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Paul Krugman on Inequality
Posted by: Jon Henke on Friday, October 13, 2006

The Von Mises Institute makes an amusing observation about an August Paul Krugman column on inequality:
Although the typical American consumer today has more affordable goods from which to choose than any time in this nation's history, that has not stopped some prominent voices from declaring that "unfettered" capitalism is undermining prosperity. [...] It is clear, according to [Paul] Krugman, that the golden age of income equality in the United States was long ago and can be revived only with policies that favor high, confiscatory tax rates and enforced unionization, as well as other methods of coercion. He writes:
Since the 1920s there have been four eras of American inequality:

  • The Great Compression, 1929-1947: The birth of middle-class America. The real wages of production workers in manufacturing rose 67 percent, while the real income of the richest 1 percent of Americans actually fell 17 percent.
We have another term for what Krugman calls the "Great Compression": It is called the Great Depression — and World War II. In other words, Krugman claims that the Great Depression, a time when the nation's unemployment rates were in double-digits, was a good time for the American "middle class" because, statistically speaking, incomes for wealthy people fell.
Another point is a bit of a pet peeve of mine. In a September column, Paul Krugman writes:
The stagnation of real wages — wages adjusted for inflation — actually goes back more than 30 years. The real wage of nonsupervisory workers reached a peak in the early 1970’s, at the end of the postwar boom. Since then workers have sometimes gained ground, sometimes lost it, but they have never earned as much per hour as they did in 1973.
Paul Krugman knows this is not true. In 1997, he wrote that the Boskin Commission had "declared that the Consumer Price Index had been systematically overstating inflation, probably by more than 1 percent per year for the last two decades" and that "the whole story about workers not sharing in productivity gains will turn out to have been based on a statistical illusion."

I'll conclude with the conclusion Paul Krugman drew in his '97 article:
one thing is now clear: the truth about what is happening in America is more subtle than the simplistic morality play about greedy capitalists and oppressed workers that so many would-be sophisticates accepted only a few months ago. There was little excuse for buying into that simplistic view then; there is no excuse now.
Indeed.

Jon Henke is the New Media Coordinator for the George Allen Senate campaign.
 
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Umm, perhaps if it’s not too much trouble, you could quote the passages where Krugman claims that the Great Depression was a good time for the American middle class. Or is this a gross distortion of what he actually said?
 
Written By: Lars
URL: http://
Krugman is quite simply an idiot. A rising tide lifts all boats, be they yachts or dingys. Take this fool to a Best Buy on the weekend, he can see all the regular people who are suffering from inequality of income still happily buying all manner of wonderful goods.

In other words, while he’s bewailing the fact that Bill Gates has more money than all of us, he’s missing the very salient point that more of us are doing better.

At least that’s his story while a Republican is in office.
 
Written By: Shark
URL: http://
I, too, did not read Krugman’s column but that is not necessary, really, to agree with Lars, though. It’s not that Krugman would think the Depression was good times. I doubt he would. But Krugman would rummage statistics to find localities wherein his preferred policies coincided or overlapped with trends any sane person would find good and then proclaim cause and effect regardless of other factors.

It could have been possible to take Krugman’s analysis of his Great Compression period at face value if his choice wasn’t a pin cushion for a host of red flags that suggest looking his statistics more closely, as well as whether the causes he might suggest were the primary causes of these results.

You note the two prime possible event flags that could affect the numbers he deals with — the Great Depression and WWII. As for policy flags, Heaven forbid Krugman might consider that immigration policies’ affect on the labor supply might have had some effect on the rise in real wages in the period of his choosing, the last third of which required searching for Rosie’s to do the riveting.

Far be it from me to say Krugman thinks in terms of "The Hand of Paul" when it comes to supply and demand curves, but over the course of time that I have read him, he does seem to like making them do what he wants rather than assessing the effects of all externalities on them.

 
Written By: Dusty
URL: http://
Jon, more tough love: glad to see you back, but I found this article pretty underwhelming, even unfair.

I was pleasantly surprised that the Van Mises institute actually spelled out the economic logic by which income inequality leads to underconsumption in fairly neutral terms. However, they then proceed to base most of their cheap shots throughout the article on a misrepresentation of Krugman’s point:

Krugman: Since the 1920s there have been four eras of American inequality:


The Great Compression, 1929-1947: The birth of middle-class America. The real wages of production workers in manufacturing rose 67 percent, while the real income of the richest 1 percent of Americans actually fell 17 percent.


Mises: We have another term for what Krugman calls the "Great Compression": It is called the Great Depression - and World War II. In other words, Krugman claims that the Great Depression, a time when the nation’s unemployment rates were in double-digits, was a good time for the American "middle class" because, statistically speaking, incomes for wealthy people fell.


This is a willful distortion of Krugman’s arugment. His Four eras don’t make normative judgements, they simply document contrasts in each era between the wage gaines or losses, and top 1% income gains. His conclusion is just that government policies matter in determining whether income inequality grows or shrinks. Few dispute this. Whether or not the Great Depression was a "good time" is irrelevant to whether or not the Great Depression was a time when income inequality shrank drastically. Indeed, the Great Depression sucked. The cautionary lesson is that income disparities that grow to the stratospheric highs of the 20’s will eventually face *overwhelming* pressure for a correction - and usually after a universal-negative-growth disaster facilitated by those income disparities - so perhaps we shouldn’t let the program get to that again, hmmm?

As to your "pet peeve" - perhaps I lack polish and insight, but I fail to see that how Paul Krugman arguing in 1997 that the CPI is overstated by a point directly contradicts a later assertion that nonsupervisory wages peaked in 1973. You’ll have to draw the lines a little more clearly if you want to avoid looking like you’re swinging at a straw man.

There are a lot of serious economists and economic observers making serious cases that income inequality has risen drastically in the past 6 years, that median real wages have been stagnant while inflation - there’s a lot more to inflation than the CPI - climbs, and that all of the above is a good reason why Americans are consistently negative on the economy, consistently rank it as a serious problem in poll after poll, and are concurrently ready to punish the GOP.

While I expect nothing better from people like Instapundit to do nothing but whine about where’s the economic love?, and blame the media, I’d like to see you take the inequality issue on a little more forthrightly, and not just take debatable potshots at Paul Krugman.
 
Written By: glasnost
URL: http://
More Von Mises strawmen:

1) There are more consumer goods choices in Best Buy 2006 than 1973, so we must all be better off! (There were more consumer goods choices in 1934 than in 1885, so everyone must have been better off, right? The business cycle and government policy is *meaningless* to economic well-being, right?)
 
Written By: glasnost
URL: http://
Umm, perhaps if it’s not too much trouble, you could quote the passages where Krugman claims that the Great Depression was a good time for the American middle class. Or is this a gross distortion of what he actually said?
The Great Compression, 1929-1947: The birth of middle-class America. The real wages of production workers in manufacturing rose 67 percent, while the real income of the richest 1 percent of Americans actually fell 17 percent.
And The first question is for you Karl Marx!
The period between 1929 and 1947 in the United States (and world wide) was notable for what two major events, what two major events?

1) The oppression of the urban proletariat and the development of the industrial bourgeoisee?
2) The years during which Walt Disney created Disneyland and won an academy award for the Steamboat Willy cartoon?
or
3) The Great Depression and World War II? (rollicking good times had by all)


Glasnost - second question, (during the booming days of the Soviet economy, when consumer goods were numerous, quality was high, and there were, of course, no shortages) was the measure of consumer goods available to Soviets a reflection of the averge Soviet citizen’s economic situation?

Funny thing about consumer goods, their quantity and quality tends to reflect the ability of consumers to consume (telephones, cars, refrigerators, washers, dishwashers, air conditioners, computers, televisions, radios - but hey, you probably liked it when only the rich folks could afford to own sh*t like that).

I also note that you’ve timed your complaint about income inequality (the last 6 years) to coincidentally, I’m sure, sync up with the election of GWB in the year 2000. Because everything was peachy keen before that (Enron, Worldcom, offshoring work to India and China, the DotCom bubble, etc).
What were the chances of that happening?! Wow!
 
Written By: looker
URL: http://
A rising tide lifts all boats, be they yachts or dingys.
Yes, of course, cliches are always empirically accurate.

When the Southern slave states enjoyed enjoyed economic growth, the slaves lot improved, they must have, because we KNOW that rising tides lift all boats.

Unfortunately, cliches are generalizations not economic laws, and economic reality is simply what it is.

I’ll agree that Krugman often begins with his conclusion and then finds statistics to back it up, as is usually the case with statistics, they often tell many different stories.

itpicking the statistics is certainly a valid method of casting doubt on the conclusion, but it is really just a tactic to suggest that Krugman is wrong, therefore I must be right. His central assertion was that inequality is driven by the ideology of those in power. So the real question is whether it is true that the economic ideology of the party in power impacts wealth inequality. And that of course forces us to ask whether relative wealth is relavent at all.

On the first, I cannot believe that there is even any pretense of an argument. Of course the idelology of those in power affects wealth inequality. Tax policy alone (although there are many other policy areas that affect economic inequality) is enough to conclusively prove this argument.

