a court order to sell its end of a mortgage contract, outlaw naked credit default swaps.
5. Stop worrying about the debt & invest in America--fix our crumbling infrastructure, build a better power grid, increase support for education at all levels, fund research, etc. If we grow the economy, the debt will fade into insignificance as in 1946 - 1973. On the other hand we can balance the budget. All 6 times we balanced the budget for more than 3 years, we got a major depression.
6. Make the federal gov the employer of last resort with a decent job or paid training for such a job for everyone able to work. There are plenty of things that need to be done. See 5.
http://www.levyinstitute.org/topics/job-guarantee
1. Institute an efficient universal gov run health care system, say Medicare for All. The data shows we could save over 1.5 TRILLION dollars each year which could better used elsewhere.
2. Return to much more progressive tax rates to encourage the Rich to leave more of their profits in their companies & their companies to pay their workers more, & to discourage the Rich from wild speculation.
3. Strengthen unions by requiring workers to pay for the union benefits they receive & by enforcing rules on coercion by companies against organization. Follow Germany & require union representation on the boards of large companies.
4. Strongly regulate speculation, e.g. require the buyer of a futures contract to take delivery, require banks to get a court order to sell its end of a mortgage contract, outlaw naked credit default swaps.
5. Stop worrying about the debt & invest in America--fix our crumbling infrastructure, build a better power grid, increase support for education at all levels, fund research, etc. If we grow the economy, the debt will fade into insignificance as in 1946 - 1973. On the other hand we can balance the budget. All 6 times we balanced the budget for more than 3 years, we got a major depression.
6. Make the federal gov the employer of last resort with a decent job or paid training for such a job for everyone able to work. There are plenty of things that need to be done. See 5.
http://www.levyinstitute.org/topics/job-guarantee
9
I can't believe I'm the only reader who recommended your excellent suggestions!
2
This article seems to be blind to the fact that negative public attitudes towards progressive wealth redistribution have been carefully cultivated through the political propaganda perpetuated by conservative think tanks and politicians who have essentially sold out to the plutocracy (who can blame them- they pay so well).
The death tax is the silver spoon tax. Social Security and Medicare is socialism and Americans like it- so a certain amount of socialism is a good thing.
As long as politicians are elected by the vote of the people- the people have the power to have a government that doesn't allow the obscene concentration of wealth we are already suffering from. But somehow they have to free themselves from the shackles of conservative economic propaganda and STOP VOTING FOR REPUBLICANS IN THEIR CURRENT INCARNATION.
The death tax is the silver spoon tax. Social Security and Medicare is socialism and Americans like it- so a certain amount of socialism is a good thing.
As long as politicians are elected by the vote of the people- the people have the power to have a government that doesn't allow the obscene concentration of wealth we are already suffering from. But somehow they have to free themselves from the shackles of conservative economic propaganda and STOP VOTING FOR REPUBLICANS IN THEIR CURRENT INCARNATION.
53
The problem is that the Democrats are not much better.
2
Tax policy should encourage one child families. We have way too many uneducated people now - oversupply of unskilled labor - which will get worse every ten years. Even a tariff wall erected to bring back manufacturing jobs won't help because the jobs simply do not exist in a world of robotic assembly plants.
11
NYT did all they could to stop any meaningful conversation or change in income inequality when they ignored Bernie's campaign and effectively silenced him.
128
Exactly. The reports the Times publishes, like this one, have a "liberal" tone but seem designed to breed pessimism, as with this article's underlying message that inequality is intractable, and that the working people don't really want to tax the rich more.
Even more telling is what they omit - most of the inequality is being generated by pro-business policies enacted by the government. The wealthy realize the importance of keeping the public in the dark, and there is no shortage of intellectuals to go along with the charade:
"And Robert M. Solow of M.I.T. said, “We are not good at large-scale redistribution of income.”"
Unless, of course, UPWARD redistribution of wealth. At that, the politicians and their corporate co-conspirators excel.
