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Phil Gramm and John Early have been trying to spin a story like this many times in the last several years on WSJ. Indeed there are always different numerical o

by blunte 6y ago

Phil Gramm and John Early have been trying to spin a story like this many times in the last several years on WSJ. Indeed there are always different numerical outcomes when you change your methods and definitions, so it is possible that by their definition things aren't as bad as the "other numbers" show. However if you look at the national minimum wage of $7.25/hr, compare that to inflation or productivity, you'll see that the lowest earners are worse now than they have been for decades. Ironically, they want to focus on "Medicare, Medicaid, food stamps and some 100 other government transfer payments". Those services aren't needed by people who earn enough to actually live on. The reason those services have increased is because the people who need them are not being paid reasonably. This is also why the top earners (particularly the top class who "earn" via capital gains instead of "income") have seen their wealth balloon over the same period that is being debated about. The authors can choose any definition they wish, but at the end of the day, there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10%. When we reach a point where one individual theoretically has $200 billion (not liquid of course, but plenty of that is), and there are still children without food, there is something wrong. What is considered fair will vary from person to person, but there are limits.

mjburgess 6y ago
The problem with this analysis and others like it is it makes atemporal distributional claims as if they were temporal. And conflates unrelated measures. Eg., consider the claim that "college graduate salaries have stagnated" -- this is true, but in 1990 c., 10% were graduates; today that's c. 55%. So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago. Consider the claim about "productivity". The reason production has increases at a greater pace than wages is automation. No one is "missing out" on the benefits from automation; they correspond to massive increases in disposable income and time, as we benefit from those tools/products. > there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10% This is true only due to the extraordinary efficacy of capitalism. As in all of these cases it's the exceptional increases in abundance which have lead to this apparent "disparity in lifestyle". And if you chose different percentiles it would be false. The bottom 10% have seen their disposable income double in a time when the top 50% have seen it treble. Thus an apparent "gap". This is the duplicitous information missing from all these atemporal comparisons. Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on. Much of the apparent difference is created from two effects, (1) the media and social media show the lifestyles of the very rich as if they were very common; and (2) people feel "the local rate of change of growth". The vast majority of this alleged "problem with inequality" is just that local rates of change of growth have been unstable since the financial crisis in 2008. Despite gains for everyone since then, people do not "remember the macroeconomy of 2008" and compare it today. Rather, all they see is the day-to-day negative news created by accelerating and decelerating growth. Even when growth is positive, if it is decelerating, people think the sky is falling. Nothing about the contemporary economy is much different, in distributional terms, than it was in 2006. Where then was this hysteria?
- skohan 6y ago
  > So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago. You are leaving the cost of education out of the equation, which has increased massively over the past 30 years. Most Americans graduate under a mountain of debt. If salaries have remained stagnant, for the 10% who would have been that amounts to a net lower salary, at least for the first X years of employment until the debt is paid off. For the other 40%, they might have had the option to go work in a steel mill or an auto plant with a high-school degree, and now they have to go to university, and acquire a massive debt to have a hope of competing for a job outside the service industry. I'm not so convinced this is a net win for anyone involved. > Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on. I'm also not so convinced this is the case. If you want to make the argument that I am living like Jeff Bezos because we can both have an LCD TV and and iPad, I think this is a very shallow argument. While the cost of consumer goods has not risen significantly in the past few decades, the cost of the markers of a middle-class existence absolutely have. For instance, due to the increased cost of housing, the rate of home ownership among millennials is much lower than that of previous generations. Due to student loan debt and the high cost of healthcare, many young people who might have risked leaving a 9-to-5 job to start a business don't feel safe to do so. Low cost consumer goods are nice, but the "American Dream" has always been about owning your own future, and being able climb into the next social class above your origins with hard work and ingenuity. Due to income inequality, the price of getting a seat at the table is what has increased out of the reach of almost everyone.
  - danaris 6y ago
    To be fair, it is a net win for the overall education of our country. That's not something to just dismiss—but it doesn't have a great deal of easily-measurable economic value.
    - blunte 6y ago
bob33212 6y ago
Solving child hunger has nothing to do with an individual being worth 200B or not. If the government siezed all of Warren Buffet's money tomorrow would hungry children magically have food show up in front of them? The government just spent 1.9T, clearly they are not limited on spending by Buffet hoarding all the money. It is terrible that children grow up with food scarcity and it is terrible that children grow up with alcoholic parents, but taxing rich people isn't going to fix that.
- dnadler 6y ago
  Not to be too pedantic, but the $200B is Bezos, not Buffett. Regardless, taxing the weathy can feed poor children by literally funding programs like food stamps. The covid payments are effectively unfunded, and taxes are the primary source of revenue for the government We're going to need to pay for these programs somehow. I'd personally be pretty happy with a lot of inflation, give how much my house cost, but I dont think that that would be the best solution for the country as a whole.
  - candiodari 6y ago
    I think the point is that the government makes money. They can spend whatever they want, they can literally name any number and spend it in dollars. They have been limited in spending by the rule that they have to loan money, not just spend made up money (after screwing up pretty badly this rule was introduced). But that still gives them trillions per year to spend. Therefore incoming dollars do not matter, taxes do not really matter. Which I think is the point that we were trying to make. So there is no justification in taxing "the rich" in any need for increased spending. This is further complicated that "the 1%" is an annual income of 500k, or an individual income of 250k. A lot of people on this site who don't see themselves as rich (but are) will be included, and will point out that this does not give a "rich" lifestyle in San Francisco. Taxing them so their income drops to, say 160k (down 30% or so) will cost them very directly in comforts, apartments, ... they will fight this tooth and nail. If you then look at the income that can be generated for the government you quickly realize that you need to tax at least the top 30%. You'll see that this will mean increased taxes (and think 70-80%) for any income over, say 90k per person, if you indeed want to increase taxes. I don't think many people will find this acceptable, because they cannot possibly maintain their lifestyles with such taxes. This will effectively mean anyone not in the 1% is limited to ~120k per year, down 30-40% from what they have now, 100 million voters. More than enough to massively swing towards whichever party opposes this. So the question becomes if this fight is really worth it, since it will not actually allow for increased spending ... Much easier for any party to force interest rates to zero and spend infinite.
prostoalex 6y ago
> However if you look at the national minimum wage of $7.25/hr, compare that to inflation or productivity, you'll see that the lowest earners are worse now How large is that group in absolute numbers and what demographics do they represent? A high school student earning this amount because his parents want him to accrue some basic time management skills - no big deal. A college or certificate program student working a minimum wage job as they are waiting to graduate and switch into professional career - slightly bad deal, but things will get better. An income earner for a family of 6 where this individual is the only one working - very bad deal. Would be interesting to see distribution of demographics before coming up with blanket solutions.
NoblePublius 6y ago
This is fantastically wrong. Just imagine to what you would have to raise the minimum wage to disqualify an individual from any government assistance. And then imagine what that would do to the prices of the services those people provide. WalMart makes about $6k profit per US employee and if they gave all of it to the employees, the employees would still qualify for welfare. So what you’re actually talking about is making Walmart customers (mostly low income people) pay more for groceries. Taxpayers aren’t subsidizing Walmart; they’re subsidizing Walmart customers. You really sound like youd prefer the poor be poorer so long as the rich are less rich.