If you tax the wealthiest 1% at 76% net effective rate (as we did on 1950) and you tax the median wage earner at 11% (as we did in 1950) then you will absolutely affect wealth inequality. The rate at which the rich get richer will be slowed and the rate at which wage earners get richer will be hastened.

Conversely, if you tax the wealthiest Americans at 26% net effective rate and you tax the median wage earner at a net effective rate of 24% (as is the case today) you will of course increase the rate which the rich get richer and slow the rate in which wage earners get richer.

I believe that concentration of wealth is a sort of economic doomsday clock. Like the Laffer curve shows there is a point when people are taxed so much they will stop being productive, I believe there is a wealth concentration point at which society will shut down the economy in revolt of some sort.

I don’t know whether that point is 50%, 75% or 90%, but I do know that we are at previously unseen levels rising above 44%. Through most of American history, this concentration stayed around 22%.

So Krugman is right about the big picture, but his stats might not be the best information he could have used to support his assertion.
I also note that you’ve timed your complaint about income inequality (the last 6 years) to coincidentally, I’m sure, sync up with the election of GWB in the year 2000.
This wasn’t for me, but I’ll address it anyway...

The greatest increases in wealth concentration began when money was declared speech in the 1974 Buckley Valeo decision. Money has spoken, and it said we that have money want more money, and the rest of you can suck eggs until you can buy your own damned government.

Cap
 
Written By: CaptinSarcastic
URL: http://
you can buy your own damned government
Would that be Soros buying it, or Abramoff buying it?
 
Written By: looker
URL: http://
Would that be Soros buying it, or Abramoff buying it?
What do you think?

Do you think that Soro’s dollars, or liberal dollars in general, are anywhere near the dollars the K-Street lobbyists for better policy for the wealthy are generating?

The proof is in the pudding, Tom Delay’s K-Street Project, the Perpetual Republican Majority at any cost with any gift to anyone that will pay for it.

Do you really think your question was serious, that you really don’t what the vast majority of political money is buying?

 
Written By: CaptinSarcastic
URL: http://
I believe that concentration of wealth is a sort of economic doomsday clock. Like the Laffer curve shows there is a point when people are taxed so much they will stop being productive, I believe there is a wealth concentration point at which society will shut down the economy in revolt of some sort.
So you think then that all those rich people are keeping their money in shoe boxes under the bed or in mason jars in the backyard? Come on Cap - what happens to the money? It goes to banks. And it becomes mortgages and business loans for the average joe. Who, if he works hard, has good ideas and catches a few breaks, will move his way up the economic ladder.
 
Written By: meagain
URL: http://
Do you really think your question was serious, that you really don’t what the vast majority of political money is buying?
Geeze - the Republicans manage to gain control of the House/Senate for a little over 10 years all due to, of course, this buying and selling of government.

Now, I gather the Democratic control all the previous years (30+ years), when the Republicans were in the minority in the House and Senate was a direct reflection of divine will, rather than any buying or selling of government, is that your story?
Ah, sorry, church and state, couldn’t be divine will after all.

And during those years, you were, where, on a street corner with a sign complaining about the buying and selling of government control by Democrats?
Right?
 
Written By: looker
URL: http://
This is a willful distortion of Krugman’s arugment.
Is it? Krugman was arguing that labor’s wages "surged" because "Franklin Roosevelt favored the interests of workers". Of course, as we know now, FDR’s policies may have ameliorated the Great Depression to some extent, but they actually extended it far beyond what it should have been. In any event, it’s difficult to attribute the compression of that period to positive actions.

It’s also a bit hard to attribute the wage growth of later periods to positive government actions, except perhaps in the case of freer trade policies. Then again, current wage stagnation — to the extent that it’s even happening — is also partially attributable to globalization, which has helped us a great deal, but also creates a larger labor pool. The Economist had a good overview on this recently.
As to your "pet peeve" - perhaps I lack polish and insight, but I fail to see that how Paul Krugman arguing in 1997 that the CPI is overstated by a point directly contradicts a later assertion that nonsupervisory wages peaked in 1973. You’ll have to draw the lines a little more clearly if you want to avoid looking like you’re swinging at a straw man.
If inflation is overstated by much at all, then that means that wages have risen faster than prices. Voila’, no decline in Real Wages.

Naturally, it’s more complicated than that. For one thing, it’s absurd to talk about real wages, rather than total compensation. It’s also important to mention that household sizes have declined.
 
Written By: Jon Henke
URL: http://QandO.net
So, looker, Krugman pointing out that a period in which the wealthiest lost ground relative to the middle coincided with, and, perhaps, partially caused the rise of the middle class implies that he thinks it was a good time? Do you really think he advocates returning to the policies that led to the Great Depression and World War II?
If so, with reasoning abilities like that, it’s no wonder you equate my challenging a conservative’s distortion of a liberal economist with my being a communist.
 
Written By: Lars
URL: http://
And by the way Cap, are you suggesting you don’t mind
if the right people are buying the one you like (Soros vs Abramoff).

Personally I don’t like anyone buying it, but I acknowledge I don’t have control past my own state representatives and my vote for the President and Vice President.
I’ll try and tend my garden, you try and tend yours, hopefully we’ll get rid of the weasels before the gardens are gone.

But your weasels are just as much weasels as mine are.

And Lars - no, I didn’t mean to call you a communist, actually that’s a bad use of a joke hardly anyone will get unless they spent far too much time in college watching Monty Python (guilty).
And no, I didn’t think Krugman said it was a good time, that was me (again) implying it was NOT a good time, and therefore I hardly want to see the balance mechanism employed when wealth inequality was reduced.

Also, the wealth inequality in the US prior to the widespread employment of the standard Income Tax allowed the government to even gather the figures. So, frankly, most of you have not a single clue about the inequality in American society prior to that, and yet, you’re all quite confident that it has NEVER been worse than, of course (queue: trumpet and drum roll) George W. Bush in the years 2000 to present.
 
Written By: looker
URL: http://
Of course the idelology of those in power affects wealth inequality.
I won’t dispute this, except to note that (a) barring the rare major structural change, the President probably has a lot less power than people generally believe, and that (b)those in power can’t really ’correct’ the economic reality so much as they can distort it. It’s called rent-seeking.
Conversely, if you tax the wealthiest Americans at 26% net effective rate and you tax the median wage earner at a net effective rate of 24%
I don’t believe that is the case. As of a couple years ago, the net effective rates were approximately 26% and 14%. The wealthies (top 1%) were taxed at an effective rate of approximately 32%.


 
Written By: Jon Henke
URL: http://QandO.net
I don’t believe that is the case. As of a couple years ago, the net effective rates were approximately 26% and 14%. The wealthies (top 1%) were taxed at an effective rate of approximately 32%.
Look again, your rates are incorrect, probably using averages and not median, and/or ignoring payroll taxes.

The net effective rate that income is taxed at (not just income taxes, but taxes on income) are 26% for the wealthiest 1% and 24% for median wage earners.

Cap
 
Written By: CaptinSarcastic
URL: http://
Personally I don’t like anyone buying it, but I acknowledge I don’t have control past my own state representatives and my vote for the President and Vice President.
I’ll try and tend my garden, you try and tend yours, hopefully we’ll get rid of the weasels before the gardens are gone.

But your weasels are just as much weasels as mine are.
I was a registered Republican and a supporter of Republican candidates from 1980 until 1996, I registered as a Democrat in 2000 and began supporting Democrats in the 2000 election.

Either all of the weasels are mine, or none of them are, but I agree with your point, get rid of the weasels.

Before I suggest a method of doing that, I want to point out that it appears that the weasels being bought for populist policies left the nation in much better condition that the weasels bought by the wealthy. (I am sure we could debate this ad nauseum)

As to how we tend to the garden, my answer is simple, public financing of elections. Offer candidates a certain amount of money plus TV time, they can accept or decline, if one accepts and the other spends private money, match whatever the privately funded candidate spends dollar for dollar. We will eventually have elected representation beholden to voters, not contributors.

Cap
 
Written By: CaptinSarcastic
URL: http://
Look again, your rates are incorrect, probably using averages and not median, and/or ignoring payroll taxes.
It does use average incomes, but they are averaged within quintiles, which prevents distortion from extreme upper and lower levels. And it explicitly uses total federal taxes.

Tax Facts, which is a product of Brookings and the Urban Institute, produced this.
 
Written By: Jon Henke
URL: http://QandO.net
Sorry for overreacting there, looker; I was feeling a bit testy this morning, and I must have missed that episode. I was also carrying over my annoyance at the glee I perceived in the article when they broke Krugman’s "code" and exposed his coverup of the Great Depression. I hardly think, as the article Jon quoted seems to imply, that simply because Krugman feels inquality is a problem he would endorse all economic policies that reduce it (including, ridiculously, the policies that led to the Great Depression).
Economic decline may be one way to equalize the economy, but I think that it is not the only one, and that there are government actions, such as progressive taxation, that can effect distributions without unduly hurting average growth. Of course, I don’t expect many on this board to agree (and I don’t even know if Krugman would agree).
 