Even more telling is what they omit - most of the inequality is being generated by pro-business policies enacted by the government. The wealthy realize the importance of keeping the public in the dark, and there is no shortage of intellectuals to go along with the charade:
"And Robert M. Solow of M.I.T. said, “We are not good at large-scale redistribution of income.”"
Unless, of course, UPWARD redistribution of wealth. At that, the politicians and their corporate co-conspirators excel.
7
I do not know what the solution is for the problem that the column described, but I do know that it will never come from the United States of America.
11
It seems to me that the existence of a large middle class is an artifact of the Westward expansion and American dominance after WW2. As such, it is an historical anomaly; the world is reverting to historical norms where a few people own and control everything. Success is cumulative and money is relative. The former means that once you have succeeded and are rich, you are likely to keep getting richer. The latter means that if you have vastly more money than others, you eventually gain control over the things they want and need. We saw this in the housing crash where millions of Americans changed from homeowners to renters. In the future, the rich will own the robots and the raw materials they need to make things, and they will own the housing, and the food supplies. Unless we can break out of the socialism vs. capitalism mold and think of something better, this is the future. So-called black swan events like massive wars, or ecological disasters will only speed up the process.
27
Most people don't have a very good understanding of tax policy, and don't understand the difference between marginal and average tax rates. Thus "when people in the United States were asked what marginal tax rates they would “most like to see” on family incomes of $375,000, the median answer was 30 percent,..." They are probably thinking of an average effective tax rate, not a marginal rate. Similarly, when people say they think an inheritance tax of about 37% is appropriate, they are probably thinking of an average effective rate on the estate and not really understanding how a threshold works.
58
I think public policy has to be focussed on strengthening the foundations of middle-class life: free public education, affordable higher education, Social Security, affordable health care, home ownership, mobility, collective bargaining, progressive taxation. All of these are currently under sustained attack by conservatives like Paul Ryan and Ted Cruz, and are being rolled back by Republicans in state and local governments. Nobody (except maybe Bernie Sanders) is making the case for these essential elements of the American system. The middle class is in serious jeopardy, and very few are paying attention.
73
Shiller is one of the best economic thinkers of our time, and
his focus here is welcome.
Still, where does economic policy from the top dovetail -- if at all --
with passing a threshold of common suffering at the center of society,
suffering that can generate political reorganizations?
Yes, it seems unlikely that democracy and widening inequality -- especially
as we create a disintermediated, shrinking middle class -- will coexist,
but that hardly answers to the issue. Dictatorship and virulent nationalism
thrive on an increase in the population that has lost its stake in the existing social contract. Democracies in part are bad at redistribution because they
get thrown out in desperate times.
As Shiller well knows, in the US the home ownership "stake" held by our
huge middle-income population suffered a severe trauma in the 2007-09
financial crisis. That may or may not prove to have been the leading edge of a serial string of periodic traumas creating greater anxiety and more extreme political views in the country.
It's not the poorest who are most likely to strike back, but those who still have something to lose and are seeing it diminish month by month, year by year.
his focus here is welcome.
Still, where does economic policy from the top dovetail -- if at all --
with passing a threshold of common suffering at the center of society,
suffering that can generate political reorganizations?
Yes, it seems unlikely that democracy and widening inequality -- especially
as we create a disintermediated, shrinking middle class -- will coexist,
but that hardly answers to the issue. Dictatorship and virulent nationalism
thrive on an increase in the population that has lost its stake in the existing social contract. Democracies in part are bad at redistribution because they
get thrown out in desperate times.
As Shiller well knows, in the US the home ownership "stake" held by our
huge middle-income population suffered a severe trauma in the 2007-09
financial crisis. That may or may not prove to have been the leading edge of a serial string of periodic traumas creating greater anxiety and more extreme political views in the country.
It's not the poorest who are most likely to strike back, but those who still have something to lose and are seeing it diminish month by month, year by year.
12
There are two public policy sources for wealth and income inequality: monetary policies that funnel the gains from seigniorage primarily to property owners and tax policies favor capital income over earned income. Both need to be corrected if public policy is to be considered fair.