by blunte 6y ago

mjburgess 6y ago

The problem with this analysis and others like it is it makes atemporal distributional claims as if they were temporal. And conflates unrelated measures. Eg., consider the claim that "college graduate salaries have stagnated" -- this is true, but in 1990 c., 10% were graduates; today that's c. 55%. So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago. Consider the claim about "productivity". The reason production has increases at a greater pace than wages is automation. No one is "missing out" on the benefits from automation; they correspond to massive increases in disposable income and time, as we benefit from those tools/products. > there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10% This is true only due to the extraordinary efficacy of capitalism. As in all of these cases it's the exceptional increases in abundance which have lead to this apparent "disparity in lifestyle". And if you chose different percentiles it would be false. The bottom 10% have seen their disposable income double in a time when the top 50% have seen it treble. Thus an apparent "gap". This is the duplicitous information missing from all these atemporal comparisons. Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on. Much of the apparent difference is created from two effects, (1) the media and social media show the lifestyles of the very rich as if they were very common; and (2) people feel "the local rate of change of growth". The vast majority of this alleged "problem with inequality" is just that local rates of change of growth have been unstable since the financial crisis in 2008. Despite gains for everyone since then, people do not "remember the macroeconomy of 2008" and compare it today. Rather, all they see is the day-to-day negative news created by accelerating and decelerating growth. Even when growth is positive, if it is decelerating, people think the sky is falling. Nothing about the contemporary economy is much different, in distributional terms, than it was in 2006. Where then was this hysteria?