Written By: Lars
URL: http://
So you think then that all those rich people are keeping their money in shoe boxes under the bed or in mason jars in the backyard? Come on Cap - what happens to the money? It goes to banks. And it becomes mortgages and business loans for the average joe. Who, if he works hard, has good ideas and catches a few breaks, will move his way up the economic ladder.
You just described trickle-down economics, or supply-side economics, or Reaganomics, you may as well have said that a rising tide raises all boats.

None of the above is accurate. There have been periods where growth affected most Americans positively and there are periods when it did not. This alone disproved the theory that when the rich get richer, everyone else does better too.

Look at the economic reality today, according to your theory, since we have good economic growth, and the rich are getting richer rapidly, that access to capital in the forms of home or business loans would be greater, when in fact the opposite is true, money is tighter, home loans are MORE expensive.

The difference between the wealthy and the not-wealthy are that the non-wealthy are not accumulators, they spend the vast majority of the earnings (because they have to in order to live) and the wealthy ARE accumulators, they keep the vast majority of what they earn and they use it to earn more, so that the average joe is not benefitting from the wealth of the wealthy they are paying the wealthy for whatever access they have.

Simple anecdote that explains this.

Company A has 10000 employees and a net profit of 10 million that is distributed primarily to 5 major stockholders.

Company A fires 1000 employees and improves profit to 20 million that is distributed primarily to 5 major stockholders.

Where did the extra 10 million come from, where will it go, who did it benefit before, who will it benefit now?

One of the 1000 who were fired borrows money to get by between jobs... perhaps it is part of the extra 10 million in profit... he should be SOOOO grateful the company fired him so they have that extra money for him to pay interest on to get by because he doesn’t have a job.

Voodoo economics

Cap



 
Written By: CaptinSarcastic
URL: http://
Cap - I agree on the public financing - all up front, where it can be accounted for. Give em a budget, let em live in it (what a concept).

And your point about weasels being ’all mine’ is well taken if I’m understanding it to mean that Texas Weasels and, say, California Weasels all sitting together in Washington end up being all ’my’ weasels.

I would like the Dems to give me a choice, but they don’t.
I would like for anyone to give me a choice, but both parties conspire, in at least this one area, to make that as difficult as possible.

The weasels definitely have a club, and they don’t want outsiders in the game.
 
Written By: looker
URL: http://
And by the way Cap, are you suggesting you don’t mind
if the right people are buying the one you like (Soros vs Abramoff).


This comparison is senseless. Jack Abramoff was caught paying politicians for personal favors and his personal enrichment. George Soros has been "caught" donating money to politically active lobbying groups. One is illegality. The other is democracy, and practiced on a vast scale by most people in the country in smaller quantities, and in large quantities by no shortage of Republican billionares, of which Pete Coors and Richard Mellon-Sciafe come to mind first.

 
Written By: glasnost
URL: http://
Is it? Krugman was arguing that labor’s wages "surged" because "Franklin Roosevelt favored the interests of workers". Of course, as we know now, FDR’s policies may have ameliorated the Great Depression to some extent, but they actually extended it far beyond what it should have been.

We know this, huh? This is a proven fact a la rocks fall towards the gravitational center? Or, this is what your personal favorite economists say?
Come on.

In any event, it’s difficult to attribute the compression of that period to positive actions.

Au contraire. Certainly the Depression itself- created by the private economy’s collapse all on its own - lowered the income of the rich over the first half of the era, but there’s no reason to suggest that FDR’s policies prevented the lower half’s wages from eqivalently, and/or were the cause of the rise, whichever effect you stipulate occured. If FDR’s actions weren’t relevant to income distribution, the rightwing and libertarian wouldn’t be calling his policies "redistributionist". How can you be redistributing and have no effect on the distribution of income?

If inflation is overstated by much at all, then that means that wages have risen faster than prices. Voila’, no decline in Real Wages.

"much at all"? You mean, if the CPI is off by a point, there’s no decline in real wages? How about flat real wages over six years while 1% income growth and corporate profits have skyrocketed? Does that really change the debate? Besides, you’d have to understate the CPI by more than that to have real wages be above 1999 levels.


Naturally, it’s more complicated than that. For one thing, it’s absurd to talk about real wages, rather than total compensation

Yeah? Well how absurd is it to use the CPI to measure inflation, when tutition, health insurance, and other non-consumer-good prices have risen drastically?
It’s not absurd at all - the CPI measures inflation in goods only, and real wages are the only way to purchase those goods. Total compensation considers inflation in services to be a net wealth increase. Now, that’s absurd.






 
Written By: glasnost
URL: http://
I love how the liberal commentors totally avoid the second point of Jon’s post where he shows how Krugman has miraculously taken a very different stance on a specific issue that he commented on back in the 1990’s. In the 90’s, workers’ share in productivity gains/increase in income was more complicated than the statistics seemed to indicate. Now, of course, it is clear that greedy Republicans have enacted policies (e.g. lowered the top mariginal tax rate by 3%, Gasp!!). The Clinton Miracle Economy (aka "stock market bubble") of the 1990’s caused income inequality to grow.

Jon is right. Income distribution/wage growth statistics are impacted by things such as the overstatement of CPI, unfettered illegal immigration, smaller family sizes, etc. Liberals’ self professed appreciation of nuance is nowhere to be found in these comments. Since Bush has been in office income inequality has increased, but as Krugman himself admits, that has been happening for a long time. Guess what, if you don’t have skills that are valued by the labor market, you won’t participate in the benefits of economic growth. If you can’t speak english, you are poorly educated or uneducated, or possess no job skills you won’t participate as fully in the wealth created by our economy as you would if you could speak english had a good education and/or had valuable job skills.

We are all better off than we were in the past, just not all to the same extent. I don’t think it is much of a surprise that the more libertarian minded on this blog don’t care about how much other people have relative to themselves. Liberals’ narcissism makes them apoplectic when other people have more than they do because their sense of entitlement leads them to believe they deserve more than anyone else. Income equality has never existed in the entirety of human history and it never will. Communism never succeeded in eliminating social classes or inequal distribution of income. Everyone’s accumulation of wealth is a product of choices, hard work and chance. That’s life and government programs aren’t going to overcome that fact anymore than they could overcome the law of gravity.
 
Written By: jt007
URL: http://
This comparison is senseless. Jack Abramoff was caught paying politicians for personal favors and his personal enrichment. George Soros has been "caught" donating money to politically active lobbying groups. One is illegality. The other is democracy, and practiced on a vast scale by most people in the country in smaller quantities, and in large quantities by no shortage of Republican billionares, of which Pete Coors and Richard Mellon-Sciafe come to mind first.
Ah yes, but they are both (all), still, buying government. The fact that the people they buy has made one legal and the other illegal doesn’t change the fact that they are buying their preferred version of government when most of the rest of us cannot do so.

You prefer to view it as a senseless comparison because you favor the ’legal’ purchase of government over the illegal purchase of government.
Cap recognized they were both buying government, and at least made it an argument of scale, rather than that one form of buying is okay, and the other is not.

As to this being ’democracy’ in action, yeah, if you say so. I know it’s what I recall, being taught that campaign contributions = government. I vaguely recall that, chapter 2 or something in the Federalist papers maybe?

Well done to bring in all the little people to your argument, all those contributions of $25.00 - $1000.00.
Now go ahead and convince me that the little people’s money doesn’t tend to just follow the BIG contributions when it’s applied to getting the government the big contributor wanted. You seriously think my $25.00 to some Republican campaign means I have the same voice as Coors’s $25,000,000?
All that really happens is Coors gets $25,000,025.00 in credit towards what HE wanted for government and I can like it or lump it the next time they call and ask for my dough.
Perhaps you contribute to some political fund that shows you exactly where your $25.00 went to.
So far, I haven’t seen that one, and I’ll wager, you haven’t either.
 
Written By: looker
URL: http://
Where did the extra 10 million come from, where will it go, who did it benefit before, who will it benefit now?
I’m no supply sider, but what will those 1000 employees be doing now that they’re not doing unnecessary work? And what will those 5 stockholders invest their additional income in? Are you really suggesting that we’ll be better off if capitalists pay people to do unnecessary work?
We know this, huh? This is a proven fact a la rocks fall towards the gravitational center? Or, this is what your personal favorite economists say?
Come on.
Like most major economic issues, it’s far from a simple answer — obviously, monetary policy had some effect on it, as well as trade policy — but that’s been a pretty wide consensus for decades now.
Certainly the Depression itself- created by the private economy’s collapse all on its own
On it’s own?
there’s no reason to suggest that FDR’s policies prevented the lower half’s wages from eqivalently,
No, his policies helped distort wages, but that doesn’t mean it necessarily lowered them. But when you raise incomes above the equilibrium, who pays the cost? Long-term structural unemployment, inflation/deflation, etc.
"much at all"? You mean, if the CPI is off by a point, there’s no decline in real wages?
Y’know, this stuff is all available if you want to read about it. Try Boskin’s "Causes and Consequences of Bias in the Consumer Price Index As a Measure of the Cost of Living" [Atlantic Economic Journal 33(1), March, 2005PDF].
Yeah? Well how absurd is it to use the CPI to measure inflation, when tutition, health insurance, and other non-consumer-good prices have risen drastically?
Much less absurd than not knowing that CPI does measure tuition, health insurance and plenty of other services.