21
If we're going to redistribute income, are we also going to redistribute work? It is extremely unfair (and ultimately unworkable) to propose a universal entitlement to a middle-class standard of living without attaching a reciprocal (and quite onerous) obligation on the part of the recipients. Otherwise, why would anyone go to the trouble of preparing to be a productive member of society and put up with all the hassles of being employed if there is no payoff to the foregone leisure and the expended effort?
14
People generally want to work and feel depressed when they do not have meaningful work of some kind. This is a basic part of human nature.
14
cs: Great! Rather than government taking half of my salary to provide a guaranteed income for someone else, why can't all those people who you say generally want to work find some "meaningful" task for which others would voluntarily pay them a wage? I believe reality is a sizable minority of our citizens would gladly sit back and let others provide for them. What do you propose to do with these people?
6
Half of your salary, as you put it, paid out in taxes is NOT because of supporting people less fortunatethan you. It is because of trillions paid out to corporations in tax breaks, subsidies and offhore tax havens along with a massive military/industrial complex fighting never ending wars overseas.
3
Excellent essay. The widespread reticence of majorities to tax super-wealthy minorities is interesting but is perhaps over-emphasized here. If there is one thing that serves as a firewall against the worst consequences of inequality (if not always against inequality itself) it is democracy. Even "privileged" Bengalis in the early 40s were colonized people, and even the best-intentioned among them had basically no means to exert social and economic changes during the great Bengal famine. India and West Bengal achieved independence--and democracy--just a few years later, whereas East Bengal remained unfree, first as an unequal partner in Pakistan, and even today as Bangladesh, with its failures to build a secular civil society. Famine has not revisited West Bengal since the 40s, but it struck Bangladesh again in the early 70s--again as a consequence of human caprice, and again as a reminder of the singular importance of democracy in protecting the well-being of human societies.
10
Today 70 individuals own more than half the world's population does together (the poorest half, naturally). If this isn't absurd beyond the comprehensible, then what would be? When do we get to a point at which every sane person on earth (including economists and politicians) has to conclude that the limit is reached and that something radical has to be done (is it any time before one individual owns all the assets)?
Democracy was meant to be the regulatory mechanism in that people were expected to vote according to their own interest and thus modify any bizarre growth of wealth for a few. As Shiller points out this hasn’t worked. But that’s not due to deficiencies among ordinary people, it’s simply an effect of the ruling classes’ power to “manufacture consent” through media and other ideology-producing institutions, something Shiller overlooks. (Herman & Chomsky clarified this thoroughly in a classic work almost 30 years ago, but censoring their fundamental findings is another consequence of the ruling classes’ power.)
Professor Shiller’s warnings that we are approaching really catastrophic situations for humanity are timely, to say the least, and NYT is commended for printing them. Remains to do something concrete about it all, and that requires, among many things, mainstream newspapers with an approach hitherto never seen.
Democracy was meant to be the regulatory mechanism in that people were expected to vote according to their own interest and thus modify any bizarre growth of wealth for a few. As Shiller points out this hasn’t worked. But that’s not due to deficiencies among ordinary people, it’s simply an effect of the ruling classes’ power to “manufacture consent” through media and other ideology-producing institutions, something Shiller overlooks. (Herman & Chomsky clarified this thoroughly in a classic work almost 30 years ago, but censoring their fundamental findings is another consequence of the ruling classes’ power.)
Professor Shiller’s warnings that we are approaching really catastrophic situations for humanity are timely, to say the least, and NYT is commended for printing them. Remains to do something concrete about it all, and that requires, among many things, mainstream newspapers with an approach hitherto never seen.
175
Yes; these 70 (fair and square or not) won at Monopoly. Let's admit it and say to them, "Congratulations; You've won (or more likely your parents won)! Now, the game is over." Many of us born after your family won, need to start again from scratch. It's our world, too, not yours. We outnumber you, and you're hurting us. We've learned from your mistakes (and our parents'). Now, put back the pieces, the hotels, the real estate, the utilities, the transportation, and yes (I know it hurts) the money. Or else...."