skohan 6y ago
> So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago. You are leaving the cost of education out of the equation, which has increased massively over the past 30 years. Most Americans graduate under a mountain of debt. If salaries have remained stagnant, for the 10% who would have been that amounts to a net lower salary, at least for the first X years of employment until the debt is paid off. For the other 40%, they might have had the option to go work in a steel mill or an auto plant with a high-school degree, and now they have to go to university, and acquire a massive debt to have a hope of competing for a job outside the service industry. I'm not so convinced this is a net win for anyone involved. > Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on. I'm also not so convinced this is the case. If you want to make the argument that I am living like Jeff Bezos because we can both have an LCD TV and and iPad, I think this is a very shallow argument. While the cost of consumer goods has not risen significantly in the past few decades, the cost of the markers of a middle-class existence absolutely have. For instance, due to the increased cost of housing, the rate of home ownership among millennials is much lower than that of previous generations. Due to student loan debt and the high cost of healthcare, many young people who might have risked leaving a 9-to-5 job to start a business don't feel safe to do so. Low cost consumer goods are nice, but the "American Dream" has always been about owning your own future, and being able climb into the next social class above your origins with hard work and ingenuity. Due to income inequality, the price of getting a seat at the table is what has increased out of the reach of almost everyone.
- danaris 6y ago
  To be fair, it is a net win for the overall education of our country. That's not something to just dismiss—but it doesn't have a great deal of easily-measurable economic value.
  - blunte 6y ago

bob33212 6y ago

Solving child hunger has nothing to do with an individual being worth 200B or not. If the government siezed all of Warren Buffet's money tomorrow would hungry children magically have food show up in front of them? The government just spent 1.9T, clearly they are not limited on spending by Buffet hoarding all the money. It is terrible that children grow up with food scarcity and it is terrible that children grow up with alcoholic parents, but taxing rich people isn't going to fix that.

dnadler 6y ago
Not to be too pedantic, but the $200B is Bezos, not Buffett. Regardless, taxing the weathy can feed poor children by literally funding programs like food stamps. The covid payments are effectively unfunded, and taxes are the primary source of revenue for the government We're going to need to pay for these programs somehow. I'd personally be pretty happy with a lot of inflation, give how much my house cost, but I dont think that that would be the best solution for the country as a whole.
- candiodari 6y ago
  I think the point is that the government makes money. They can spend whatever they want, they can literally name any number and spend it in dollars. They have been limited in spending by the rule that they have to loan money, not just spend made up money (after screwing up pretty badly this rule was introduced). But that still gives them trillions per year to spend. Therefore incoming dollars do not matter, taxes do not really matter. Which I think is the point that we were trying to make. So there is no justification in taxing "the rich" in any need for increased spending. This is further complicated that "the 1%" is an annual income of 500k, or an individual income of 250k. A lot of people on this site who don't see themselves as rich (but are) will be included, and will point out that this does not give a "rich" lifestyle in San Francisco. Taxing them so their income drops to, say 160k (down 30% or so) will cost them very directly in comforts, apartments, ... they will fight this tooth and nail. If you then look at the income that can be generated for the government you quickly realize that you need to tax at least the top 30%. You'll see that this will mean increased taxes (and think 70-80%) for any income over, say 90k per person, if you indeed want to increase taxes. I don't think many people will find this acceptable, because they cannot possibly maintain their lifestyles with such taxes. This will effectively mean anyone not in the 1% is limited to ~120k per year, down 30-40% from what they have now, 100 million voters. More than enough to massively swing towards whichever party opposes this. So the question becomes if this fight is really worth it, since it will not actually allow for increased spending ... Much easier for any party to force interest rates to zero and spend infinite.

prostoalex 6y ago

> However if you look at the national minimum wage of $7.25/hr, compare that to inflation or productivity, you'll see that the lowest earners are worse now How large is that group in absolute numbers and what demographics do they represent? A high school student earning this amount because his parents want him to accrue some basic time management skills - no big deal. A college or certificate program student working a minimum wage job as they are waiting to graduate and switch into professional career - slightly bad deal, but things will get better. An income earner for a family of 6 where this individual is the only one working - very bad deal. Would be interesting to see distribution of demographics before coming up with blanket solutions.

NoblePublius 6y ago

This is fantastically wrong. Just imagine to what you would have to raise the minimum wage to disqualify an individual from any government assistance. And then imagine what that would do to the prices of the services those people provide. WalMart makes about $6k profit per US employee and if they gave all of it to the employees, the employees would still qualify for welfare. So what you’re actually talking about is making Walmart customers (mostly low income people) pay more for groceries. Taxpayers aren’t subsidizing Walmart; they’re subsidizing Walmart customers. You really sound like youd prefer the poor be poorer so long as the rich are less rich.