In any event, it is a bit absurd to pretend that CPI is a measure of inflation. It is not a true cost of living index or a measure of inflation, and even the BLS acknowledges that. That’s part of the reason why CPI has overstated inflation for a long time.
 
Written By: Jon Henke
URL: http://QandO.net
When the Southern slave states enjoyed enjoyed economic growth, the slaves lot improved, they must have, because we KNOW that rising tides lift all boats.
I didn’t bother reading anything else you had to say after this bout of dishonesty. To keep using my "cliche" you darn well know the slaves lot wasn’t impacted since they were not in boats but locked up on land - in other words, artificially kept out of the economic cycle.

Try again, this time using honest and pertinent examples, if you can. Until then, your long posts simply aren’t worth reading
 
Written By: Shark
URL: http://
The difference between the wealthy and the not-wealthy are that the non-wealthy are not accumulators, they spend the vast majority of the earnings (because they have to in order to live)
Talk about inaccuracies - the difference between the wealthy and non wealthy are generally in the decisions they make. I’ll use myself as a nice little example. Born into the lowest possible level of the ’middle class’ - more accuratley we were the upper side of poor. I have a sister. We have all the same basics. She chose to drop out of college and has spent the last 20 years working at hourly paid jobs, barely getting by. No money to buy a house. No money to buy a decent car. Heavy credit card debt. But she has a cell phone. She has DirectTV with the NFL ticket. She goes to the bar Friday and Saturday night. She always has a carton of smokes. The decisions she made and continues to make continue to affect her.

I put myself through college. I worked at jobs and built a history. I moved to where the job environment was better. I bought a house. I bought a second house. I work 70 hour weeks when necessary. I stay home most weekends. I make choices that affect my world and tend to have a cumulative benefit. And most of my family thinks I’m ’lucky’.

Poverty is a choice. Or, better said, it is the cumulative outcome of choices.
 
Written By: meagain
URL: http://
but that’s been a pretty wide consensus for decades now.

We’ll have to agree to disagree both on the point and the consensus.

No, his policies helped distort wages, but that doesn’t mean it necessarily lowered them.

You must have misunderstood me. I was arguing that, though the incomes of the rich fell through inherent causes to some extent, it doesn’t make sense to argue that FDR’s policies had no effect on the wages and incomes of the lower/middle class - and therefore, that his policies had no effects on the resulting income inequality situation. I wasn’t claiming that FDR’s policies lowered incomes. That would be, at miniumum, counterintuitive.

But when you raise incomes above the equilibrium, who pays the cost? Long-term structural unemployment, inflation/deflation, etc.

Perhaps. But if the market equilibrium is, to pull a number out of the air, declined by a third from where it was five years ago across the board, then it becomes an open discussion (not to libertarians, but to policy makers) the extent of those costs and whether or not they’re worse to society than the costs of the aforementioned drastic slash in equilibrium living standards.


Much less absurd than not knowing that CPI does measure tuition, health insurance and plenty of other services.

Oops. My bad. Good link.

In any event, it is a bit absurd to pretend that CPI is a measure of inflation. It is not a true cost of living index or a measure of inflation, and even the BLS acknowledges that. That’s part of the reason why CPI has overstated inflation for a long time.

Less convinced here. The paper you linked to discussed in its prologue several historical instances where clear and explicit historical biases were corrected fairly quickly. That in itself suggests that this argued bias is, by comparison, well, argubale. That seems to fit very well with the speculative nature of his claimed biases. The extent of any substitution effect is certainly rather hard to quantify, the argument for an "improving-quality" adjustment is poor (it would distort what is genuinely trying to be measured, frankly, the cost of living, not the total returned universal ’value’ of items purchased...).. and so on.

Besides, frankly, for me, this topic is pretty semantic. Like I said earlier, even if your arguments were so empirically overwhelming as to prove that median real wages were only flat from 99-05 and not declining, I don’t think you would even try to argue that the relative position of the median real wage earner in 2005 is as well-off relative to the median 1% investment multimillionaire as he was in 1999. Be it absolute decline, real decline, stagnation or just wide divergence in relative growth rates - the bottom line is the same - this set of economic policies are a failure on my terms, not to mention on the terms of the median real wage earner, relative to the policies of the previous political era.

 
Written By: glasnost
URL: http://
Until then, your long posts simply aren’t worth reading
Don’t bother, I’m not interested in your opinion anyway, they have never been original, creative, thoughtful, or interesting.

If I want your opinion I’ll refer to the RNC talking points memo.

Cap
 
Written By: CaptinSarcastic
URL: http://
Looker, it’s not that I don’t sympathize with your argument - I’d love to have public campaign financing based on an enforced equality, or equality-rated-across-income-scales, of contributions, and an absolute ban on political contributions outside of the public financing scheme - thus ending any one citizens’ perceived greater relative utility to any politician’s campaign over any other citizen-

but that shouldn’t be used to pretend there’s no difference between Soros and Abramoff. Abramoff got business - money in his pocket, his personal pocket, not even the pockets of a class of people like him - from money he indirectly handed out to politicians. Soros (and various right-wing billionaires, who also shouldn’t be equated to Abramoff) are funding groups dedicating to enacting policies for reasons other than the explicit financial gain of those involved.
 
Written By: glasnost
URL: http://
Abramoff got business - money in his pocket, his personal pocket, not even the pockets of a class of people like him - from money he indirectly handed out to politicians. Soros (and various right-wing billionaires, who also shouldn’t be equated to Abramoff) are funding groups dedicating to enacting policies for reasons other than the explicit financial gain of those involved.
This is absolutely true, Abramoff’s influence was based on bottom line decision making, one group paid for decisions that would make them money, plain and simple briberry.

This is completely different than left wing or right wing ideologues supporting candidates of like mind.

The problem still remains that whichever ideology has the most dollars behind it will probably be selected to represent all of us, and that’s where and why our current system is broken. Even when big money participates for all the right reasons, we lose genuine representation.

Public financing is likely the only way we we will ever have representation again.

Cap

 
Written By: CaptinSarcastic
URL: http://
median real wages were only flat from 99-05 and not declining

The age group with the highest median incomes (ages 34-55) steadily increased as a percent of the overall population, starting at 25.2% in 1990 and ending 1999 at 29.7%. They peaked in first quarter of 2000, and have been slowly declining since to now what is 29.2%.

Also, legal immigration has grown at a faster annual rate from 1999-2005, than it did in the 90’s. While a small portion of the population, new immigrants make less than 60% of the median worker.

Both of these need to be taken into account when thinking about wage growth this decade relative to the 90’s and earlier.
 
Written By: m.jed
URL: http://
Public financing is likely the only way we we will ever have representation again.
Nonsense. Aside from the ethical, Constitutional, democratic and practical problems with mandatory, public-only financing (how big does my website have to get before it becomes an "illegal in-kind contribution?"), the fact is that, with trillions of dollars sloshing around, money will find a way in. It won’t be the same way as it now does, but public financing will only redirect the river.
 
Written By: Jon Henke
URL: http://QandO.net
Nonsense.
No, what we have now is nonsense, literally, the opposite of sensible. If the idea of your society is a representative constitutional republic, and you determine who represents the people by forcing them to raise money to put on a campaign and expect them to represent the people rather than the source of the money, THAT is nonsense.
Aside from the ethical,
There are no ethical problems, none.
Constitutional,
I agree that a public finance policy must be constitutional and it can be, as I stated earlier, by making the public financing optional, if you choose it, you cannot accept any private monies or in-kind assistance. If you choose private financing and your opponent chooses public, your opponent will receive a sum certain amount of funding, if you spend more than that, public financing will match additional spending dollar for dollar, but your opponent will be able to make the credible claim that he owes nothing to moneyed interests and can act for the benefit of the voters.
democratic
There are democratic problems with the current system, this solution resolves many of them.
and practical problems
No problem, you are either accepting public financing or not.
with mandatory, public-only financing
I never said mandatory, thought with my plan, eventually candidates would come to realize that it is simply moronic to choose private financing.
(how big does my website have to get before it becomes an "illegal in-kind contribution?"),
I see no reason for a website to ever be considered such, unless of course they are sending out campaign e-mails or some other active campaigning. Merely being a website that is an advocate poses no problems for me.
the fact is that, with trillions of dollars sloshing around, money will find a way in.


And the people behind it will find their way into prison.
It won’t be the same way as it now does, but public financing will only redirect the river.
Yes, back to back room deals and straight out bribery, I’m fine with that, let’s make crime a crime again.

Cap
 
Written By: CaptinSarcastic
URL: http://
We are all better off than we were in the past, just not all to the same extent. I don’t think it is much of a surprise that the more libertarian minded on this blog don’t care about how much other people have relative to themselves. Liberals’ narcissism makes them apoplectic when other people have more than they do because their sense of entitlement leads them to believe they deserve more than anyone else. Income equality has never existed in the entirety of human history and it never will. Communism never succeeded in eliminating social classes or inequal distribution of income. Everyone’s accumulation of wealth is a product of choices, hard work and chance. That’s life and government programs aren’t going to overcome that fact anymore than they could overcome the law of gravity.
What we are seeing now is not the product of choices, luck, or hard work, the extreme concentration of wealth we are seeing now is the result of policy, plain and simple. It is no less redistributive than welfare. It is oligarchical redistribution, and the proof is is the numbers, a greater and faster concentration of wealth than at any time in our history.