3
Increasing taxes to solve poverty is not effective.
3
On the face of it, your comment is absurd, if we assume that wealthy people pay more taxes than poor people do, and that the taxes are used to help everyone. So presumably you are suggesting that increased taxation somehow decreases overall national income, and that this decrease affects the poor more than it does the rich. This is a reasonable assertion, and indeed Schiller presents much the same view. However, Schiller also points out that the reason this may be the case is that the rich have much more power than the poor, so they can ensure that taxes help them much more than the do the poor, thus invalidating the initial premise. In other words, the real reason why you may be right is, we do not have a true democracy, but an oligarchy disguised as a democracy.
49
Why just talk about taxing the rich. Why not talk about eliminating laws that enrich the rich. Lobbyists write most of the important legislation and the legislators who endorse it don't even read it, just sign the legislation and countersign the checks that eventually come their way.
18
The US has gone from 15 brackets to 7. The net effect is that the ultra-wealthy are in the same tax bracket as the middle income with the exception that most middle income people don't have the cash required to take advantage of a lot of the breaks that the wealthy use every day to further reduce their tax payments. Hence, the boss pays a lower effective tax rate than the employee.
The system is no longer progressive it is regressive. Unfortunately, the regressive model is the one that has been present in human society for most of our existence on the planet. Most of that history has been rather ugly for the vast majority of people.
The accumulation of wealth and power is part of our social DNA. We form governments to protect the less fortunate. Unfortunately, the most fortunate portray themselves as being the most victimized and take the most offense at being called-out for their egregious behaviors.
There have been "good" kings in human history but they are the exception. Our Republican-Democracy is on the brink of becoming just another in a long line of monarchies with a vast chasm between the haves and the have-nots.
What happens to the USA and the rest of the world cannot be predicted but it will be ugly.
The system is no longer progressive it is regressive. Unfortunately, the regressive model is the one that has been present in human society for most of our existence on the planet. Most of that history has been rather ugly for the vast majority of people.
The accumulation of wealth and power is part of our social DNA. We form governments to protect the less fortunate. Unfortunately, the most fortunate portray themselves as being the most victimized and take the most offense at being called-out for their egregious behaviors.
There have been "good" kings in human history but they are the exception. Our Republican-Democracy is on the brink of becoming just another in a long line of monarchies with a vast chasm between the haves and the have-nots.
What happens to the USA and the rest of the world cannot be predicted but it will be ugly.
66
The top bracket, 39.6%, starts at a household income of $410,000. Would you call that middle-class? Not even in Manhattan....
4
Way back in 1987 the Australian writer George Turner imagined such a world set in 2041 in a book he wrote called "The Sea and Summer". It wasn't pretty.
Runaway population growth, advances in automation, and climate changes had landed humans up in a degraded world with 90% unemployment, where the mostly invisible "Swill" existed beyond the notice and eyeshot of the fortunate 10%, the "Sweet" puttering away in their precarious bubbles. The story follows the sudden, shocking (to them), and enlightening slide into "Swilldom" of a family whose father is made redundant by automation. (He cuts his own throat.)
In some desperation some elements of the Sweet security state concoct a "solution" which involves the surreptitious spread of a pathogen intended to render most of the Swill sterile.
Not a surprising piece of logic. But surely a more human and less destructive forward pathway could be imagined and chosen. How much energy and vision is currently being invested on such a scenario?
Time is as a great bird, and, lo, it is on the wing.
(the Rubaiyat of Omar Khayyam)
Runaway population growth, advances in automation, and climate changes had landed humans up in a degraded world with 90% unemployment, where the mostly invisible "Swill" existed beyond the notice and eyeshot of the fortunate 10%, the "Sweet" puttering away in their precarious bubbles. The story follows the sudden, shocking (to them), and enlightening slide into "Swilldom" of a family whose father is made redundant by automation. (He cuts his own throat.)