If the characteristics that you use to describe liberals are accurate, than I am not a liberal. I am neither narcissitic, nor do I have a sense of entitlement. I have precisely what I have earned and I do alright.

I am suggesting that the differences between 50 years ago in America and today are drastic and every way that is important, American wage earners are worse off than they were 50 years ago.

Conservatives (or dishonest libertarians) point to DVD players and cable and two car families as evidence of things bing better today. I point to real differences, like the fact that in order to maintain a stagnant after-tax household income 71% of families now have two working parents. Our children are being raised in daycare, heathcare is either provided by an employer or it is out of reach for most families.

In every real way, the American dream of each generation living better than the previous, died a generation ago.

We can save it, but only by bringing representation back to people.

Cap
 
Written By: CaptinSarcastic
URL: http://
I agree that a public finance policy must be constitutional and it can be, as I stated earlier, by making the public financing optional
This is the problem with your scheme: you’ve made public financing optional for the candidates, but not for the taxpayers who are forced to support candidates they wouldn’t under any other circumstances.
I see no reason for a website to ever be considered such, unless of course they are sending out campaign e-mails or some other active campaigning. Merely being a website that is an advocate poses no problems for me.
Why would a website be any different from a billboard? Or an ad in a newspaper? Or even a radio or television commercial? No one’s forcing anyone to view those media, just as no one’s being forced to view a website. Would it be legal for private money to pay for those media advocating one or more candidates?

If not why shouldn’t I, as a private citizen, be allowed to advertize any political content I wish in any medium I can afford?

Bottom line: publicly financed, dollar-matched campaign money overwhelmingly favors incumbents.

Sorry, but your idea creates far more problems than it solves.


 
Written By: Steverino
URL: http://steverino.journalspace.com/
No, what we have now is nonsense, literally, the opposite of sensible.
I didn’t say I liked it. I’m just pointing out that it is an unavoidable result of the power and largesse of government.
There are no ethical problems, none.
If, as you suggest, you make it voluntary, I could see how that might obviate any ethical problems for libertarians. On the other hand, who would qualify for public funding? Would you set an arbitrary cut-off point for popular support before they qualify? Would you set it at 0, or very low, giving many third parties hundreds of millions of dollars in funding?
There are democratic problems with the current system, this solution resolves many of them.
I’m not really certain that it does. One of the hallmarks of democracy is the right to speak, to engage in politics and to campaign as you wish. Making that illegal for some candidates would be a major step backward.
I see no reason for a website to ever be considered such, unless of course they are sending out campaign e-mails or some other active campaigning. Merely being a website that is an advocate poses no problems for me.
Then you haven’t thought about it very much. That’s already pretty tenuous under our current system. What if I spend $100/month to run a website in support of Acme Smith? What if I spend $1000/month? What if I run an enormous website that requires many servers, writers and technical staff, all in support of Acme Smith? What if I run a small website for Acme Smith, but give away free Acme Smith bumper stickers on the website? Etc.

Alternately: assume Big Corp has $5 million dollars and wants to see Acme Smith elected. They don’t have to give him the money. They can support the AS Foundation, which — by amazing coincidence! — runs ads and sends out research in support of all the issues Acme Smith supports. By further coincidence, they oppose his opponent on every issue.

Is that now illegal? Because if you make campaign donations illegal, it will just move one step over. You haven’t destroyed the incentive; you’ve just moved it.
 
Written By: Jon Henke
URL: http://QandO.net
What we are seeing now is not the product of choices, luck, or hard work, the extreme concentration of wealth we are seeing now is the result of policy, plain and simple. It is no less redistributive than welfare. It is oligarchical redistribution, and the proof is is the numbers, a greater and faster concentration of wealth than at any time in our history.
You have a bit of a paranoid view of income distribution. That’s not really unnatural. Research has indicated that humans have a natural, biological tendency (enhanced by childhood socialization) to see agency where none exists.

The Economist had a good article about this recently. In short, the emerging world is developing very, very rapidly right now. That development, along with some technological productivity advances, has resulted in much better bargaining power for that foreign labor, but has also decreased the bargaining power of domestic labor a bit. (it’s a bigger pool, and Developed World Swim is ending)

Plus, there’s the problem with CPI which drastically distorts our perceptions of this.
American wage earners are worse off than they were 50 years ago.
I can only note two things:

1) Check Household size. It has declined precipitously in the past few decades. Want to increase household income? End no-fault divorce. Don’t like that idea? Neither do I. But don’t pretend there’s no cost.

2) As even Paul Krugman said, "the truth about what is happening in America is more subtle than the simplistic morality play about greedy capitalists and oppressed workers that so many would-be sophisticates accepted only a few months ago. There was little excuse for buying into that simplistic view then; there is no excuse now."
 
Written By: Jon Henke
URL: http://QandO.net
You have a bit of a paranoid view of income distribution. That’s not really unnatural. Research has indicated that humans have a natural, biological tendency (enhanced by childhood socialization) to see agency where none exists.


Are you saying that there is no ideological policy support for supply side economics, that is what we are talking about here?

I am not saying that it is a brilliant conspiracy, more of a just a perfect storm of timing, money, and SCOTUS decisions.

Change the SCOTUS ruling in Buckley v Valeo, and we have a completely differnet political landscape.

I am not talking about agency, I am talking about policy direction that pushes wealth unnaturally toward concentration at the top and moneyed interests of varied interests, but all generally interested in amassing more money or keeping more money, priming the pump of our political system.

You call me paranoid, I’m not, but I am wondering if you are naive?

Cap

 
Written By: CaptinSarcastic
URL: http://
Are you saying that there is no ideological policy support for supply side economics
No, but I am saying that the decades-long and global trends to which you refer have relatively little to do with cutting income taxes by a few percentage points here and there, excepting, of course, the un-bottling of the harmful, distortionary 70% tax rates. Hell, monetary policy has more to do with most short-term fluctuations than fiscal policy, and productivity and globalization are the primary drivers of income and growth.

There absolutely are people interested in accruing wealth, but that wealth doesn’t sit still. If it stops generating economic activity, those people stop gaining wealth. It’s interesting to note that tax cuts on capital produce more economic activity and growth than tax cuts on income. A tax cut on income will pay for approximately 17% of the tax cut; a tax cut on capital will pay for close to 50% of the tax cut.

Those are nowhere near "paying for themselves" as some supply side evangelists and true believers like to pretend — despite the fact that the administration’s own economists specifically deny that recent tax cuts will pay for themselves — but it’s a good indicator of the distortions that taxes put on economic activity.

It’s also worth noting that domestic corporate taxes — a big favorite of anti-corporate Left — are borne predominantly by domestic labor, not by the owners of capital. (70% to 30%)
 
Written By: Jon Henke
URL: http://QandO.net
Bottom line: publicly financed, dollar-matched campaign money overwhelmingly favors incumbents.
This is hilarious, truly, the US House has an incumbant reelection rate of about 98%. You think that publically financed elections are going bring that UP?

Is this something you heard on Rush Limbaugh or from some other talking head to whom sounds are better than facts?

Bottom line, Saddam Hussein barely had a better chance of reelection than our representatives.

LMAO

Cap



 
Written By: CaptinSarcastic
URL: http://
No, but I am saying that the decades-long and global trends to which you refer have relatively little to do with cutting income taxes by a few percentage points here and there, excepting, of course, the un-bottling of the harmful, distortionary 70% tax rates.
I agree, and when I said that policies are redistributing wealth, I did not mean exclusively tax policies, those are just the most obvious. Foreign policy is an element, whether by accident or intent, we are funneling enormous amounts of tax dollars to private corporations in war related contracts. Corporate welfare, corporate socialism, whatever you want to call it, it is just one of many examples of policies that move wealth to the wealthy.

Now, can you tell me empirically, why 70% tax rates are harmful? I don’t disagree that they are, but I other than rhetorical arguments and appeals to fairness and liberty (which I agree with), I am not aware of any actual evidence that these rates hurt anything.

Cap
 
Written By: CaptinSarcastic
URL: http://
What we are seeing now is not the product of choices, luck, or hard work, the extreme concentration of wealth we are seeing now is the result of policy, plain and simple. It is no less redistributive than welfare. It is oligarchical redistribution, and the proof is is the numbers, a greater and faster concentration of wealth than at any time in our history.

Um, even Krugman recognizes the trend in rising pays for "superstars" - which has nothing to do with policy.

University of Chicago’s Steven Kaplan recently published a paper (http://faculty.chicagogsb.edu/steven.kaplan/research/krsep06.pdf) which attributes the increase in the number of "Wall Street" jobs as having a significant impact on the increase in income inequality - also nothing to do with policy. An portion of his abstract: Non-financial public company CEOs and top executives do not represent more than 8% of any of the top AGI brackets (the top 0.1%, 0.01%, 0.001%, and 0.0001%). Individuals in the Wall Street category comprise at least as high a percentage of the top AGI brackets as non-financial executives of public companies. While the representation of top executives in the top AGI brackets has increased from 1994 to 2004, the representation of Wall Street has likely increased even more. While the groups we study represent a substantial portion of the top income groups, they miss a large number of high-earning individuals. We conclude by considering how our results inform different explanations for the increased skewness at the top end of the distribution. We argue the evidence is most consistent with theories of superstars, skill biased technological change, greater scale and their interaction.

There was an article in today’s NY Times that attributed part of the rise in executive compensation to the unintended consequences of attempts to limit the rise - in the same way that athlete’s agents use the public salary information of comparable athletes to negotiate contracts, so have compensation lawyers representing their CEO clients.

Erik Hurst, also of University of Chicago, has written a paper on leisure inequality, (http://www.bos.frb.org/economic/wp/wp2006/wp0602.pdf) which has also grown disproportionately over the past forty years - but leisure time has grown faster for the lower-end of the income spectrum, essentially mirroring the trend in income and disproportionately benefiting the least-educated. We also find that leisure increased during the last 40 years for a number of sub‐samples of the population, with less‐educated adults experiencing the largest increases. Lastly, we document a growing “inequality” in leisure that is the mirror image of the growing inequality of wages and expenditures, making welfare calculation based solely on the latter series incomplete

I recall a post a few months back on this blog about productivity inequality - something along the lines of lower end not holding up their end of the deal.

 
Written By: m.jed
URL: http://
Now, can you tell me empirically, why 70% tax rates are harmful? I don’t disagree that they are, but I other than rhetorical arguments and appeals to fairness and liberty (which I agree with), I am not aware of any actual evidence that these rates hurt anything.

Well, I’m sure the benefits or lack thereof of such an occurence will be debated - but I believe the explosion of women in the workforce, and second earners in households, coincides closely with the drastic reduction in the top marginal tax rates. I don’t know of any academic studies on this subject, but with women making up more than half of college enrollees, and a much larger percentage of the working population, it would seem that empirically, returning to those tax rates would indeed cause significant harm.
 
Written By: m.jed
URL: http://
Well, I’m sure the benefits or lack thereof of such an occurence will be debated - but I believe the explosion of women in the workforce, and second earners in households, coincides closely with the drastic reduction in the top marginal tax rates. I don’t know of any academic studies on this subject, but with women making up more than half of college enrollees, and a much larger percentage of the working population, it would seem that empirically, returning to those tax rates would indeed cause significant harm.
I am not getting how women in the workforce is relavant to the top marginal (or effective) income tax rate.
 
Written By: CaptinSarcastic
URL: http://
It is oligarchical redistribution, and the proof is is the numbers, a greater and faster concentration of wealth than at any time in our history.

Another item on this topic - there is a floor on how little income a person can make, but, thankfully no ceiling. What is oligarchical about sub-50-year-old billionaires, including the two founders of Google (and other Google employees), the two founders of Yahoo, Michael Dell, Ken Griffin (founder of Citadel, one of the largest hedge funds), the founder of eBay along with their CEO, Jeff Bezos, Mark Cuban and his partner from Broadcast.com, Bill Gates, Steve Balmer, Steven A. Cohen, the founder of Morningstar?

All members of the Forbes 400, all either started their companies or were key to the success of the companies - and none of the companies except for Dell and Microsoft, and maybe Morningstar, existed as little as 20 years ago.
 
Written By: m.jed
URL: http://
Better than the drivel you spew cap.

Thanks for not refuting my point....
 
Written By: Shark
URL: http://
I am not getting how women in the workforce is relavant to the top marginal (or effective) income tax rate.

My wife works. Our effective tax rate is inconsequential to the decision to have her work, as with any economic analysis, it’s the marginal tax rate that matters. She is technically self-employed, so she pays both sides of payroll taxes. So with a 70% federal income tax rate and a 12.4% payroll tax rate, as well as state income taxes, means she’d take home around $0.15 on each dollar she earned.

And since intelligent people tend to marry other intelligent people, high marginal tax rates will drive intelligent, and presumably higher than average productive people, out of the work force.



 
Written By: m.jed
URL: http://
Cap,

I think he’s saying that too high a tax rate means that not-working becomes a more valuable choice for women.

I.e. raising kids is worth 1,000 utilities, while working is worth 2,000.

Now, after taxs:

1,000 vs. 600

So many women would return to the home.
 
Written By: Harun
URL: http://
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Written By: gasd
URL: http://
...having a significant impact on the increase in income inequality
Anyone can come up with a reason for the increased wealth and income inequality, there are thousands of reasons out there, some of them are even true, some are even relavent, but the funny thing is that many of these people are quick to discount the obvious and grasp at the obscure and unlikely.

But they do so and ignore the fact that we cut taxes on the rich while we tax working people’s income but not rich people’s wealth (capital gains), eliminate the estate tax on the rich so they can build family baronies of inherited wealth, use corporate coffers to finance politicians to get subsidies from the government. The economic factoids cited by David Brooks or Steve Kaplan may have some validity, but the idea that the above are populist myths would require that they actually address the populist assertions, not simply find some other possibilities and pretend that if their assertions are not false, then the populist ideas must be.

What they are doing is like finding that Mercury affects Earth’s tide and ignoring the moon.


Cap
 
Written By: CaptinSarcastic
URL: http://
My wife works. Our effective tax rate is inconsequential to the decision to have her work, as with any economic analysis, it’s the marginal tax rate that matters. She is technically self-employed, so she pays both sides of payroll taxes. So with a 70% federal income tax rate and a 12.4% payroll tax rate, as well as state income taxes, means she’d take home around $0.15 on each dollar she earned.

And since intelligent people tend to marry other intelligent people, high marginal tax rates will drive intelligent, and presumably higher than average productive people, out of the work force.


Okay, I understand now, but the 70% top marginal rate would not likely apply to anyone earning less than $1,000,000 a year or so, and people could of course file separately or perhaps not even marry, but I agree that if the tax rates were such it might have that effect on high income 2 worker families.

And then I wonder if that is a bad thing?

I think the 2 worker family is awful for our society. An entire generation of children raised by day care and public schools and after school care... these kids are going to be different.

But my real point was about whether there is any empirical evidence that when we did have 70% tax rates, there was a damaging effect that can be quantified in some way?

I have never really been curious, since I accept the premise that taxing that much is just on it’s face so who cares if it damaging to anyone, even if it doesn’t affect the lifestyle of the person paying the tax it’s still wrong. Unless of course we are at war or something.

Oh yeah, we are at war?

Anyway, now I’m curious and cannot find anything better than the Laffer curve, which never identified a point of diminishing returns other than 100%.

Cap
 
Written By: CaptinSarcastic
URL: http://
can you tell me empirically, why 70% tax rates are harmful?
The short answers are that (a) it discourages progressive economic activity, (b) it incents people to engage in tax avoidance and evasion, and (c) it distorts the price mechanism and sends high value economic activity in lesser-value directions.

And, really, why would you even want to discourage the highest-value contributors from engaging in economic activity?
 
Written By: Jon Henke
URL: http://QandO.net
This is hilarious, truly, the US House has an incumbant reelection rate of about 98%. You think that publically financed elections are going bring that UP?

Is this something you heard on Rush Limbaugh or from some other talking head to whom sounds are better than facts?
Cap, I don’t think you’re stupid, just an incredibly shallow thinker. When you disagree with someone you claim they’re adherents to Rush Limbaugh or the GOP talking points or whatever. But you spew little more than platitudes.

The incumbency re-election rate right now is a direct result of all the campaign finance reform we’ve had for the past 30 years, combined with gerrymandering at the state legislatures (which your public funding for campaigns wouldn’t fix). The more you equalize the funding the, the more likely the incumbent wins. This doesn’t come from some talking head, it’s just plain logic: the incumbent has years of exposure to his constituency, allowing him to get name recognition for free. The challengers don’t have that advantage, and need to overcome it through advertizing.

Go ahead and call me a talk-radio listener if it makes you think you’ve won the argument.
 
Written By: Steverino
URL: http://steverino.journalspace.com/
just why exactly are Marxists like Glasnost and Sarcastic wasting their time on a Libertarian site? I mean its not like you guys are going to convince any of us you know what the hell your talking about.

Here is a clue, all wealth groups in the USA are better off both materially and relatively than we were in the 1970’s. We pay less for food, slightly more for fuel, and far, far less for nearly every other consumer good and service, as well as lower taxes.

Of course if you live in a state which has high taxes and anti-growth policies which drive up housing costs, then you might not be better off. Solution, move.

Krugman is simply dishonest. he frequently disremembers things he wrote only a few years ago which are directly counter to his current arguments.
 
Written By: kyle N
URL: http://impudent.blognation.us/blog
Anyone can come up with a reason for the increased wealth and income inequality. . .we cut taxes on the rich while we tax working people’s income but not rich people’s wealth (capital gains), eliminate the estate tax on the rich so they can build family baronies of inherited wealth, use corporate coffers to finance politicians to get subsidies from the government.
It seems that you are confusing wealth inequality with income inequality. The Kaplan paper addresses the latter, and CEOs, Wall Street professionals, attorneys, entertainers, and athletes generate the majority of their income from wages not from capital gains. Since these are the people cited in the Kaplan paper as making up a significant portion of the upper end of the income spectrum, please explain to me how "cutting taxes on the rich" explains their high pre-tax incomes.