In some desperation some elements of the Sweet security state concoct a "solution" which involves the surreptitious spread of a pathogen intended to render most of the Swill sterile.
Not a surprising piece of logic. But surely a more human and less destructive forward pathway could be imagined and chosen. How much energy and vision is currently being invested on such a scenario?
Time is as a great bird, and, lo, it is on the wing.
(the Rubaiyat of Omar Khayyam)
10
Wasn't the top marginal rate 91% during Eisenhower's presidency? I think our country was becoming more prosperous during that time. I don't see anything wrong with taxing income over, say, 1 or 2 million $ at that rate.
62
Yes, and the bottom tax rate was 20%, compared to 10% today (and all brackets were proportionately higher).
1
The actual taxes paid then, according to IRS records, were about 30-35% by the rich, and 20-25% by the middle class. Today, the middle class pays very little compared to what they paid in the 1950s, while the rich pay about the same.
2
In the 1950s corporations paid roughly 35% towards the total tax received in to the governments coffers, that number is now down to less than 11%. I doubt also such convenience tax avoidance schemes like corporate inversions and offshore tax avoidance havens existed back then either. In that respect, when it comes to the rich, especially those at the higher end of the scale, I am just a "little" skeptical of your numbers.
8
Wage and job insurance: The effectiveness of this idea is less plausible than buying lottery for making a living. They depend on private profitability and investment. Who is going to insure the latter? If not, wage and job are even less insurable.
Capital prefers wars to peace for defense on the surface only; their real intention is that wars are rare opportunities for monopoly profit none of which can be attainable in peace time. Taxes that were raised during wartime return to capital insidiously and capital gain doubly.
“Most people do not vote strictly in their narrow self-interest.” People for over 140 years since Lincoln are coaxed round to believe in what the two-party duopoly dictates and led to think their own interests are exactly the same as those of the one percent. Redistribution of tax or income becomes taboos to them because they do not know it is they who create all income and wealth. But then the autocratic system will have no incentive to redistribute anything including income, tax and wealth except under duress.
Inequality is not the root cause of the economic disaster; rather it is the necessary result of the business model of private profit maximization. To get rid of inequality without transformation of the system that is at the lowest ebb as a result of calamitous abyss of production barrier will be futile.
The true barrier of capitalist production is capital itself. To cut the Gordian knot means nationalization of the means of production.
Capital prefers wars to peace for defense on the surface only; their real intention is that wars are rare opportunities for monopoly profit none of which can be attainable in peace time. Taxes that were raised during wartime return to capital insidiously and capital gain doubly.
“Most people do not vote strictly in their narrow self-interest.” People for over 140 years since Lincoln are coaxed round to believe in what the two-party duopoly dictates and led to think their own interests are exactly the same as those of the one percent. Redistribution of tax or income becomes taboos to them because they do not know it is they who create all income and wealth. But then the autocratic system will have no incentive to redistribute anything including income, tax and wealth except under duress.
Inequality is not the root cause of the economic disaster; rather it is the necessary result of the business model of private profit maximization. To get rid of inequality without transformation of the system that is at the lowest ebb as a result of calamitous abyss of production barrier will be futile.
The true barrier of capitalist production is capital itself. To cut the Gordian knot means nationalization of the means of production.
6
History indicates that a market-based economy seems to be the best engine for innovation and wealth creation. So I'll pass on nationalization except in a few sectors (e.g., healthcare and education). What is really needed is the political will to make the market economy the servant of society rather than vice-versa. Tax and labor policies that redistribute rather than protect and reinforce wealth concentration are all that is necessary. How to do this is well known. But the electorate and its representatives, collectively, have been uninterested in this for over 35 years now.
5
Capital-driven market economy used to be effective to create innovation and wealth mainly for capital’s self-aggrandizement at, as always, the expense of the working class. When the rate of (private) profit (R.O.P.) was about 20%, capital would throw crumbs on them to assuage their sorrow, poverty, unemployment, bankruptcy and decline in socio-political status. That period was called “the golden age” such as the one in the 1960s after WWII. The going rate has been hovering near 15% for decades due to forced automated production, crumbs are brushed off; working masses are haunted by fears of the slump again, although their labor power created innovation and wealth, they could not enjoy their own fruits. Capital being a hegemonic power appropriate as profit of the sum total of the surplus value created by labor power without any compensation.