As for family baronies of inherited wealth. . .and corporate coffers to finance politicians to get subsidies from the government, I’d ask you to explain those members of the Forbes 400 I cited above in this context. Even those who have access to "inherited wealth", like Abigal Johnson of Fidelity, or the left’s favorite poster child for everything wrong with wealth accumulation, Paris Hilton, have careers that put them at the very upper end of the income spectrum regardless of their parents’ wealth.
but the 70% top marginal rate would not likely apply to anyone earning less than $1,000,000 a year or so, and people could of course file separately or perhaps not even marry,
Or so? The platform of the Democrats is to roll back the Bush tax cuts on the top 1%, which I believe is around $200,000 of household income. And as for not marrying - that’s just what we need from a tax code, not only distorting economic activity, but let’s have it get in the way of social activity. Or it seems, you’d encourage tax avoidance anyway, such as filing separately. So then what’s exactly the point other than making the envious feel better?
I think the 2 worker family is awful for our society.
Barefoot and pregnant, eh? I mean really, what are all those women doing in college anyway, when we can just tinker with the tax code so they don’t have to compete in a man’s world.
 
Written By: m.jed
URL: http://
"You just described trickle-down economics, or supply-side economics, or Reaganomics, you may as well have said that a rising tide raises all boats."

does that mean that the rich DO keep their money in shoeboxes?

"...they spend the vast majority of the earnings (because they have to in order to live)"

You don’t know my wife and her family. Is a television in every room a necessity of life?

"they keep the vast majority of what they earn and they use it to earn more,"

They can do that without taking it out of the shoebox and letting those scruffy peasants touch it?


"Voodoo economics"
Nope, dodo economics.

"he extreme concentration of wealth we are seeing now is the result of policy, plain and simple."

But which policies, and are the policies worse than the alternatives? Perhaps environmental and safety policies(airbags and catalytic converters) contribute to the alledged inability of the lower classes to rise. A few thousand more for an automobile means a few thousand less for capital accumulation. Mandatory coverage in health care policies for things like pregnancy and sex-change procedures increases the price of those policies. Prohibiting timber harvesting to protect the spotted owl causes higher wood prices, and higher housing prices. Etc.

You say the middle class is doing worse than it was 50 years ago? I don’t believe it. Closet space is one indicator. Look at the closet/storage space in a home built 50 or 60 years ago and compare it to the space available now. How many houses with one-car garages do you see now?

Finally I really do not care if the rich get richer, as long as they do not steal it, and you havn’t made much of a case that they have.
 
Written By: timactual
URL: http://
You say the middle class is doing worse than it was 50 years ago? I don’t believe it. Closet space is one indicator. Look at the closet/storage space in a home built 50 or 60 years ago and compare it to the space available now. How many houses with one-car garages do you see now?
Much more than that Tim, home ownership is up and at the same time the average size home is way bigger than before. Same with auto’s, there are more of them per capita and they last much longer than the older models and are safer. In nearly every way you measure it we are better off, including the lower classes.
 
Written By: kyle N
URL: http://impudent.blognation.us/blog
tax cuts on the top 1%, which I believe is around $200,000 of household income.

my mistake - this was a typo - was supposed to say top 10%, and it’s wrong anway. The top quintile has average income $190,000. Top 10% averages around $275,000. Top 1% is slightly over a million.
 
Written By: m.jed
URL: http://
"Much more than that Tim,..."

Well, I couldn’t mention everything. Brevity, as they say, is the soul of wit, and I have to start somewhere.
 
Written By: timactual
URL: http://
The incumbency re-election rate right now is a direct result of all the campaign finance reform we’ve had for the past 30 years, combined with gerrymandering at the state legislatures (which your public funding for campaigns wouldn’t fix). The more you equalize the funding the, the more likely the incumbent wins. This doesn’t come from some talking head, it’s just plain logic: the incumbent has years of exposure to his constituency, allowing him to get name recognition for free. The challengers don’t have that advantage, and need to overcome it through advertizing.

Steve, I don’t care if you’re a talk radio listener or not. This is just a very flawed argument. The biggest advantage of all that an incumbent has is his massive financial advantage. There *is* no public campaign funding right now in typical federal HoR elections, and there is nothing like financial parity. Incumbents often- typically - have 500% or more greater financial resources than challengers to spend on communication. Challengers mostly fail because of, aside from gerrymandering, no one knows who the challenger is, and he can’t afford to educate them. Why do incumbents have all this money? Becuase of the favors they do for people with money.

The idea that incumbency rates are high because "campaign finance reform" has eliminated the financial advantage that challengers used to have is perfeclty logical, if we were creating a fantasy novel about politics on Mars. It’s still logical on earth, but it is one hundered percent disconnected from the facts.

Look at fundraising totals for challengers vs. incumbents right now in 2006. You won’t even find ten races where the challengers have more money, and probably less than 20% where the challengers have *half* as much money.
 
Written By: glasnost
URL: http://
tax cuts on the top 1%, which I believe is around $200,000 of household income.

my mistake - this was a typo - was supposed to say top 10%, and it’s wrong anway. The top quintile has average income $190,000. Top 10% averages around $275,000. Top 1% is slightly over a million.
I’m a mess today. The average income of the top 1% is about a million, but the lower bound of income for the top 1% was $237,000 as of 2003.
http://www.cbo.gov/showdoc.cfm?index=7000&sequence=0
 
Written By: m.jed
URL: http://
Incumbents often- typically - have 500% or more greater financial resources than challengers to spend on communication. Challengers mostly fail because of, aside from gerrymandering, no one knows who the challenger is, and he can’t afford to educate them. Why do incumbents have all this money? Becuase of the favors they do for people with money.
Actually, incumbents have the franking privilege and a budget for newletter mailings, which allows them to mail all sorts of stuff to their constituents. That’s where they get their exposure and their name recognition.

I’d suggest that gerrymandering has a much larger effect on HoR re-election rates than campaign spending.

If representatives getting re-elected at a 98% rate is a bad thing, then why not just pass a term limits amenedment? That’d be much easier and cheaper to implement than another set of byzantine campaign finance laws.
 
Written By: Steverino
URL: http://steverino.journalspace.com/
Go ahead and call me a talk-radio listener if it makes you think you’ve won the argument.
You must be a talk radio listener... I win

Okay, point taken, I’ll try not to do that, but it was such a silly statement that anything could protect incumbants more than the current system.

And then there’s this...
just why exactly are Marxists like Glasnost and Sarcastic wasting their time on a Libertarian site?
I’ll ignore that one
Barefoot and pregnant, eh? I mean really, what are all those women doing in college anyway, when we can just tinker with the tax code so they don’t have to compete in a man’s world.
I think I am being called sexist here, yet it was the accuser that simply assumes I meant that the man should work and the woman should stay home and be barefoot and pregant. I think that in a family with children, it is much better for the children to be raised by the parents, with one at home, either one. Call me conservative, I guess I am just old fashioned that way.

I also don’t believe that 71% of American households with two workers prefer to have two workers, I think the majority believe they NEED to have the two incomes to get by.
Finally I really do not care if the rich get richer, as long as they do not steal it, and you havn’t made much of a case that they have.
Ding, ding, ding... we have a winner. Excellent point and right on the money!!!
You are of the opinion that people who have wealth and increase that wealth are entitled to keep that wealth... as long as they did not steal it. An absolutely fair and valid point. And clearly, I will have to try harder to show just how much of that wealth is being stolen in one manner or another. But at least you have made the requirements needed to change your opinion clear, so thanks for that.

Finally...
If representatives getting re-elected at a 98% rate is a bad thing, then why not just pass a term limits amenedment? That’d be much easier and cheaper to implement than another set of byzantine campaign finance laws.
Our campaign finance laws ARE byzantine, I agree, they were of course created by incumbents and then tinkered with by other incumbents, and then of course twisted around by constitutional concerns and finally by courts. They may have been well intentioned, but the final product sucks. Public financing of elections does not have to be byzantine, nor even terribly complex, you either choose it or you do not, if you choose it, you cannot be outspent, period.

And cheaper... this is what gets me, people complain about the cost of a few billion dollars ever 4 years (much less in midterms) while they happily vote for the guys being financed by other guys who’s sole purpose for political contributions is to effect their own bottom line. If You think SBC/at&t is fmaking political campaign contributions because they want a better country, you may be clinically insane (I don’t think you think this). These people are getting something, it is the job of corporate leadership to enhance shareholder value, a valuable and important role, but know this, when these guys make campaign contributions, it is to advance THAT purpose. As a result, political campaigns are given a few billion by interested parties every cycle, and the federal government through direct subsidies, contracts, and legislation, hand these guys hundreds of billions in tax dollars every year.

Someone on this thread complained about not having a choice in public financing of elections, well, I want a flipping choice in whether candidates are accepting legal bribery and paying back 100 fold what they have been given.

And this brings us full circle. Policy, inequality, theft, and taxes....

Does bribing government (legally) to increase your wealth constitute theft?

I say it does.

If you disagree, because no laws have been broken, then I say that voting a 95% tax rate for the 400 wealthiest Americans does not constitute theft either, for the exact same reason.