There is almost no chance for the capital to relinquish voluntarily what they’ve appropriated over hundreds of years of exploitations and plunders. A new democratic revolution is needed to right the wrong by nationalization of all means of production. Social-cultural undertakings such as higher education and healthcare can be heralds of the great transformation of society under a comprehensive nationalization into public owned means of production - physical, non-human inputs used for the production of economic value, such as facilities, machinery, tools, infrastructural capital and natural capital.
There is almost no chance for the capital to relinquish voluntarily what they’ve appropriated over hundreds of years of exploitations and plunders. A new democratic revolution is needed to right the wrong by nationalization of all means of production. Social-cultural undertakings such as higher education and healthcare can be heralds of the great transformation of society under a comprehensive nationalization into public owned means of production - physical, non-human inputs used for the production of economic value, such as facilities, machinery, tools, infrastructural capital and natural capital.
2
I agree. And I'm a Socialist.
Taxes on income do almost nothing. Scaled taxes on some specific assets is the only effective mechanism for preserving quality of life for all.
For example: Second homes need to be taxed highly. Third homes even higher. But first homes, under a given size, not at all. Etc.
There are a few "sacred" areas where asset bubbles must be prevented at all costs. Housing is one of them. If you allow an asset bubble in housing you starve actual productive growth, population growth and social mobility. There's a reason the term "landed aristocracy" exists.
Other areas where asset bubbles are devastatingly destructive are food, healthcare and education. Allow asset bubbles to form in those sectors and you will, as sure as night follows day, destroy your society.
We're not doing very well.
For example: Second homes need to be taxed highly. Third homes even higher. But first homes, under a given size, not at all. Etc.
There are a few "sacred" areas where asset bubbles must be prevented at all costs. Housing is one of them. If you allow an asset bubble in housing you starve actual productive growth, population growth and social mobility. There's a reason the term "landed aristocracy" exists.
Other areas where asset bubbles are devastatingly destructive are food, healthcare and education. Allow asset bubbles to form in those sectors and you will, as sure as night follows day, destroy your society.
We're not doing very well.
6
What about asset bubbles in financial instruments?
8
A tax rate most would like to see of 30% on an income of $375k may seem low in the context of fairness and income inequality, however if you took away all the deductions such as carried interest, mortgage interest, state and local taxes, etc., it would probably generate more than enough additional government revenue. Establishment politicians desire to pick winners and losers work against most peoples notions of fairness and work against the basic problem.
10
Economic Reform with Inverse Taxation
Professor Schiller needs to think outside the box to understand the power of all three tax bases: wealth, income and consumption. If all three bases are taxed the same total tax revenue could be produced with the lowest tax rates. Schiller deserves credit for talking about wealth and inequality but he does not realize that middle class success (which I define as $1,000,000 in family wealth and $100,000 in annual income) should be the policy focus to maximize upward mobility. Tax policy should help people become millionaires and let multimillionaires fend for themselves.
Consider the effect of a taxpayer choice of income tax rate between 8% and 28% paired with a wealth tax rate of 2% decreasing to zero. Each taxpayer would also be able to save up to $500,000 wealth tax free for retirement, health care and education; and combined payroll taxes (now fixed at 15.7%) would be eliminated. Social Security would be funded by a 4% VAT and 8% C corporation tax with no tax expenditures. Cumulative wealth taxes could be used to offset estate and gift taxes (set at 28%) – finally making the Estate Tax fair to all.
Schiller has a plan for job insurance but guaranteed jobs in the charitable nonprofit sector(at a little below business rates) would be better. Most of the funding could come from simply limiting the %40 billion charitable deduction to charities that agreed to provide many transitional jobs in times of business slowdown and vice versa.