Mind you I would prefer to have the genuine representation that might come with public financing rather than stealing from the rich.

Cap
 
Written By: CaptinSarcastic
URL: http://
"I think the majority believe they NEED to have the two incomes to get by."

They may, in your opinion, believe they need two incomes, but do they? What is meant by "getting by"? I know of at least one family with eight children and the wife stays at home and home schools the kids. They "get by". I suppose if happiness is measured by the amount of material goods people own, they probably do need two incomes. For that matter, There are single people who work two or more jobs because they NEED two incomes to have a nice car, lots of pretty clothes, etc.
I think a better standard is how much is needed to provide a person or persons with necessities. I really don’t care if someone has to drink beer because they can’t afford champagne, or has to visit family on vacation instead of going to Cancun. I wonder, for example, how many of the college students in Ft. Lauderdale, etc., for spring break have both parents working to put them through school.
 
Written By: timactual
URL: http://
What is the problem with incumbents getting re-elected at a 98% rate?

What that means is that 2% of the time, voters decided they made a mistake when they elected them the last time. 98% of the time, voters decide they made the right choice the first time.

I’d be pretty worried if the number was a lot less — which would indicate a fickle electorate which practiced a fair amount of buyers remorse repeatedly year after year.

Remember also that with our elected representatives making more of a career out of politics, the ones that have survived a couple of elections stay around longer. And while it would make sense to have "voter remorse" after seeing a freshman in action, I’d expect that after 2 or 3 times the voters would get it right, and then that person would get re-elected because voters finally found the right person.

After that, there’s no reason to replace the incumbent, unless you get to the point where you decide fresh blood is needed.

Even now, projected swings and endangered incumbents seems more about the electorate MOVING around the country than it does people within the electorate deciding they want to switch their choice.

Gerrymandering certainly helps keep incumbents, (it also helps keep too many elections from being really close, which probably keeps our blood pressure down). But gerrymandering helps more with the party than the incumbent — it helps keep the seat when the incumbent retires.

OK, this didn’t deal at all with the Krugman column. I have lots of thoughts about that as well, but I like to pick up on little side issues that I find interesting that can be found within other, larger discussions.
 
Written By: Charles
URL: http://www.twoconservatives.blogspot.com
I think a better standard is how much is needed to provide a person or persons with necessities
Okay, I don’t disagree.

And I agree that some families do have two parents working not because they don’t make enough to "get by", but because they want to do more than just get by.

I guess the question is whether we have become so incredibly materialistic that 71% of families have two working parents, compared to less than 20% 50 years ago, primarily because people want extra stuff.

Either way it is an indictment of Americans, since with all these people working, we are still saving LESS than we did 50 years ago.

It’s not a matter of whether something is broken, I think it is more a matter of pinpointing what IS the matter.

I think there a many things wrong, some of it is cultural, but some of it is policy.

Cap
 
Written By: CaptinSarcastic
URL: http://
I find discussions about quintiles to be mostly disingenous, as are medians, averages, and other views we often use to try to make sense of things.

Income disparities are growing, to be sure. But you could solve that problem simply by capping the maximum income people can make. And that wouldn’t help one person make a dime more, but we’d all be expected to "feel better" because the disparity would be less.

Imagine you have a house. It’s a big house, 4 bedrooms, your two kids each have their own room, you’ve got a 2-car garage. It’s everything you ever wanted or needed in a house, in a nice neighborhood.

But now everybody else starts building bigger houses, more bedrooms, bigger garages. Soon your house is one of the smallest houses around.

How are you harmed? In what way has your life been negatively impacted in the slightest by the fact that other people have gotten much larger houses?

Or another stupid analogy — you can run a 6 minute mile, you’ve always been able to do so. But more and more people are running faster miles. How does that hurt you that others run faster? Or if you can hold your breath for 3 minutes, and you have always been able to do that, what is it to you if suddenly the rest of the world could hold their breath for 4 minutes?

Anybody here want to argue that, if Bill Gates hadn’t made Microsoft and didn’t end up with billions in stock, that THEY would therefore have MORE money?

Sorry, doesn’t work that way. We all benefit from what Bill Gates did (go with me here, I know a lot of us don’t feel Microsoft is a force for good), even though he benefitted a LOT more than we did.

As a poster said earlier, the problem with "income disparity" is that you can’t make less than nothing, but there is no limit to how much you can make.

So if you can build one chair a week, but your neighbor can build 2, he’ll have twice as many chairs, and if another neighbor figures out how to build 10 he’ll have 10 times as many, but no matter how bad the last neighbor is, he’ll never have less than zero chairs.

Other comparisons are silly too. The chief executive of a company today might make 50 times as much as the average employee, instead of 10 times as much. But the company is 10 times larger than it was, meaning there are 10 times as many employees. So before there would have been TEN chief executives, each earning 10 times as much, but now we’ve figured out how to do that job with ONE chief, paid half as much as the old 10 chiefs. The workers aren’t any worse off, they just "feel bad" because the executive makes more. Meanwhile 9 other people get to go do something else productive.

How about "median income" dropping? Well, if you lower the unemployment by 2%, if you put 6.6 million more people to work, it’s likely they aren’t coming into the workforce in the upper end of the pay scale. So they will pull down the median income.

If we laid off everybody making less than $100,000 bucks, the median income would skyrocket — but even Krugman would agree that would be bad for the average person.

 
Written By: Charles
URL: http://www.twoconservatives.blogspot.com
"I guess the question is whether we have become so incredibly materialistic that 71% of families have two working parents, compared to less than 20% 50 years ago, primarily because people want extra stuff"

I think so, and my guess/opinion is that the primary reason is that people want more stuff. Not to say there are not other reasons, such as necessity or the desire to have a job outside the home.
I am not so sure that spending more is an indictment. How easy and profitable is it to save? Factoring in inflation, commissions, taxes, etc., investment/saving may not be significantly more profitable for many people. Buying a house seems to be touted as a very good investment, which may explain much of the debt. Once you own a house, you have to furnish it, maintain it inside and out, pay taxes and insurance, etc. Then you have to travel from your house to work, stores, etc. More expense, probably involving two or more vehicles.
As an aside(not directed at you), I am always amused by those who spent decades belittling the religious beliefs and "Puritan Ethic" of bourgeois middle-class America, and then bemoan the crass materialism and moral decay of contemporary American society.
 
Written By: timactual
URL: http://
Charles, that’s a smart argument, but the problem is that real life isn’t like that abstract, academic case.

The problem is that, to make a general case out of it, institutions adapt to the income disparity and interconnect with it in ways which leave those not at the top end of the disparity in the cold.

Random example - DC internships. You can’t live off your parents’ money, you can’t get one. You’re not rich, you are therefore not connected. Oh, sure, there are loopholes, the odd scholarship - and these are essentially redistributive functions.

Another example are career barrierst to entry. I’m interested in web design, and all the prices for the neccesary toolkit software are, frankly, insane. Either the profit margins are insanely high - because a very rich top-society bulge can afford them - or else the margins aren’t high, but the overhead costs are insanely high, again because of that bulge at the top. For whatever the reason, if you’re a poor person starting from scratch, it might cost a year’s salary just assemble the raw tools you need to get into this industry - forget actual training.

The bottom line is that every price in our country is driven by the collective shape of the income environment for our country. Increasing disparities in wealth and income effectively drive the cost of living for people who aren’t getting richer, upwards.

So it’s not just passively sitting around while someone does better than you - it’s seeing your staying-in-place ground downwards towards the edge.
 
Written By: glasnost
URL: http://
" it might cost a year’s salary just assemble the raw tools you need to get into this industry -"

So? You expect somebody else to pay for your tools and training? When and where has any independant businessman or craftsman NOT had to pay for their own tools and training?

"Increasing disparities in wealth and income effectively drive the cost of living for people who aren’t getting richer, upwards"

Any examples, other than real estate?
 
Written By: timactual
URL: http://
Increasing disparities in wealth and income effectively drive the cost of living for people who aren’t getting richer, upwards
That’s the way markets work. Risk-adjusted returns on investment in education are high? Well two things happen - first, the price of education accordingly rises thus depressing future returns towards normal risk-adjusted levels and second, the supply of education increases in response to the price increase, thus increasing supply of educated students and further accelerating a decline in the future returns on education towards normal risk-adjusted levels. We’ve seen both happen over the past thirty years.

On this premise it’s easy to argue that elite universities don’t charge enough - but there’s a caveat - not all Harvard grads go on to become CEOs, lawyers, or investment bankers, and I’m sure Harvard doesn’t want all of them to. But the ones who do are expected to endow the university, an unspoken implicit agreement, if you will, knowing that they got a good value on their investment at the time, for their career choice and their education was "discounted" relative to the expected future returns because of (1) chance of failure and (2) to subsidize those who go into the arts, academics, or other high-skill but comparatively low paying jobs.

Your software example is no different - a few people identified the ROI early in the process, took a risk, and made a boat load of money. The software manufacturer’s product was validated and it was able to raise the price, thereby driving the future returns downwards.

In what way is this a problem and more importantly, if you consider it to be a problem, what do you propose to correct the market mechanism and please describe why you consider your correction to be fair and just.
 
Written By: m.jed
URL: http://

 
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