Professor Schiller needs to think outside the box to understand the power of all three tax bases: wealth, income and consumption. If all three bases are taxed the same total tax revenue could be produced with the lowest tax rates. Schiller deserves credit for talking about wealth and inequality but he does not realize that middle class success (which I define as $1,000,000 in family wealth and $100,000 in annual income) should be the policy focus to maximize upward mobility. Tax policy should help people become millionaires and let multimillionaires fend for themselves.
Consider the effect of a taxpayer choice of income tax rate between 8% and 28% paired with a wealth tax rate of 2% decreasing to zero. Each taxpayer would also be able to save up to $500,000 wealth tax free for retirement, health care and education; and combined payroll taxes (now fixed at 15.7%) would be eliminated. Social Security would be funded by a 4% VAT and 8% C corporation tax with no tax expenditures. Cumulative wealth taxes could be used to offset estate and gift taxes (set at 28%) – finally making the Estate Tax fair to all.
Schiller has a plan for job insurance but guaranteed jobs in the charitable nonprofit sector(at a little below business rates) would be better. Most of the funding could come from simply limiting the %40 billion charitable deduction to charities that agreed to provide many transitional jobs in times of business slowdown and vice versa.
12
Sadly, our fellow citizens have voted to support policies that have contributed to the exacerbation of inequality over several decades. More sadly, Americans have a strong anti-intellectual bent which prevents them from gaining the knowledge that would help them understand how the trend of inequality became established. Too many people ignorant and proud of it. The wealthy will have their way because bread and circus is sufficient for the others.
139
Warfare used to handle excess population but now it is too indiscriminately applied, without any regard to wealth or power. Something along the old neutron bomb philosophy is needed: vaporize the people but preserve the infrastructure. Perhaps it would make sense for the wealthy to finance the engineering of a plague for which only they could afford the antidote. In fact, this seems like such a simple solution and according to Occam's Razor....
1
I very much respect your thoughts and expertise. Inequality of outcome in current and past generations generates inequality of opportunity in future generations. This process will only increase inequality, as Piketty has documented. Robert Reich has made some excellent points. We should be concentrating on predistribution rather than redistribution. Strong unions, a rising minimum wage, universal healthcare, paid family leave will all strengthen the middle (and lower) classes. There is no reason that a Walmart worker should be paid less than a General Motors worker was paid a generation ago.
99
But James, with the present huge inequality of wealth surely redistribution must come BEFORE predistribution.
7
American politicians constantly speak of the middle class. Democrats, Republicans all insist their policies defend it.
But what does it really mean? This question is rarely asked. What exactly is the middle class?
A new study suggests that the U.S. hardly even has one.
More than half of Americans — 56 percent, to be exact — have less than $1,000 combined in their checking and savings accounts, according to a recent survey, Forbes reported.
But what does it really mean? This question is rarely asked. What exactly is the middle class?
A new study suggests that the U.S. hardly even has one.
More than half of Americans — 56 percent, to be exact — have less than $1,000 combined in their checking and savings accounts, according to a recent survey, Forbes reported.
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Could that be because many have their money in other investments? I certainly feel that if I have $1,000 or more in my non-existent savings account or my checking account, it is not working for me as it should
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The poor and working class have been destroyed -- and now the middle class is being destroyed.
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Professor Shiller wonders what will we do in the future if the 37-39% tax rate wont produce enough revenue to help the poor and middle class. How about improve the way we help the poor and middle class?! There are 126 federal safety-net human services programs focused on the 46 million Americans in poverty. Annual government spending on these programs is almost $1 trillion, or an average of $21,700 for each American in poverty, or nearly $87,000 for a family of four. Clearly we are not getting the results we should from this enormous level of spending.
As for taxes, it isn’t the tax rate -- it is the exemptions, which total about $1.3 trillion or 8% of GDP. More than 60% of tax preferences flow to the wealthiest 20%, with only 3% going to the bottom quartile. Government in effect subsidizes our big houses, expensive health care and retirement savings.